0001 1 2 3 4 5 LIBRARY OF CONGRESS 6 RULEMAKING HEARING 7 SECTION 1201 8 9 10 11 12 13 Date: May 8, 2009 14 Time: 9:40 a.m. 15 Location: Library of Congress Center 16 Madison Building 17 101 Independence Ave, Southeast 18 Washington, DC 20540 19 20 21 22 0002 1 P R O C E E D I N G S 2 MS. PETERS: Good morning. I’m Marybeth 3 Peters, Register of Copyrights, and I would like to 4 welcome everyone to our third day of hearings in 5 Washington and our final day of hearings in the Section 6 1201 Rulemaking. 7 This hearing is part of our ongoing triennial 8 rulemaking process mandated by Congress in the Digital 9 Millennium Copyright Act. 10 Section 1201(a)(1) provides that the Library 11 may exempt certain classes of works from the 12 prohibition against circumvention of technological 13 measures that control access to copyrighted works. Any 14 exemptions that are granted last for three years. The 15 new ones will begin on October 28th , 2009, and go until 16 October 28th , 2012. 17 The purpose of this rulemaking proceeding is 18 to determine whether there are particular classes of 19 works as to which users are or are likely to be 20 adversely affected in their ability to make non- 21 infringing uses of the works if they are prohibited 22 from circumventing the technological access control 0003 1 measures. 2 This rulemaking establishes the record on 3 which my recommendation to the Librarian will be based. 4 After the Copyright Office’s Initial Notice of 5 Inquiry in this rulemaking, published in the Federal 6 Register on October 6th , 2008, the office received 20 7 comments proposing exemptions to the prohibition on 8 circumvention and 56 responses to these proposed 9 exemptions, all of which, of course, are available on 10 the office’s website. 11 The agendas for all of the hearings, as well 12 as the full record in this and previous 1201 13 rulemakings, are also available on the office’s 14 website. 15 There are some hard copies of today’s agenda 16 near the entrance to this room. 17 We do intend to post the transcripts and audio 18 of all the hearings on our website within a few weeks. 19 The comments, the responsive comments, the 20 hearing testimony will form the basis of evidence in 21 this rulemaking which, after consultation with the 22 Secretary, and communications and information of the 0004 1 Department of Commerce, will result in my 2 recommendation to the Librarian. As I mentioned, the 3 th 4 Librarian’s determination is due by October 28 , and he 5 will decide the exemptions, if they should issue. 6 The format of the hearing is basically two 7 parts. In this case we have one witness and that 8 witness will present his testimony and then the second 9 part is we will ask questions and hopefully we will ask 10 probing, thoughtful, difficult questions. 11 Let me now -- and one thing we do do is we 12 reserve the right to come back and ask you further 13 questions. Frequently what happens is once we sit down 14 and start to talk to each other, we realize that there 15 are certain issues that we haven’t probed deeply 16 enough. 17 So those of you who haven’t been here and most 18 faces look fairly familiar, to my immediate right is 19 David Carson, General Counsel of the Copyright Office. 20 To my immediate left is Rob Kasunic, Principal Legal 21 Advisor and Assistant General Counsel. To his left is 22 Ben Golant, also Principal Legal Advisor and Assistant 0005 1 General Counsel in the Office of the General Counsel, 2 and to David’s right is Chris Weston, an Attorney- 3 Advisor in the Office of General Counsel. 4 A few notes before we begin. Yesterday we had 5 a lot of problems with cell phones and Blackberry 6 interference with our audio signal. So please turn off 7 all phones and PDAs while you’re in this room. 8 Also, anyone who has not given us an 9 electronic copy of the material that will be displayed, 10 performed or distributed in this room during the 11 hearing, please be sure to give it to us before you 12 leave. 13 And with that, we will start the hearing with 14 you, Mr. Richert. 15 Literary Works 16 MR. RICHERT: Thank you. I hope you all can 17 hear me. Great. Thank you. 18 My name is Mark Richert. I’m the Director of 19 Public Policy with the American Foundation for the 20 Blind. 21 It’s a pleasure to be here this morning. I 22 feel a little lonely being the only person for this 0006 1 panel and I mention that not only because I’m sensitive 2 about such things but also in the past when we’ve come 3 before you and we’ve been here now, this will be our 4 third time, -- 5 MS. PETERS: Third time, yeah. 6 MR. RICHERT: -- you know, we’ve had folks on 7 the other side speaking up, I believe that was true for 8 both times, certainly true for the first time when we 9 were here, speaking against proposing an exemption. 10 We’re here, of course, asking that the 11 exemption that’s been in place now for six years for 12 certain literary works with respect to providing access 13 to folks who are blind and visually impaired and may 14 have other disabilities remain and in fact be renewed. 15 We did submit, of course, formal written 16 comments for the record. I wouldn’t want to try to 17 repeat that. 18 I guess what I’d like to do today, to provide 19 as much opportunity for interaction or questions you 20 all might have, is just to sort of give you a little 21 bit of an update about sort of where we’ve come in 22 these last six years. 0007 1 When we first came before you in 2003, I think 2 folks were struck by the reality or surprised by the 3 reality that there were -- I think everybody knows that 4 DRM does obviously pose some kinds of -- sometimes 5 often technical problems for providing access, but that 6 people were surprised by the fact that when folks pull 7 up ebooks often with the kind of technology that folks 8 who are blind, for example, use, that often a specific 9 message would appear on the computer screens simply 10 indicating no, this book may not be read using a screen 11 reader. 12 Somebody had to take the time to sit down and 13 write that kind of a notice out. It wasn’t just a 14 question of providing or implementing digital writes 15 management technology to protect the copyright. It was 16 an affirmative decision on someone’s part that, indeed, 17 this ebook will not be read aloud, even with access 18 technology and, quite frankly, we were rather offended 19 by that. 20 Essentially, what that looks like to us is a 21 rather stingy approach to the exercise of the privilege 22 of a copyright, that someone who provides an ebook for 0008 1 sale and a customer puts down good money for that ebook 2 expects to be able to use that ebook like everybody 3 else, just simply in an alternate way, by having a 4 synthesized computer voice read that material aloud. 5 Quite frankly, that should be permitted. 6 So we came, made that case. We made that case 7 again in 2006 and you all agreed with us that, indeed, 8 an exemption for the exercise of -- you know, try to 9 get around those features, if in fact we need to get to 10 the text of the book that way, was appropriate. 11 In both of those times, in 2003-2006, we had 12 lots of questions to answer. How big of a problem 13 really is this? How many books are we really talking 14 about? And what’s the scope of the problem? 15 We’ve tried to provide some, some indication 16 of that in the testimony we did in 2003 and 2006. You 17 know, the honest answer is nobody has sat down and done 18 a scientific analysis of how broad the scope of that 19 problem really is, except that in the course of the 20 last few months an issue has come to a head and some, 21 not all of you, may be very well aware of it. 22 Amazon has made available the Kindle product 0009 1 with its new text-to-speech feature and many owners of 2 copyright through contract have essentially said to 3 Amazon we want to exercise the option to restrict that 4 text-to-speech option, to essentially be able to turn 5 it off. 6 If the experience that we’ve been talking 7 about in 2003 and 2006 wasn’t bad enough, now we have a 8 situation where folks are affirmatively shutting out 9 folks with disabilities and, quite frankly, we think 10 that that’s unacceptable. 11 So we’re again asking you to approve, to renew 12 this exemption for another three-year period of time, 13 especially now, when we are at a point where we’re -- 14 and believe me, this is not a 100 percent adversarial 15 process. We’ve been meeting actively. Frankly, the 16 entire disability community has been meeting very 17 actively with authors’ groups, publishers, agents, 18 frankly the entire alphabet soup essentially in the 19 copyright world, to say why can’t we all get along, 20 essentially. 21 So we do feel, though, that in that kind of 22 environment, it’s very, very important that an 0010 1 exemption remain for these types of works, so that 2 folks who are somehow able to technologically navigate 3 their way around those kind of barriers, so that they 4 can in fact read the contemporary American literature 5 that’s required for their college class or fill-in-the- 6 blank, that they’re not going to be subject to the 7 rather significant penalties under the DMCA. 8 So that’s all the comments I’d like to offer, 9 admittedly very informally, but I’d welcome any 10 opportunity for dialogue or questions. 11 MS. PETERS: Thank you very much. Let me 12 start. You should be pleased that you are alone. 13 There is nobody sitting there opposing what you’re 14 saying. 15 But are you aware whether or not Amazon has 16 actually turned off the read-aloud feature yet? 17 MR. RICHERT: I don’t believe they have. I 18 think they’re being pressure to do it significantly. 19 MS. PETERS: Okay. I think that’s the only 20 question I had, but you expect them to turn it off? 21 MR. RICHERT: That’s the expectation. 22 MS. PETERS: Okay. And nothing that the 0011 1 authors or publishers have told you have given you any 2 comfort? 3 MR. RICHERT: No, not to tell too many tales 4 out of school. We’ve had meetings very, very recently 5 and I think there’s -- we’re still sort of at that 6 articulating each other’s points of view stage. 7 MS. PETERS: Okay. Thank you. 8 MR. CARSON: Okay. Mr. Richert, in your 9 submission to us, your written submission to us, your 10 factual showing, I think, was based upon, five ebook 11 titles that you looked at to determine whether they 12 were available and accessible format, correct? 13 MR. RICHERT: Mm-hmm. 14 MR. CARSON: Now, in each of those cases or in 15 any of those cases, did you check to see -- let me 16 start over. 17 In each of those cases, I assume from what I 18 read that you looked at one ebook version of a 19 particular book and checked to see whether it was 20 screen reader accessible, is that correct? 21 MR. RICHERT: I believe that’s correct, yes. 22 MR. CARSON: Did you check to see whether 0012 1 there might be other ebook versions of the same titles 2 out there which were accessible? 3 MR. RICHERT: The specific -- the short answer 4 is that those specific ones that we put in, I believe, 5 were checked to see if the precise edition was 6 available just as it was set up electronically. There 7 may, for example, I think we did one or two public 8 domain books and it wouldn’t surprise me if they were 9 available some place else in some kind of a recorded 10 format, but the precise editions that were looked at 11 there, I believe were checked to see if those were 12 available and in accessible format. 13 MR. CARSON: What do you mean by precise 14 edition? 15 MR. RICHERT: Well, I mean, it’s especially if 16 you look at something like the Kindle and you’re told 17 that one is going to read Chapter 1, Chapter 4 or talk 18 about specific pages or if you’re talking about a 19 collection of poetry, which specific ones on which 20 page, the navigability of those materials is key. 21 So I think even if you (1) could find that, 22 you know, two or three or four folks would provide an 0013 1 accessible version, say, of the “Imitation of Christ,” 2 which I don’t think was one of the ones we did this 3 time, it was, I think, years ago we did it, -- 4 MR. CARSON: Right. 5 MR. RICHERT: -- maybe we did it again, I 6 don’t recall now, but, you know, I think one could 7 certainly say that there is a recording of that 8 conceivably floating around somewhere or a text version 9 of it floating around on the Web somewhere, but that’s 10 not the same thing as saying that the one that I am 11 required to read with its footnotes, with its editing, 12 is the one that’s available. 13 MR. CARSON: Okay. Let’s get a little more 14 th 15 specific. Your written comments say, “On October 9 , 16 2008, we downloaded five ebooks created in either Adobe 17 PDF or Microsoft Reader.Lit formats. Two PDF books and 18 three Microsoft Lit format books were tested.” 19 MR. RICHERT: Yes. 20 MR. CARSON: So for the two PDF books that you 21 looked at, did you check to see whether there was a 22 Microsoft Lit version? 0014 1 MR. RICHERT: As well, no, I don’t believe we 2 did. 3 MR. CARSON: Okay. In preparing -- well, 4 first of all, you understand that the current -- are 5 you asking for precisely the same exemption that we had 6 last year or are you proposing modifications? 7 MR. RICHERT: We’re asking for renewal of what 8 we proposed last time. 9 MR. CARSON: Okay. You understand that the 10 existing exemption is for literary works distributed in 11 ebook format when all existing ebook editions of the 12 work contain access controls that prevent enabling 13 either the book’s read-aloud functions or screen 14 readers that render the text into specialized format. 15 In other words, the only way this exemption 16 works is if there’s no ebook edition out there that has 17 accessible text. 18 MR. RICHERT: Well, of the work. 19 MR. CARSON: Yeah. 20 MR. RICHERT: Of that specific work. 21 MR. CARSON: Right. 22 MR. RICHERT: Which is as formatted as 0015 1 navigable, you know, as edited appropriately. So, I 2 mean, it’s not a question of whether or not you can 3 actually simply get to content. It’s a question of 4 whether this particular book is available in an 5 accessible format. 6 MR. CARSON: Okay. But, for example, do you 7 -- is it your understanding, through an existing 8 exemption, if a particular book that you want is not 9 available in an accessible format using the Microsoft 10 Lit format but is available in the Adobe PDF format, 11 you would be able to circumvent the Microsoft Lit 12 edition? 13 MR. RICHERT: I guess it would depend on if 14 that’s precisely the same work. I mean, if it’s 15 exactly the same work and it’s available in one 16 electronic format versus another, I wouldn’t see that 17 this exemption would apply. 18 MR. CARSON: Okay. 19 MR. RICHERT: But I don’t know that there are 20 very many of those like that out there. 21 MR. CARSON: Okay. In preparing for this 22 rulemaking proceeding, did you review the Register’s 0016 1 recommendation from the last time around? 2 MR. RICHERT: I’m sure one of us must have. 3 MR. CARSON: Okay. Let me read you a passage 4 from that recommendation. 5 “American Federation for the Blind did not 6 test all of the ebook formats in which the sample book 7 titles were available. For instance, American 8 Federation for the Blind tested the “Imitation of 9 Christ” by Thomas a Kempis in the Microsoft Reader Lit 10 format and found that work to be inaccessible, whether 11 or not Microsoft’s text-to-speech product was 12 installed. However, the Joint Reply Commenters pointed 13 out that the same title appeared to be available in the 14 Adobe format with a read-aloud function enabled.” 15 Notwithstanding the fact that we’ve observed 16 that you really hadn’t checked to see whether all 17 formats were available last time, you didn’t feel there 18 was any need to do that this time either, is that 19 correct? 20 MR. RICHERT: Well, I think the issue is 21 whether -- first of all, we are the American Foundation 22 for the Blind and I think the American Federation for 0017 1 the Blind -- I’m not even sure that there’s an 2 organization with that title. 3 MR. CARSON: Okay. I’m sorry. That’s my 4 problem. We said AFB and I misspoke. 5 MR. RICHERT: No worries. But I think, you 6 know, I think that the issue is what are we going to do 7 in the event that there isn’t an accessible version of 8 the book available in precisely the format that the 9 person wanted, desired, purchased, or in fact is 10 required sometimes? 11 If you have, in the Microsoft Lit format and 12 in the ebook, the Adobe format, the exact same work 13 available, I wouldn’t see that this exemption 14 necessarily would apply, but I think the real issue is 15 not so much the degree or the number of books that are 16 out there but what do you do in the individual case 17 where someone needs access to the book that they want 18 and if in fact there isn’t precisely that work 19 available in an electronic form some place that they 20 can get access to, they should not be subject to the 21 significant penalties of the DMCA. 22 MR. CARSON: Now, in 2003, the first time you 0018 1 made a case to us, you may recall you presented 2 statistics relating to the overall percentage of ebooks 3 in which the read-aloud function was disabled. Do you 4 recall doing that? 5 MR. RICHERT: Yes. 6 MR. CARSON: You chose not to do that last 7 time or this time. Can you explain why? 8 MR. RICHERT: Well, as I say, I honestly think 9 that the issue is not so much the scope, it’s about 10 providing protection for people who need access and so 11 whether we’re talking one book or 10 million, I think 12 that’s why you have an exemption. 13 If, quite frankly, we were to find that the 14 majority of books or almost all of them had troubles, I 15 think we wouldn’t be here. We’d be making our case 16 across the street on Capitol Hill and, indeed, we may 17 have to be doing that. 18 MR. CARSON: Okay. Let me read you another 19 paragraph on Page 39 of the Register’s recommendation 20 from three years ago. 21 “In selecting a tiny example of only five 22 titles and in conducting only a limited examination of 0019 1 the options available even for those five titles, AFB 2 has made at best a minimal showing to demonstrate the 3 existence of a continuing problem and the need to renew 4 the proposed exemption.” 5 MR. RICHERT: Right. 6 MR. CARSON: “If AFB or others propose renewal 7 of this exemption three years from now,” that is now, 8 “they would be well advised to review a larger, more 9 representative sample of titles and ascertain the 10 availability and accessibility of those titles in all 11 ebook formats.” 12 When you prepared this year, did you have -- 13 did you take into account at all what the Register had 14 said three years ago, what I just repeated to you? 15 MR. RICHERT: Sure, sure. Absolutely. 16 MR. CARSON: And you decided to ignore it? 17 MR. RICHERT: No, no, no. I think the issue 18 is, you know, the facts speak for themselves, and I 19 think over the last couple of months demonstrate that 20 the move in the ebook market is not to provide access, 21 it’s to restrict access. 22 MR. CARSON: So are you saying you didn’t make 0020 1 a case initially but the facts fortunately have made 2 the case for you subsequent to your submissions? 3 MR. RICHERT: Well, I think that what we’ve 4 done is shown that over the last six years, certainly 5 the problem has not gone away and that language that 6 you submitted was essentially originally proposed by 7 publishers and I think if they were here, which they 8 have chosen not to be, they’d have an awful difficult 9 case to have to make to demonstrate whether or not the 10 progress that’s been made, as they made promises to you 11 all in 2003 and 2006, that in fact progress would be 12 made. 13 MR. CARSON: I have nothing more. 14 MR. RICHERT: Thank you. 15 MS. PETERS: Okay. Rob? 16 MR. KASUNIC: It looks to me like, at least in 17 terms of what the prior exemptions have been and what 18 you are saying you need, there’s a discrepancy between 19 them because in terms of this limitation on all 20 existing ebook editions seems to indicate that if that 21 work is generally available in some kind of accessible 22 format, then that would foreclose the exemption, but 0021 1 you seem to be indicating that if there is a desired 2 version of a particular work, that that is what should 3 be the critical factor. 4 And I think that what we need to hear from you 5 are what characteristics of particular ebooks are 6 necessary for the purposes that -- for accessibility 7 purposes because I think we have to -- if this 8 exemption were to be issued again, there would probably 9 have to be some kind of a clarification and giving some 10 more guidance in that. 11 Can you give some specificity to what features 12 of an ebook would be necessary for accessibility? 13 MR. RICHERT: Sure. I can certainly try. 14 Over the course of the last six to nine years, a lot of 15 work has gone into the development of a so-called DAISY 16 format book. I believe it’s Digital Audio Interface -- 17 I can’t remember all the letters for the acronym. 18 Essentially, it’s a format that allows greater 19 navigability of an electronic work. So a file -- the 20 format of the work is so structured that one can jump 21 from chapter heading to major headings, sidebars, 22 subsections within a chapter, et. cetera. That kind of 0022 1 structure is pretty key if you’re navigating around in 2 a fairly sizable book. 3 Admittedly, if one’s looking at a basic novel, 4 reading it from cover to cover, there’s nothing but 5 chapters there, perhaps chapter divisions or other 6 major divisions, that kind of structure isn’t as 7 critical, but you still want to be able to navigate 8 around appropriately. 9 The alternative to that, of course, is what 10 folks have been doing for years which is to, namely, 11 use, if one is using, for example, an audio format, 12 once upon a time we used to put in cassette tapes and 13 do it. Before then, I’ve got folks who remember the 14 reel-to-reel days and so there you’d be trying to hunt 15 around for even the beginning of chapters. 16 That’s even true now with, you know, digital 17 formats. Unless the book is structured in such a way, 18 as I’m describing, one essentially has the only option 19 of jumping around on the basis of time. How far into a 20 book are you jumping? So the advantage or the key of 21 having a book with the appropriate structure is to be 22 able to do that kind of navigation. 0023 1 I think everybody on, quote unquote, our side 2 has always assumed that these exemptions pertain to 3 access to a specific work, not just to whether or not 4 if there are four or five, 10 publishers of a 5 particular work that, you know, that it’s essentially 6 the underlying content that we’re trying to get access 7 to. In fact, we’re really talking about the specific 8 work that’s expected. 9 To jump to the Kindle, as I wrap up, the 10 expectation now is, and I’m not picking on the Kindle 11 but there’s going to be other work -- other equipment 12 around the corner. You know, the expectation is that 13 equipment like this, technology like this is going to 14 be used for educational purposes, and I don’t see how 15 we can talk in a very serious way about saying that, 16 well, you can have access to this material, perhaps an 17 earlier edition of the textbook, perhaps, you know, a 18 comparable version of the book or a comparable version 19 of the anthology’s available, so you can hunt around on 20 your own and find that material. 21 I think it really needs to be specific to the 22 given work. 0024 1 MR. KASUNIC: So then, if a work was not 2 available in the DAISY accessible format, that would be 3 what would kick in the exemption? 4 MR. RICHERT: Well, I think what would kick in 5 the exemption would be if a specific copyrighted work, 6 and I’ll just hypothesize an anthology of short 7 stories, if that specific one is not available by that 8 publisher in any kind of accessible format, then I 9 believe this exemption kicks in. 10 MR. KASUNIC: In any kind of accessible 11 format. That’s what I’m just trying to clarify, is 12 what exactly -- how you’re characterizing accessible. 13 So if it was -- and what level of 14 accessibility would be sufficient so that the exemption 15 would not apply? 16 MR. RICHERT: I’m not sure that that -- I 17 think we may be comparing apples and oranges. The way 18 that we read the exemption is that there may be digital 19 writes management features put in place to bar certain 20 types of accessibility, like screen reader access or 21 text-to-speech capability, and what we’re asking for is 22 that if someone can find a way to get around those 0025 1 features, even if the accessibility they ultimately 2 achieve as a result is inferior to what could 3 conceivably be available, that they shouldn’t be 4 subjected to the DMCA penalties. 5 MR. KASUNIC: So if a book was available in 6 the text-to-speech on Kindle 2 and would that be 7 providing accessibility at that point or if it doesn’t 8 allow, then the connection with a -- doesn’t allow 9 interoperability with other forms of accessibility? 10 MR. RICHERT: The honest answer is that I have 11 not played around with the Kindle much at all. Part of 12 the reason for that is that the controls on the Kindle 13 itself are inaccessible and so that’s yet another 14 aspect to this that we’re working on. 15 I would say that as I understand the type of 16 text-to-speech feature available, it provides a level 17 of accessibility and I’m sure that it’s not as robust 18 as other, you know, formats that are available through 19 such well-known organizations in our community, at 20 least as Recording For the Blind and Dyslexic, that 21 provide books routinely in this sort of structured 22 format that I’m describing where, you know, read-loud 0026 1 volunteer read will essentially read a book aloud and 2 you can navigate around in that much more structured 3 way. 4 MR. KASUNIC: Do you have any sense whether 5 this exemption that was issued for the last six years 6 has had any effect on the market? Has this helped 7 things? Has this made things -- has this exemption 8 being in existence changed behavior by copyright 9 owners? 10 MR. RICHERT: Well, it would appear not, if 11 the last couple months are any example. 12 It seems to me that -- I don’t really think 13 that what’s happened in the last few months as this 14 text-to-speech issue with Kindle has come to a head, 15 that that’s the result of any of this activity. I’m 16 not sure if many folks in the copyright world are 17 paying much attention to it. 18 I can say that, to the exemption, I can say 19 that with respect to folks who are blind and visually 20 impaired and may have other disabilities, that, you 21 know, the community is aware of individual brainy, very 22 computer-savvy folks who’ve been able to avail 0027 1 themselves of this exemption and that, they’ve been 2 able to find a way to get access to books when they’ve 3 needed them. 4 I don’t know of any and I don’t think anybody 5 else knows of any, you know, concerted effort yet to 6 sort of broaden that. So, you know, on the side of the 7 copyright owners, I would say no, there really hasn’t 8 been, frankly, much attention paid to this exemption, 9 except every three years when we come here, and if this 10 Kindle situation is any example, it would appear that 11 we’re obviously going in the wrong direction and in 12 terms of our community, as I say, there may be isolated 13 examples of folks finding a way to crack the DRM to be 14 able to get access to the materials but there’s no 15 widespread effort that I’m aware of that’s been 16 successful in that connection. 17 MR. KASUNIC: Have you -- are you aware of any 18 individuals who have actually utilized the exemption? 19 MR. RICHERT: As I say, I think the community 20 as a whole knows of, in general terms, you know, 21 particularly smart, capable individuals who’ve been 22 able to find their way around these barriers and 0028 1 obviously because of the exemption feel safe in doing 2 so. 3 But as I say, I don’t know of any concerted 4 effort to make that happen yet. 5 MR. KASUNIC: But then specifically, you know 6 that there may be people savvy enough to get around it, 7 but you don’t know whether they’ve actually fulfilled 8 the terms of the exemption in terms of having looked to 9 see whether there are other accessible formats or -- 10 MR. RICHERT: No, no. I mean, we’re not in a 11 position to police that kind of activity. We think the 12 copyright owners are in the best position to do that. 13 MR. KASUNIC: One thing that we found in 2003 14 was that rather than some kind of concerted effort to 15 deny accessibility, there were certain defaults set in 16 to some of the systems, for instance Adobe, and I 17 believe we saw in 2006 that there had been some change 18 in that in light of the fact that there was greater 19 realization of the effect of those defaults. 20 Is that -- do you have any sense that that is 21 changing in any way, that there are -- although there 22 may be some disputes, like with the Kindle 2, and there 0029 1 are issues between -- as far as I understand, the 2 Authors Guild has been urging for Amazon to create 3 accessible or to open books up for the Kindle, up for 4 accessibility. 5 Is there greater awareness -- is the 6 heightened awareness of this attributable just to the 7 general publicity that’s occurred with the Kindle 2 or 8 does this have any relationship to the exemption? 9 MR. RICHERT: I don’t think there’s any way to 10 know the answer to that scientifically. I really 11 don’t. I mean, I think -- 12 MR. KASUNIC: Anecdotally, it would be fine. 13 MR. RICHERT: I would say anecdotally, we -- 14 one of the major things that the American Foundation 15 for the Blind does, we’re not a membership organization 16 but what we do or hope to do is to provide -- and I 17 don’t. That’s why I’m here. I don’t provide the kind 18 of technological eval that some of my colleagues do. 19 They actively work with Adobe and other 20 providers all the time. Has there been movement, 21 openness to talking? Has there been some improvements? 22 Have there been improvements in technology over the 0030 1 course of this six years? For sure. 2 But what we’re still seeing is that digital 3 writes management is being used as essentially the fig 4 leaf to exclude folks from receiving access in a way 5 that’s meaningful for them and, you know, I think folks 6 need to understand that it becomes almost an emotional 7 issue as well as, you know, a substantive legal or 8 copyright issue for the community when folks are being 9 told you paid good money for a work and now if you want 10 to actually be able to read it with technology that you 11 bought, that, you know, you’re either going to have to 12 pay us extra or you’re going to have to buy some other 13 book because I don’t care to have you read my work or 14 you need to register, which is what’s being proposed 15 now, that you need to declare your disability and if 16 you’re sufficiently disabled to someone’s satisfaction, 17 then you’ll be entitled to read our book. 18 And I think what we’re simply saying here is 19 that while all of that is sort of shaking out, that 20 this exemption be in place so that people who do in 21 fact need access, they’re not going to be subject to 22 the penalties of the current law. 0031 1 MR. KASUNIC: And are there any changes given 2 some of the changes in these -- like in Microsoft 3 Reader or Adobe formats, that are either getting better 4 or worse in terms of providing accessibility? 5 MR. RICHERT: I think the folks who are 6 particularly steeped in technology and mine and other 7 groups, if they were here, they would say it’s sort of 8 like a shell game. You fix something in one area and 9 then, of course, technology changes and so you’re 10 constantly trying to shore up things in other areas. 11 So it can be very frustrating for sure. 12 MR. KASUNIC: Thank you. 13 MR. RICHERT: Thank you. 14 MS. PETERS: Can I ask one last question? If 15 a visually impaired person is looking for an ebook, I 16 think what I heard you saying, there’s no way when you 17 purchase that to know whether or not the features that 18 you need in order to make it accessible to you are 19 available on that ebook, that you have to purchase it 20 and then find out later whether it works or not, is 21 that right? 22 MR. RICHERT: Yeah. Essentially, yeah. 0032 1 MS. PETERS: Okay. Thank you. 2 MR. RICHERT: Thank you. 3 MS. PETERS: We have no more questions and so 4 we may get back to you, but at this moment, we’re done 5 with this part of the hearing. 6 MR. RICHERT: Thank you very much. Appreciate 7 the questions. 8 MS. PETERS: I guess because Steve Metalitz 9 isn’t here, we’re breaking till 11. 10 [Recess.] 11 MS. PETERS: So we are resuming, and the 12 Proposed Class that we are discussing is 6, Computer 13 Programs protected by dongles that prevent access due 14 to malfunction or damage or hardware or software 15 incompatibilities or require obsolete systems or 16 obsolete hardware as a condition of access, and since 17 you’re the proponent, Mr. Montoro, you go first. 18 Proposed Class 6 19 MR. MONTORO: Thank you, Ms. Peters. 20 Good morning. Good morning. I just want to 21 mention that everything was submitted this year. I 22 would have submitted it last year, if I could have, but 0033 1 please believe me everything was on time this year. 2 MS. PETERS: I understand. David actually 3 turns red every time we talk about this. 4 MR. MONTORO: I won’t do it -- it won’t happen 5 again. Thank you. 6 Good morning, ladies and gentlemen. My name 7 is Joseph E. Montoro, Jr., and I come before you today 8 to ask at the very least to renew the existing 9 exemption on dongles and this year to take it a little 10 further and look at obsolete hardware and software 11 systems. 12 This is my fourth time here before you since 13 the DMCA was passed. The last time my daughter joined 14 me. Now she just turned 16 and got her driver’s 15 license. So she doesn’t hang around dad too much 16 anymore. 17 I’ve had many customers come to me thinking 18 that they could never get their dongle software to work 19 again and they’ve given up hope and hope is an 20 important thing to have. 21 From about 2004 through 2007, I had 22 degenerative disk disease in my lower back at three 0034 1 levels. There were too many nights I had to simply 2 take my narcotics and pray I fell asleep to ease the 3 pain. I tried a number of pain management treatments 4 and was told I would be a pain management patient for 5 life but that wasn’t good enough for me. So I did what 6 a lot of my customers do. I kept looking for a 7 solution. 8 I found one and after much research learned 9 that our health system would not cover a new artificial 10 disk procedure, but in Europe they have been doing this 11 for years. 12 I found a clinic in Munich, Germany, where I 13 had the three bad disks replaced. I grew an inch and a 14 quarter taller from the operation and I’m now playing 15 tennis again. Hope is a wonderful thing to have. 16 When we use computers and software, we have a 17 reasonable expectation that they will continue to be 18 healthy. Maybe they need a fix here and there but 19 still work. We all depend on the hardware our 20 computers use and the software that does the job we 21 need. 22 There is no greater fear than turning on that 0035 1 computer and seeing a virus or opening up that program 2 which may be connected to a dongle and it not work. 3 This is true whether you work for NOAA and depend on 4 the software to enter mission-critical fisheries data 5 or Westinghouse and use your software for stress- 6 testing your core structures, both of which are clients 7 of mine. 8 This division of Westinghouse uses what is 9 called a Legacy System. A Legacy System is an old 10 computer system using an old computer hardware 11 operating system and software. By removing this 12 somewhat working dongle, they are hoping I can help 13 them upgrade to a newer, better, more reliable system. 14 In this case, a 350 megahertz processor, 64 15 megabytes of RAM and an ISA computer running DOS 6.22. 16 For comparison, now we are running quad core systems at 17 3.5 gigahertz per core, six gigabytes of RAM, PCIE 18 slots and Window 7 is due out shortly. 19 So as some have suggested, why not simply 20 upgrade this package? Because the software program is 21 part of a system and is interdependent with other 22 programs that do the work. The system cannot be taken 0036 1 out of service and the cost of designing new systems is 2 quite high. 3 Retraining on a completely new system would be 4 costly in lost time and money for not much benefit. 5 I’ve included a 26-page illustrated Quick Start Guide 6 by Zhukov. It shows the software structure and 7 relations for the structure testing process and even if 8 there are no engineers in the room, I think by looking 9 at the last page, we all get it. It’s not easy to set 10 up and run and I submitted that the other day, a couple 11 of day ago actually, of course, and this is the last 12 page that I wanted to refer you to. The rest of the 13 structures are quite -- I’m sorry. 14 Mr. Carson? It would be this -- it’s this 15 document here and this was e-mailed. The last page. 16 MR. CARSON: He didn’t open his e-mail till 17 last night, so we can’t consider it. Sorry. 18 [Laughter.] 19 MR. MONTORO: The last page, gentlemen, is 20 this poor guy who’s gone through quite a bit of work 21 here trying to put all this together and has worked 22 quite hard doing what he had to do. 0037 1 However, the base system that this gentleman 2 uses cannot be upgraded -- can be upgraded to last 3 longer. Let’s be clear. The dongle is not damaged. 4 It functions but only on very old obsolete hardware 5 systems for which program -- for which replacement 6 parts are very difficult to find. 7 The dongle prevents much newer hardware from 8 being used because the dongle will no longer be 9 recognized by the software, but by bypassing this 10 access control device, a faster computer can be used, 11 extending the useful life of the system, and this is 12 actual harm we’re showing on somebody that’s actually 13 purchased the software quite a bit of time ago. 14 The same thing is true with NASA Space Shuttle 15 Program not far from my hometown St. Augustine. It 16 uses a large amount of ‘70s era technology. 17 Replacement cost is prohibitive because of the 18 expensive requirements for flight certification. The 19 Legacy hardware currently being used has completed the 20 expensive integration and certification requirement for 21 flight, but any new equipment would have to go through 22 that entire process again, requiring extensive tests of 0038 1 the new components and their new configurations before 2 a single unit could be used in the Space Shuttle 3 Program. This would make any new system that started 4 the certification process a de facto Legacy system by 5 the time of completion. 6 Additionally, because the entire Space Shuttle 7 system, including ground and launch vehicle assets, was 8 designed to work together as a closed system and the 9 specifications have not changed, all of the certified 10 systems and components still serve well in the roles in 11 which they were designed. 12 What I have in front of me are dongles that 13 are connected to a printer port. That would be these 14 devices. I know we have all seen those before. A 15 dongle is a technological measure. It is an access 16 control device that attaches to either the printer port 17 or the USB port of a computer and prevents a licensed 18 end user from accessing the computer program that has 19 been legally purchased, a non-infringing use. 20 Unless the hardware access control device is 21 attached and the required device driver installed and 22 is supported by the operating system and all are 0039 1 functioning properly, the program will not run. 2 One program would have one dongle. So if you 3 have multiple programs, you would, of course, need 4 multiple dongles. This is not uncommon. Even though 5 these dongles are only a few years old and the software 6 runs fine, they can only be run on a computer with a 7 printer port and today most computers do not have one. 8 So now we have the new and improved version 9 USB dongles and these stick out from multiple sides of 10 a laptop and are waiting to be broken and it looks 11 something like this. 12 Now, in my written testimony before that I 13 submitted in the initial comments, I also showed how 14 one of the companies was SafeNet Technologies who had 15 problems with their own dongles USB-type as far as 16 being on the ports and breaking quite easily. They 17 actually went through and ended up doing a comparison 18 test to show that now they have a new improved version 19 which doesn’t break as easily and that’s nice, unless 20 you’re the person using that software that had the 21 broken dongle to begin with and have had to wait and 22 get a replacement and then they’ve had down time and 0040 1 not being able to use the software you paid for. 2 I’d like to refer you to an article called 3 “The Problem with Dongles,” and this by John Gillespie- 4 Brown and I’ve sent that one up, also, that echoes the 5 comments I have made before. 6 John Gillespie-Brown is a published author, 7 lecturer, founder, CEO and an expert on software 8 licensing and piracy. He currently mentors at 9 Stanford, UC-Berkeley, and the London Business School. 10 He says, “One of the problems with dongles is that 11 there are no standards for dongles, meaning that each 12 dongle solution works differently. Using different 13 ASICs,” which is a computer chip that goes in the 14 little dongle itself that perform the calculations, 15 “and software drivers.” 16 He goes on to say, “They create support 17 headaches. Dongles can cause incompatibilities with 18 hardware and software. A dongle that works perfectly 19 well may suddenly experience problems following a major 20 operating system upgrade or a driver patch,” and this 21 happened with Vista, Microsoft Service Pak 1. 22 They introduced a service pak for Vista and 0041 1 the end result was that USB devices were not being 2 recognized. 3 “Should a dongle suddenly begin locking up 4 because of changes to its operating environment, the 5 supplier will have to resolve the problem, often with 6 considerable time delays waiting for new drivers. “ 7 Again, these are the words of a well-known 8 expert in software security that echo identical to the 9 words that I’ve said to the Copyright Office here for a 10 number of years. 11 st 12 On Wednesday, April 1 , 2009, the Texas State 13 Senate gave preliminary approval to a state budget that 14 includes a provision forbidding government agencies 15 from upgrading to Windows Vista without written 16 permission. 17 Senator Juan Hinojosa, the Vice Chairman of 18 the Finance Committee, proposed a rider because of the 19 many reports of problems with Vista. The problems with 20 this particular operating system are known nationwide 21 and I think it’s Apple who’s made quite a good series 22 of commercials on the poor gentleman from Microsoft who 0042 1 does everything but actually improve the operating 2 system. 3 Companies continue to get bought and sold and 4 their products do become obsolete. I have testified 5 over the years that a dongle exemption is needed 6 because companies get bought and sold and products are 7 no longer supported. This can happen to even the 8 giants of an industry. 9 In March of this year, it was reported that 10 IBM was looking to buy Sun Microsystems. Most of us 11 are familiar with Sun through the Java programming 12 language, but they also were very big in the server 13 market and that business was based on Sun’s proprietary 14 hardware designs, something that will be obsolete very 15 shortly, especially when ANV, Unitel can run much lower 16 cost processors using personal computer technology. 17 On April 1st , 2009, a shocker, Silicon 18 Graphics, 12 years ago was nearly a $4 billion-a-year 19 company, is being sold for $25 million to Rackable 20 Systems. Now, SGI made some of the most incredible 21 computer systems using their own chips and operating 22 systems. 0043 1 If you ever saw the “Jurassic Park” movies, 2 those special effects were done with all Silicon 3 Graphics computers. Now, all that is left is obsolete 4 hardware and obsolete operating systems. 5 But I saved the best for last. Over the 6 years, the two largest dongle manufacturers have been 7 Rainbow Technologies and Aladdin Knowledge Systems. 8 Rainbow was acquired by SafeNet a few years ago and as 9 I testified, more than half of their product line was 10 discontinued. 11 On March 27th , 2009, a report stated that 12 Aladdin will be acquired by SafeNet, leaving us with 13 one large dongle company and a boatload of dongles that 14 would be discontinued and no longer supported. 15 In my initial comments, I noted that Aladdin 16 was expected to earn between a $123 and a $130 million 17 for the year of 2008, which was up from the $105.9 18 million in 2007. 19 Under this new Obama Administration, perhaps 20 we can give the average person a little more credit and 21 realize they are not trying to rip off companies, yet 22 they do not want to be ripped off either. 0044 1 When an operating system or older hardware 2 interferes with the user’s right to use software that 3 was lawfully obtained that uses a dongle, consumers 4 deserve a choice in obtaining a replacement part should 5 they have a problem with it. 6 If I buy a General Motors car and the 7 alternator goes bad, even though General Motors makes 8 that part, I don’t have to buy that replacement part 9 from General Motors because other companies are out 10 there in the marketplace providing that replacement 11 part. 12 If 64-bit Microsoft Windows 7 does not have a 13 device driver for a dongle, which is needed for the 14 software that was legitimately obtained to run, 15 shouldn’t the consumer be allowed to find one from any 16 source? 17 I applaud the Joint Commenters. All of the 18 reply comments have been positive for renewing the 19 exemption, at least in its present form. This, from 20 what were once opponents. There has never been an iota 21 presented that the dongle exemption, even dating back 22 to the original one nine years ago, has done any harm 0045 1 to the industry when I first proposed it. 2 In 2006, this Board defined obsolete as it 3 related to video games and said, “A format shall be 4 considered obsolete if the machine or system necessary 5 to render a perceptible work is no longer manufactured 6 or reasonably available in the marketplace,” and it was 7 specifically relating to machines or systems, and I 8 think we’ll find the same thing in the next three years 9 if the panel approves my proposed class of works. 10 Computer programs protected by dongles that 11 prevent access due to malfunction or damage or hardware 12 or software incompatibilities will require obsolete 13 systems or obsolete hardware as a condition of access. 14 I thank you once again for the opportunity to 15 be part of these proceedings and look forward to your 16 questions. 17 MS. PETERS: Thank you. 18 MR. MONTORO: Thank you now. 19 MS. PETERS: Mr. Metalitz? 20 MR. METALITZ: Thank you. Good morning, and I 21 will say for the record again I’m here on behalf of the 22 nine copyright industry organizations joined together 0046 1 as joint copyright -- joint creators and copyright 2 owners. 3 I’m not one and a half inches taller than I 4 was a few years ago. In fact, I think I’m one and a 5 half inches shorter than I was last Friday after three 6 days of hearings, but, nonetheless, I’m happy to 7 present the views of the Joint Commenters on Proposed 8 Exemption 6. 9 Mr. Montoro is correct that we’re not opposing 10 the recognition of an exemption this time that would be 11 the same as what we recognized last time. It’s not 12 renewal of the exemption but it would be recognition of 13 the same exemption and that really depends on whether 14 you think that he has met the burden of showing -- of 15 satisfying the criteria that you have been directed by 16 Congress to apply. 17 We do oppose any expansion of the existing 18 exemption, in particular the expansion that he has 19 proposed, and this is primarily over the issue of 20 alternatives to circumvention, not on the issue of non- 21 infringing use or whether there is a non-infringing use 22 and whether the prohibition is affecting it. 0047 1 I guess I would -- one question that I wasn’t 2 really able to answer for myself when reviewing 3 submission was what activity is currently -- excuse me. 4 What activity is not permitted under the current 5 exemption that he would be seeking to engage in under 6 the exemption that he proposes? It’s possible that 7 that would shed some light on the proposal for an 8 expansion. 9 In some cases, for example, I’m not sure that 10 what he’s describing doesn’t describe a malfunction of 11 the dongle, a dongle that’s not working, and if that’s 12 the case, perhaps -- and if the dongle is obsolete in 13 the sense that the office defined it in the 2006 14 exemption, perhaps there are -- perhaps it falls within 15 the current exemption. 16 But in looking at the submission, there -- I 17 think there’s many examples that were given that I 18 think would be -- I think Mr. Montoro is saying would 19 be covered by his proposed exemption that are not 20 covered by the existing exemption under the headings of 21 Software/Operating System Incompatibilities. 22 My printout of this was not paginated, but 0048 1 it’s on the fifth page of his submission, and then 2 there’s another section called Dongle 3 Malfunction/Hardware Incompatibilities on Page 8. 4 So having looked at some of these, I’m not at 5 all sure that they really describe a situation in which 6 there is a malfunctioning dongle at all and I certainly 7 don’t think that they describe a situation in which 8 there are no alternatives to circumvention or no viable 9 alternatives to circumvention in order to obtain access 10 to the software. 11 If you look at the example that’s aligned with 12 Exhibit 15 on Page 6, Windows Vista doesn’t -- the 13 dongle doesn’t work with Windows Vista. Well, 14 obviously you can use a different operating system. 15 Exhibit 16, same thing. Exhibit 17, this 16 seems to consist of a support document from Aladdin 17 that explains ways to solve problems if your dongle is 18 not working. I’m not sure if he’s saying that none of 19 these solutions work, but certainly the exhibit that’s 20 presented there shows that the manufacturer is 21 supporting the dongle and is providing suggestions on 22 how to get the dongle to work when it’s not working. 0049 1 Exhibit 18, as it’s described here, this is 2 not a dongle problem, this is a software problem. The 3 software is sending out a signal that’s causing the 4 machine that it’s operating to -- milling machine to do 5 something -- to start moving erratically. That’s a 6 software problem. The dongle is not causing that 7 problem. There’s no indication that the dongle is 8 malfunctioning in any way whatsoever. 9 Exhibit 21. If you have multiple user 10 profiles, then you may have problems, your dongle may 11 not work right. Well, there’s an obvious solution. 12 Don’t use multiple user profiles. 13 On Exhibit 22, -- excuse me. I skipped 14 Exhibit 20 which doesn’t even mention dongles. It 15 talks about USB devices and I’m not familiar with this, 16 but I’ve got to assume that if no USB device was 17 working with Vista, that that problem was fixed pronto 18 by Microsoft. If I’m wrong, then I’m not sure how I’m 19 operating the mouse on my laptop but that’s -- I think 20 this problem went away. 21 Exhibit 22. Microsoft again is telling you 22 how you can fix this problem of incompatibilities 0050 1 between the dongle and an operating system, similarly 2 with Exhibit 23. 3 In the next section, Exhibit 26, it sounds 4 like this is a malfunction of the virtual private 5 network that’s dropping these calls and without ending 6 the session. The company’s offering to fix it for a 7 price. It’s not clear to me that this is a situation 8 that would even be covered by his proposed exemption. 9 On Exhibit 27, someone named Aaron approached 10 Mr. Montoro looking for a replacement dongle. 11 Obviously they came to the wrong place, but there’s no 12 indication that they couldn’t get a replacement dongle 13 if they went to the right place. 14 Exhibit 31. This isn’t describing a 15 malfunction of the dongle. This is describing the 16 conditions under which the dongle will function 17 correctly and, you know, if you plug something in to 18 the wrong port, it’s not going to work, and again 19 they’re saying some other things that you have to make 20 sure are not the case if you want your dongle to work. 21 Again, I think there’s -- these are all work-around 22 that don’t require circumvention. 0051 1 So on the whole, I don’t -- I didn’t see that 2 the submission really demonstrated the need for 3 expansion of the exemption because it didn’t 4 demonstrate situations in which only circumvention of 5 the access control was a viable means of gaining access 6 to the software which is what this is, you know, all 7 about. 8 Now, I’m not sure in the discussion of the 9 reference to NASA whether Mr. Montoro is saying that 10 the entire Space Launch System of NASA would have to be 11 redesigned unless a dongle could be circumvented. 12 I think if that were demonstrated, that, I 13 think, would run up against what Ben Golant asked about 14 a couple of days ago which was how do we decide what -- 15 to what degree could we say that if the user has to 16 incur expense but can -- that if the user incurs some 17 expense, it can accomplish -- it can access the 18 material without circumventing, is there an endpoint to 19 that, and I suppose if you were to say that, yes, NASA 20 would have to design, redesign its entire Space Launch 21 System, then that -- it would be kind of hard to argue 22 that that was an alternative circumvention. 0052 1 But I don’t think we really have proof of that 2 or it might be interesting to explore that further. 3 Several other of the examples and in the 4 testimony today involve delays in getting replacements 5 which are unfortunate but clearly there is -- if you 6 can get the replacement dongle, then the exemption 7 doesn’t apply. So I’m not -- taken as a whole, I think 8 it’s very questionable that the evidence has been 9 presented that would support any expansion of the 10 exemption that you have before you. 11 I’ve not seen the material that Mr. Montoro 12 submitted a few days ago and, of course, would be 13 interested in seeing that and we may have some 14 reactions to that, but short of that, I would simply 15 urge you not to -- if you do decide that the burden has 16 been met for recognizing an exemption in this area, 17 that you not expand it beyond the boundaries that you 18 recognized in 2006. 19 Thank you. 20 MS. PETERS: Thank you. Do you want to 21 respond to Mr. Metalitz? Maybe specifically, you could 22 address his question about what activity is not 0053 1 permitted under the current exemption that would be 2 covered by the expansion? 3 MR. MONTORO: Yes, ma’am. I think one of the 4 problems maybe is the definition of what we’re talking 5 about and Metalitz -- 6 MR. METALITZ: Steve. 7 MR. MONTORO: May I? Thank you. 8 MR. METALITZ: Yes, please. 9 MR. MONTORO: I’ll take it. Thank you. You 10 know, I understand what Steve’s saying, but for the 11 most part, there are not the activity that’s not 12 covered under the present exemption. 13 We’ve got -- the way the exemption was framed 14 and the way my submission in the last -- about three 15 years ago was not exactly timely and all the materials 16 that were presented. I didn’t really have an 17 opportunity, I think, to do the justice to that 18 argument and I certainly apologize to the Board for not 19 being timely on that. 20 But now, when you’ve got the activities -- let 21 me just put this -- think of how I want to say this. 22 If we’re talking about obsolete hardware and 0054 1 obsolete software and incompatible operating systems, I 2 think that’s what I’m really talking about. Now, how 3 do we define a malfunctioning dongle or is it a problem 4 with the operating system or is it a problem with the 5 dongle? Is it a problem with the hardware? And I 6 suppose we could go passing blame from one point to the 7 other to the other, but I think really these whole -- 8 everything operates as a unit and what I tried to make 9 the point of in my testimony today was that all these 10 systems are integrated. 11 You can’t simply have a dongle and run a 12 program without an operating system. You can’t run a 13 program without a computer. So I don’t know if we can 14 actually separate and say that if one -- you can have 15 one thing but not the other and if we have any one 16 part, for example, my example with Windows 764 coming 17 out and the problem we had with Vista actually, which 18 was almost identical in the beginning when Vista came 19 out because it was completely rewritten software, but 20 drivers for some of these devices were not available 21 and now when we’ve got Aladdin being bought out by 22 SafeNet, if the dongle functions under Windows XP, 0055 1 that’s fine. 2 Windows XP is being phased out, won’t be 3 supported anymore, and Microsoft makes that very clear 4 on their website. So the newest operating system is 5 Vista. Now, Vista won’t be phased out. So we have no 6 other operating system, as Steve suggested, to go back 7 to. He said don’t run it on Vista. Well, we really 8 don’t have any choices. That’s what sold on new 9 computers. 10 Microsoft doesn’t sell DOS anymore. They 11 don’t sell Windows 3.1 anymore and they don’t sell XP 12 anymore, unless you actually downgrade through an 13 original equipment manufacturer when you buy a new 14 computer, and some of these devices don’t actually take 15 -- don’t work under the faster machines. 16 So to answer the question again, is it a 17 question that the dongle malfunctions or is it the 18 operating system or is it the hardware, and I really 19 submit that it’s all of these combined because nothing 20 works by itself. 21 MR. METALITZ: I think what Mr. Montoro’s 22 describing is interoperability problems and again I 0056 1 don’t think that -- this is not new to this proceeding 2 or perhaps this is made in a somewhat different 3 context. 4 I’m not sure there really is an expectation, 5 which I think he indicated at the beginning of his 6 presentation, that every piece of software will work 7 forever on any operating system that comes along, even 8 if the operating system on which it originally was 9 designed, for which it was really designed becomes 10 obsolete. 11 I’m just not sure that that’s a problem that 12 falls within the scope of this proceeding. 13 MR. MONTORO: I think when we -- may I? Thank 14 you. I think when you -- you don’t actually buy 15 software. We lease software. So unless there’s a 16 specific time period that says in the software that 17 you’re buying or leasing, actually, that says this 18 software will only work for a certain period of time or 19 this software is only good until the next operating 20 system comes out, well, it doesn’t do that, and so when 21 you actually go out and buy that version of a product, 22 you’re really expecting that product to continue 0057 1 working and to be supported along the line for a period 2 of time. 3 It works in any of the industries. We really 4 expect if we’re buying something for a CAD design or 5 we’re buying something to use through WestLaw, we 6 expect whatever the access mechanism is to get in to 7 WestLaw will continue to work for us, whether it’s an 8 operating system of Vista or something else. 9 MS. PETERS: Okay. Rob? 10 MR. KASUNIC: I just have a couple of 11 questions about some of the questions that Steve asked 12 in regard to how do -- how would this proposed 13 exemption be limited in terms of certain activities 14 that are offered by copyright owners? 15 For instance, if copyright owners are 16 providing information about how to attempt to fix 17 particular problems or if they’re providing -- even if 18 -- or in -- well, let’s start with one at a time. 19 If they’re providing information about how to 20 address problems, to what extent do individuals have to 21 go by what the copyright owner is offering first? Do 22 they have to establish that none of those fixes that 0058 1 have been suggested are working? 2 MR. MONTORO: I think it’s a matter of time 3 and as I mentioned, the comments from Mr. John 4 Gillespie-Brown, Microsoft admitted they had a problem 5 with Windows Vista when they came out with this Service 6 Pak 1 and I’m glad Steve didn’t have a problem with his 7 mouse, but if you were using a dongle device, you may 8 well have had problems. It didn’t happen to every 9 system. 10 So what happens is you may have -- I guess the 11 reasonable question is what’s a reasonable time to wait 12 for a problem to be resolved and that’s what Mr. 13 Gillespie-Brown talks about. 14 Once a problem is discovered, it has to be 15 submitted as a bug report and if you’ve ever tried to 16 get any information out of Microsoft or contact them if 17 you’ve had a problem, if can take quite some time. 18 Then other people have to report the issue and once 19 they’ve reported the issue, then Microsoft goes ahead 20 and they do their testing and then they do some more 21 troubleshooting and they have to come up with a patch. 22 Now, the period of time -- what’s the 0059 1 reasonable period of time you have to wait to go 2 without your software is really the question? 3 MR. KASUNIC: Well, maybe you could answer 4 that question? 5 MR. MONTORO: Well, and it depends on the 6 industry. I suppose if I’m using my computer to surf 7 the Internet, I don’t think it’s really a big problem, 8 unless I’m doing what I do. If you’re using a computer 9 that’s really important for computer-aided design and 10 manufacturing and you could lose thousands of dollars 11 if this device fails, then you can’t afford to be down 12 for one period of time and I’ve shown examples in my 13 testimony before that these are mission-critical 14 devices. The fisheries, if that is not entered, it’s a 15 big problem. 16 MR. KASUNIC: And so this would vary on the 17 nature of the use and the particular software in terms 18 of what kind of delay would be -- how could that be 19 sort of framed within the exemption in some way, that 20 in some cases where it’s a certain kind of software 21 that the amount of time that would be reasonable -- I 22 mean, is this just putting some kind of -- unless the 0060 1 copyright owner is reasonably responsive? 2 MR. MONTORO: Obviously, I don’t expect the 3 office to frame something that would -- for each 4 individual person out there. I think we’re going to 5 have to simply say that after reasonable attempts have 6 been made to contact the software or copyright owner, 7 if the problem has not been resolved, then a 8 circumvention measure should be available to the end 9 user. 10 MR. KASUNIC: Well, then what about -- going 11 back to the question of -- sort of another level of 12 this beyond delay, the question of cost, and we had 13 some discussion of this and I think we weren’t quite 14 clear exactly what the record had been in the past. 15 Steve and I were talking about that a little, 16 but to what extend -- I believe that the testimony and 17 the evidence had been in the past and I see, at least 18 in your submission this time, as well -- again I don’t 19 have the page number, but I guess this is on the fourth 20 page of the submission in the paragraph that starts, 21 “There are times.” 22 MR. MONTORO: Zemax, yes. 0061 1 MR. KASUNIC: That the program sells for 5,000 2 per user and for 10 people to use the software, but 3 that if something goes wrong, then it looks like it 4 will cost $7,000 to get the service contract, is that 5 right? 6 MR. MONTORO: Yes, correct. From my 7 experience, what I’ve seen is that companies will not 8 simply -- let’s say you have a device, a dongle that is 9 having a problem. Well, the company -- unless you have 10 a maintenance agreement with the company, with the 11 software manufacturer, you have -- they won’t help you. 12 So you actually have to go out and have a service 13 contract. 14 Now, for this company in particular, Zemax, 15 one user license is $5,000. So if you have a $25 16 dongle but no support contract, you’re basically out of 17 luck. Now, if you pay their support contract, that 18 support contract is about $7,000 for those 10 licenses. 19 So you have to have a current maintenance 20 contract in order to get a little device replaced. 21 Things like that are not reasonable. 22 MR. KASUNIC: Well, given that this is 0062 1 occurring in the market, to what extent are we dealing 2 with software for which there is essentially no 3 competition? Is that a factor here? Because I would 4 think that in a situation where the service contract 5 costs more than the software, if there were alternative 6 provides of comparable software that the prices might 7 -- may go down. 8 MR. MONTORO: The problem with that is most of 9 the software that we’re talking about is higher-end 10 software. We don’t usually see 99 cent programs out 11 there that use a dongle because the dongles themselves 12 are expensive, roughly $25 to $40 apiece. 13 So in order to make it worthwhile the company 14 has to sell software that’s rather expensive. So 15 that’s one reason. 16 Now, the program that’s out there, usually 17 these are pretty high-end software programs and the 18 amount of training that it would take in order to 19 retrain your company, you would have to first purchase 20 another program, if it was available. Whether it would 21 be less or not, I don’t know. 22 The problem is that if I have a suit, how many 0063 1 suits are going to be in that same price category? 2 There may be some that are more. I’m sure for what I’m 3 wearing there’s a lot more, but there may be more, 4 there may be less, and does it do everything you need 5 it to do? Is your machinery tooled for that software 6 program, and then what’s the learning curve to go from 7 that program to something else, and then do you have -- 8 how do you integrate that system and take your other 9 stuff offline where you’re creating -- while you’re 10 implementing the new software? 11 MR. KASUNIC: Okay. So there essentially 12 would be little competition for some of these products 13 and maybe not -- it’s just the fact that someone chose 14 a particular piece of software that had maybe 15 unreasonable terms in terms of replacement costs for 16 dongles or service contracts. There aren’t 17 alternatives for those users that -- 18 MR. MONTORO: There aren’t very many 19 alternatives and any alternative out there would be 20 priced along a similar line since we’re talking about 21 similar industries. 22 Let’s say for Zemax, for example, if we’re 0064 1 talking optical design, we’re talking about some very 2 highly-trained professionals. We’re talking about 3 software that does the same things that are going to be 4 in that same price range as far as the software goes. 5 We’re not talking software that might be like 6 Microsoft Word that’s a word processor that we can get 7 get open source word processors that are much less 8 expensive. These are softwares that are very highly 9 specialized. 10 MR. KASUNIC: So to what extent is this 11 example that you gave you in terms of that price 12 relationship of the software and the service contract 13 or the price that would be charged for replacement 14 dongle? Is this the norm in many of the types of work 15 that you’ve had experience with or is this anecdotal? 16 MR. MONTORO: Oh, no. This is quite normal 17 for the industry, that a software -- companies will not 18 provide support unless they have a maintenance contract 19 and that’s very typical. 20 MR. KASUNIC: In the same vein, I guess, as 21 with the question of time and the remedies that are 22 made available for -- by a copyright owner and that 0065 1 having some kind of relative relationship to the 2 particular use of that software and the need for it, 3 are we dealing with a similar kind of situation in 4 terms of costs, that we should be looking at this or 5 considering this in terms of what the substitute would 6 be for costs? If a copyright owner provided a 7 replacement for some fee, and I assume that you would 8 accept there are some amount -- some costs that are 9 reasonable? 10 MR. MONTORO: Certainly. If a copyright owner 11 will replace the device for a customer without having 12 to, you know, go through an exorbitant cost, that’s 13 wonderful. 14 MR. KASUNIC: So how do we quantify what is 15 exorbitant and what is -- is this again just a 16 reasonableness standard in terms of time and price? 17 MR. MONTORO: Well, let’s also remember that 18 the copyright holder has already been compensated for 19 his product and once they’ve been compensated for the 20 product, we’re not taking anything away from them. 21 Now, General Motors, if I buy one of their 22 cars and hopefully they stay in business for awhile, I 0066 1 buy one of the General Motors cars and a device, 2 something goes wrong with it, well, I don’t have to 3 stay only with that vendor because the car’s been paid 4 for. 5 Now, while I don’t own software, I have paid 6 the vendor for what they are asking for for the 7 software and the use of that product. So maybe if 8 something does go wrong, it should be an open market 9 system that I should be able to go ahead and get it 10 replaced somewhere else, if that’s possible. 11 MR. KASUNIC: And how much would -- for 12 someone who knows what the dongle is doing, I mean 13 assuming you had to figure that out, there would be 14 additional costs that would be involved, but how much 15 does this hardware lock cost to produce? Generally, is 16 this -- like for a USB key, it’s like the cost of that 17 piece of plastic and metal and putting in the software 18 into that? 19 MR. MONTORO: Well, there’s the cost of the 20 hardware piece itself, the dongle itself, which is 21 rather minuscule, maybe $35 to $40 roughly, but then 22 there’s whether or not that company will actually do 0067 1 that and obviously they’re not going to sell that 2 replacement for $35 or $40. 3 So the cost to an end user, if they have a 4 problem, are, first, money, and, second, down time and 5 then, third, could be retraining employees, if 6 necessary, if they’re having problems. 7 Most companies, if you have a problem, will 8 want you to send in -- if they do a swap-out, for 9 example, and if you have a current maintenance 10 contract, you’ve got to send in your device to them 11 first. Then once they receive it, they’ll send you out 12 a replacement. So there’s considerable time delays and 13 a lot of industries cannot simply afford to have those 14 delays. 15 MR. KASUNIC: How long and how much - how long 16 would it take and how much does it cost typically for 17 someone to go to a third party to get a replacement? 18 MR. MONTORO: Well, again, there are no other 19 -- there are no real third parties. I mean, I do my 20 service, but it also varies and depends on the kind of 21 software that I’m working on. 22 MR. KASUNIC: And what’s a typical turnaround 0068 1 time for your services? 2 MR. MONTORO: Again, it depends on the actual 3 lock device that we’re working with and the software 4 program. Some things we’ve developed which took quite 5 a bit of expense and time where we can actually turn 6 that over within a day or two and others can take up to 7 a couple of weeks or so or maybe even a little bit 8 longer, depending on the device and if it’s something 9 that’s readily -- that we have regularly pre-made. 10 Nothing is off the shelf, but some of it doesn’t take 11 as much work as others do. 12 MR. KASUNIC: Steve, do you have any thoughts 13 about in terms of any limitations on the -- any 14 proposed exemption in terms of some of those, the time 15 and cost issues? 16 MR. METALITZ: Well, I have two thoughts on 17 this. One is the existing exemption says reasonably 18 available in the marketplace, I think, and that would, 19 I think, subsume issues of time and cost, and I’m not 20 sure there’s been any demonstration of problems with 21 that and it would probably be difficult to come up with 22 a more precise definition. 0069 1 MR. MONTORO: I wouldn’t object to that, 2 Steve, the way it is. 3 MR. METALITZ: Okay. But the other -- well, 4 yeah. I think -- okay. The other -- just to back up a 5 second here, as I understand it, Mr. Montoro is not in 6 the business of selling replacement dongles. He’s in 7 the business of circumventing so that the dongle is 8 unnecessary. 9 The -- again, as I understand it, this is not 10 the mass market, this is a high -- generally a high-end 11 market and it’s not the one I’m most familiar with, but 12 software developers -- software publishers use dongles 13 for a reason and the reason usually is to enforce 14 limitations on the number of simultaneous users or the 15 number of licenses, number of seats that can use this 16 software at once. 17 So if they have three -- I mean, there’s 18 examples in here where there are three dongles and they 19 don’t want to give -- have engineers carry one around 20 because then if they’re not available, they can’t use 21 the dongle, you know, they can’t use the program. 22 But the idea that they’ve already been 0070 1 compensated is a little -- I think is a little bit off 2 because they’ve been compensated on the expectation 3 that license limitations will be enforced and the way 4 they enforce them is through a dongle. At least this 5 is my understanding. 6 Now that’s why there’s a big difference 7 between a replacement dongle which is kind of restoring 8 the status quo and enforcing the -- continuing to 9 enforce the limitation and under this license that Mr. 10 Montoro correctly pointed out, usually these programs 11 are licensed and not sold. 12 There’s a big difference between that and 13 circumventing which eliminates the dongle from the 14 picture and I would think also eliminates the 15 technological means of enforcing the license 16 limitations. I would assume that if there’s no dongle 17 involved, then it’s probably much easier for more 18 people to use this software than is covered by the 19 license. 20 I think if that’s the case, there’s clearly a 21 -- that’s the harm that’s inflicted on the software 22 publisher by circumvention. 0071 1 Now, as you’ve recognized the situation in 2 which it’s appropriate to inflict that harm, if you 3 will, because the software publisher really won’t 4 support -- they won’t provide a replacement dongle or 5 they can’t. You know, they’ve disappeared. It’s 6 obsolete. You know, it’s obsolete in the sense that 7 you’ve defined it. That’s one thing, but I think it’s 8 quite different to say, well, they’re too slow or 9 they’re too expensive or the switching costs from one 10 program to another are too high because I think Mr. 11 Montoro was not saying there’s not competition. 12 He was saying that there are high switching 13 costs and you have to retrain people and so forth. 14 These are features of this market. The companies are 15 trying to compete in this market and to have a -- to 16 expand the category of situations in which 17 circumvention can be accomplished and this method of 18 enforcing their licenses would be taken away from them. 19 If you’re assuming it’s a situation in which 20 they are ready, willing and able to solve the problem, 21 perhaps at a cost that people don’t like and perhaps in 22 a time frame that people don’t like, I think that’s a 0072 1 huge step that I would encourage you not to take, 2 unless you have a stronger record than you have here. 3 MR. KASUNIC: Well, let me address that to 4 you, Joe, that it was my understanding in the past and 5 maybe still the case that when there is some 6 circumvention in order to fix for somebody that there 7 was the inclusion of a technological protection measure 8 on the fix, so that there was an effort by you to 9 prevent this from -- to basically replace the status 10 quo, to limit what harm could come of that. 11 Is that still the case, and is that something 12 that would be an acceptable thing to think about in 13 terms of being included within the exemption? 14 MR. MONTORO: Well, I can only speak for my 15 company and we certainly don’t sell the hardware 16 replacement of a dongle itself because that’s patented 17 by the other companies. So I can’t sell the exact same 18 thing. 19 What we do is we write virtual software that 20 has all the functions that the hardware piece has and 21 in doing so, then it provides all those same functions 22 and when I sell software, typically it would be copy- 0073 1 protected so that once the driver, the dongle 2 replacement driver is installed and we do it as a 3 driver in the operating system, that that driver goes 4 back and we put certain measures on to the hard drive 5 that our software checks that’s like a license manager 6 that comes up to say that this software is licensed, 7 too, and to do our share in trying to keep the 8 copyright owner protected, as well. 9 But to make it -- I’m sorry -- but to make it 10 actually a part of the exemption, I don’t know if 11 that’s practical because not all products can be done 12 that way. 13 Some of the -- if it’s a device that’s 14 obsolete, then I don’t think it would come into 15 question, but if it’s an incompatibility issue on 16 something current, sometimes we’re not able -- we may 17 have to actually patch the software program instead of 18 actually create the driver. That was the case when we 19 did work for the INS, the Immigration and 20 Naturalization Service, back in 2003. 21 MR. KASUNIC: One of the things in that 22 response, that you’re creating in many cases software, 0074 1 so you’re independently creating computer program 2 essentially. 3 To what extent, and you probably don’t have 4 this before you, but I wonder if you’ve thought or if 5 your lawyers have thought about -- I can’t remember our 6 analysis on this in the past, but to what extent might 7 1201(f) and the reverse engineering and some of the 8 other provisions in there provide some of the 9 authorization to do what you’re doing since you’re 10 creating essentially an independently-created computer 11 program. 12 MR. MONTORO: I’m sorry. The 1201(f) is the 13 reverse engineering? 14 MR. KASUNIC: 1201(f) is the reverse 15 engineering section. 16 MR. MONTORO: I don’t have a comment on that 17 at the moment, sir. 18 MR. KASUNIC: Okay. We may have a question 19 later for you on that. 20 One other thing in terms of in the way dongles 21 came up during this proceeding previously was we were 22 talking about authentication servers and I’d just be 0075 1 interested in hearing to what extent dongles are still 2 and other sort of hardware locks are the prevalent form 3 of protecting software and to what extent have you seen 4 that this is moving -- that the industries are starting 5 to move away from dongles to remote authentication of 6 that software? 7 MR. MONTORO: In the general marketplace, I’ve 8 heard Microsoft is going to stop delivering boxed 9 software to stores and be doing downloads, but in the 10 industry that I work with or the industries that I work 11 with typically the newer software would come out, it’s 12 still high-end software, so they’re still getting 13 deliverables and I think the lock devices will still 14 continue for some time. 15 And then again, also, we have the people that 16 have already purchased software along with those lock 17 devices and the companies that are going out of 18 business or merged and there’s still a reason for an 19 exemption due to the fact that companies do go out of 20 business and are bought and sold. 21 MR. KASUNIC: So to what extent is the problem 22 that is faced in this area due to sort of Legacy 0076 1 Systems and to what extent is this with currently- 2 produced software or recently-produced software? 3 MR. MONTORO: I’d say approximately maybe 30 4 percent are Legacy items, then about 70 percent would 5 be really other items. 6 MR. KASUNIC: Would be what? 7 MR. MONTORO: I’m sorry? If we consider 8 Legacy-type as very old hardware, very old software, I 9 think it’s about 30 percent, and if we talk about 10 software that’s current, I think we have something -- 11 well, even the example that I gave a few minutes ago, 12 actually, we’re talking about these dongles that were 13 only a few years ago, now this is Legacy, I suppose, at 14 this point in time, also. So the actual numbers may be 15 reversed. It may be more like 80 percent because these 16 programs and software are currently available still. 17 MR. KASUNIC: And are they still putting out 18 serial port hardware box? 19 MR. MONTORO: Printer, parallel printer port. 20 Not the major companies, not the Aladdins, not the 21 SafeNets. There are still some in the marketplace from 22 other companies. 0077 1 MS. PETERS: Okay. All right. Yes? 2 MR. CARSON: I’d like to get a better 3 understanding of the new language you’re proposing, 4 specifically the language that relates to hardware and 5 software incompatibilities or require obsolete systems 6 or obsolete hardware as a condition of access. 7 All that new language, is that all relating to 8 the same problem? In other words, when you’re talking 9 about hardware or software incompatibilities, are you 10 talking about obsolete systems and hardware or are 11 those two different problems? 12 MR. MONTORO: Typically, it’s the same 13 problem, and it may actually have already been 14 accounted for by Ms. Peters and also what Steven said, 15 as far as how you phrased the initial language a few 16 years ago, and the definition of obsolete being if 17 something is -- how it refers to the machine or the 18 system if it’s not able to render it, and we may have 19 already -- like Steve was saying, it may have already 20 been addressed and it may not even be an issue any 21 longer, if we take that into account. 22 MR. CARSON: Okay. When you do what you do, 0078 1 when you perform your service, are you in any way doing 2 anything with the original computer program itself? 3 MR. MONTORO: Most of the time, no. 4 MR. CARSON: Okay. 5 MR. MONTORO: Mostly what we do is create a 6 device driver that’s independently created that has no 7 code whatsoever from the other product itself and no 8 code that’s similar at all to the actual dongle itself 9 and then we create -- the way a dongle essentially 10 would work is that it comes up with -- it asks a 11 question to -- the software will ask a question to the 12 dongle. The dongle will reply with an answer to the 13 software program. 14 If those two things match, then it’s allowed 15 to continue and work. If the question happens to be 16 what’s 2+1 and it’s looking for 3, then I could add 17 what’s 1+1+1 and that’s 3 and it would come up with the 18 same result. So that’s how we’re actually doing that 19 and it’s through the device driver. 20 MR. CARSON: Okay. And I’m sure we’ve covered 21 this ground in the past rulemaking hearings when you’ve 22 appeared before us but just to be clear. 0079 1 You do understand that, to the extent we can 2 do anything for you, it has to do with Section 3 1201(a)(1) which has to do with the act of 4 circumvention. We can do nothing here that addresses 5 anything you might do which could be construed as 6 offering to the public a service that circumvents? 7 MR. MONTORO: Yes. 8 MR. CARSON: Okay. 9 MS. PETERS: Okay. Thank you very much. We 10 may have further questions, and we will resume at 1 11 o’clock. 12 MR. MONTORO: Thank you again. 13 MR. METALITZ: Thank you. 14 [Whereupon, at 11:42 a.m., the meeting was 15 recessed for lunch, to reconvene at 1 o’clock p.m.] 16 17 18 19 20 21 22 0080 1 A-F-T-E-R-N-O-O-N S-E-S-S-I-O-N 2 [1:05 p.m.] 3 MS. PETERS: Okay. Good afternoon. We are 4 going to be focusing on the Exemptions 5A, B, C, D, 5 which all involve computer programs, and I’m not going 6 to read through which -- what each one of A, B, C and D 7 say. I’m sure it will come out in the presentations 8 that are being made. 9 We’re going -- for those who weren’t here, you 10 make your statement. It’s your opportunity to make 11 your case and prove it and then we ask questions and 12 hopefully we probe holes in some of the things you’re 13 saying, but we’ll see. 14 We’re going to start with you, Mr. Inglish. 15 Proposed Classes 5A through 5D 16 MR. INGLISH: Thank you. Good afternoon. My 17 name is Darren Inglish, and I’m Senior Legal Counsel 18 for Cricket Communications. 19 I’d like to thank you for the opportunity to 20 participate in this hearing and I hope I provide some 21 helpful information. 22 I support the day to day legal-operational 0081 1 issues and that includes issues that arise in the 2 company’s interactions and dealings with our customers. 3 I am not a copyright attorney, but I’m here today to 4 talk about what I see in the marketplace, what I know 5 about Cricket’s customers, and what I see about the 6 importance of this exemption. 7 Cricket is a subsidiary of Leap Wireless 8 International, Inc. Cricket provides innovative, high- 9 value wireless services to a fast-growing youth and 10 ethnically-diverse customer base. Cricket is a mid- 11 sized wireless carrier that focuses on offering low- 12 cost, flat-rate plans using a streamlined distribution 13 and service model. 14 Cricket, along with its joint venture 15 partners, currently offers service in 32 states and 16 holds licenses in 35 of the top 50 U.S. markets. 17 Through its affordable flat-rate service plans, Cricket 18 offers customers a choice of unlimited voice, text, 19 data and mobile web services. 20 The majority of Cricket’s customers earn less 21 than $35,000 per year. Our customer base also trends 22 to the young side. We find that many of these younger 0082 1 customers don’t have established credit histories and 2 don’t even have credit cards. 3 We’ve created an offering that allows them to 4 take advantage of the mobile communications services 5 that are important today. Cell phone unlocking in a 6 non-infringing activity and consumers should be able to 7 unlock their phones, update the preferred roaming list 8 or PRL and then use the phone on whatever network they 9 choose. 10 The fact is software locks aren’t used to 11 protect the integrity of the underlying works. The 12 locks are used by certain carriers to keep customers on 13 their network. Now that’s not -- now there’s nothing 14 wrong with customers staying on a network per se, but 15 locking didn’t develop over copyright concerns, as the 16 Copyright Office pointed out in their 2006 decision, 17 and it shouldn’t stop a consumer from being able to 18 switch telecommunications networks without having to 19 pay for a new phone. 20 Cricket supports a narrow exemption that 21 allows an individual to circumvent the technological 22 protection measures that control access to the PRL that 0083 1 connects a phone to a carrier’s network. 2 Section 1201(a)(1) prohibits the act of 3 circumventing an access control technology. In 2006, 4 the Copyright Office adopted an exemption from the 5 anti-circumvention provisions of the DMCA for computer 6 programs that operate wireless handsets. 7 In your decision, the Copyright Office noted 8 that software locks utilized on wireless handsets 9 prevent customers from using their handsets on a 10 competitor’s network, even after all contractual 11 obligations to the original wireless carrier have been 12 fulfilled. 13 The Copyright Office further noted that the 14 evidence clearly indicated that in order for a customer 15 to switch carriers, the customer would have to buy a 16 new phone because most wireless network providers would 17 not allow the customer to access the boot loader or the 18 operating system within the handset that is necessary 19 to switch networks. 20 In sum, the Copyright Office determined that 21 the use of software locks on wireless handsets to 22 prevent access to the handset’s PRL is a business 0084 1 decision that has nothing to do with the interests 2 protected by copyright. 3 The Copyright Office took the right steps in 4 2006 by adopting an exemption that gives consumers the 5 ability to rightfully use the cell phone that they’ve 6 purchased. Pursuant to the exemption, a customer that 7 owns his or her phone is able to update the phone’s PRL 8 and bring that phone to Cricket’s network, if the phone 9 is compatible with Cricket’s technology. 10 Since the 2006 exemption was adopted, Cricket 11 has seen significant increases in the number of 12 customers who want to bring their phone to Cricket’s 13 network. Cricket expects those numbers to continue to 14 grow over the next three years. 15 The 2006 exemption for cell phone unlocking is 16 due to sunset on October 27th , 2009. However, a new 17 exemption is warranted now more than ever. Little has 18 changed since the Copyright Office adopted its initial 19 exemption in 2006. 20 Many wireless providers are still using 21 software locks on wireless handsets or not providing 22 the unlocking codes as a means to prevent their 0085 1 customers from migrating to a competing carrier’s 2 network or at least frustrate their efforts to do so. 3 However, at the same time we are seeing a 4 growing number of customers that want to keep their 5 phones when they change carriers. We see a number of 6 factors that contribute to the growing number of 7 requests. 8 For one, many low-income customers simply 9 can’t afford to buy a new phone, no matter how 10 inexpensive the handset. Higher-income customers are 11 also affected and may not want to buy a new phone 12 simply because they’re changing networks. 13 While the vast array of technological features 14 available on high-end handsets has increased since 15 2006, so has the price for many of these devices. 16 Customers do not want to pay good money to buy a new 17 phone when they already have one that works perfectly 18 well. 19 Phone subsidies aren’t really an option either 20 since customers typically end up paying more for their 21 monthly service, plus some customers don’t want to 22 invest the time to learn to operate a new phone or they 0086 1 have many concerns about losing customer content that 2 they’ve put on the phone. 3 Indeed, the various comments filed in this 4 proceeding clearly indicate that cell phone unlocking 5 and updating the PRL is an issue of great importance to 6 consumers who want the freedom of choice and the 7 ability to use their lawfully-owned handsets on a 8 wireless network with the best rates and that best 9 suits their needs. 10 Cricket’s customers in particular would suffer 11 adverse effect if the Copyright Office does not adopt 12 an exemption to the DMCA’s anti-circumvention 13 provision. 14 Cricket serves a diverse segment of customers 15 that is typically under-served by traditional wireless 16 carriers. Fifty-six percent of Cricket’s customers are 17 Hispanic, African American or another minority, 18 compared with just 29 percent of traditional carriers. 19 Additionally, 74 percent of Cricket’s 20 customers have annual household incomes of less than 21 $50,000 and 62 percent report that they make less than 22 $35,000 per year. Moreover, Cricket’s customers are 0087 1 also relatively young, as 50 percent of Cricket’s 2 customers are under the age of 35. 3 Because most of Cricket’s customers are lower 4 in income, many cannot pass the income and credit 5 requirements necessary to obtain service from one of 6 the bigger traditional post-paid carriers. As a 7 result, pay-as-you-go wireless service providers, such 8 as Cricket, are frequently the only option for these 9 customers to obtain wireless service. 10 Unlike most of the major wireless carriers, 11 Cricket does not run a credit check, does not require 12 long-term contracts, and does not impose early 13 termination fees. Cricket is able to offer its high- 14 quality, low-cost mobile service in large part because 15 it runs its network efficiently and has streamlined its 16 distribution and service model. 17 To keep costs low, Cricket allows its 18 customers to bring in flashed phones and activate it on 19 the Cricket network. Without an exemption from the 20 DMCA’s anti-circumvention provisions, Cricket’s low- 21 income customers would be required to purchase a new 22 handset and would not be able to take advantage of the 0088 1 cost savings from reflashing a phone to Cricket’s 2 network. 3 Although large carriers would argue that such 4 cost savings are de minimis and therefore ought not to 5 be considered, when such cost savings are viewed in the 6 context of thousands of customers, the cumulative 7 effect amounts to a significant impact, particularly 8 for low-income individuals. 9 Moreover, when viewed from the perspective of 10 Cricket’s lowest-income subscribers, this savings means 11 the difference between being able to afford having 12 wireless service and not having wireless service. 13 When considering that more than half of 14 Cricket’s customers fall into the lower-income 15 category, the harm that these customers would suffer in 16 the absence of an exemption becomes even more evident. 17 Cricket’s customers in particular would be 18 affected by the absence of an exemption because 19 Cricket’s wireless customers use their wireless service 20 differently than the average mobile phone user. Based 21 on company survey, Cricket customers talk an average of 22 1,500 minutes per month, more than double the wireless 0089 1 industry average, and 70 percent of Cricket’s customers 2 have cut the cord and rely solely on Cricket for their 3 phone service. By comparison, 15 percent of all U.S. 4 wireless subscribers rely solely on their mobile phone. 5 In addition, 93 percent of Cricket customers 6 reported their Cricket phone was their primary phone 7 compared to just over half of traditional wireless 8 customers. 9 If Cricket’s low-income customers are no 10 longer permitted to unlock and reflash phones for their 11 personal use and cannot afford to buy new phones, these 12 customers would be at risk of having no access to phone 13 service whatsoever. 14 Cricket’s low-income customers would not be 15 the only customers adversely affected if the Copyright 16 Office does not adopt an exemption. Customers simply 17 seeking more robust network choices on which to operate 18 specialized handsets would also be affected. 19 As other commenting parties have recognized, 20 the industry now offers a dizzying array of wireless 21 devices, ranging from basic models to full-featured 22 wireless handsets with characteristics, such as QWERTY 0090 1 keyboards, touch screens, e-mail service, and the 2 capability to access high-quality video and audio. 3 The availability of these enhanced features 4 and the heftier price tags that consumers generally pay 5 for them further supports the rationale that a customer 6 should be able to keep their phone and take it to 7 whatever service provider he or she chooses. 8 Unlocking wireless handsets permits customers 9 to use the product that they have already purchased. 10 Unlocking and reflashing also lets consumers choose 11 more freely between competing service providers. 12 It is worth noting that in the comments filed 13 in the proceeding by actual customers, all of them 14 favored continuing the DMCA’s anti-circumvention 15 provision. 16 For example, Jonathan Fletchinger noted that 17 the 2006 DMCA exemption permitted him to unlock a phone 18 he purchased from AT&T and bring it to T-Mobile’s 19 network because T-Mobile had significantly more 20 affordable texting rates. T-Mobile’s more affordable 21 texting rates in turn allowed him to better communicate 22 with his deaf wife because he was no longer constrained 0091 1 by the number of messages that he could afford to send. 2 Commenter Doug Kilpatrick also used his 3 unlocked and reflashed phone for traveling to Thailand 4 and was able to save hundreds of dollars by using a 5 prepaid SIM card instead of the international roaming 6 service rates offered by his domestic provider. 7 Commenting parties in this proceeding have 8 also said that an exemption to the anti-circumvention 9 provisions of the DMCA may not be necessary. They say 10 that there are ways to connect to a wireless network 11 without unlocking a phone, including asking the carrier 12 to unlock the phone or simply buy a new phone that is 13 compatible with the customer’s network of choice. 14 Neither of these options are viable alternatives. 15 For one, wireless carriers may say that they 16 will unlock a phone if asked, but what the carrier does 17 and what the carrier says are frequently not the same 18 thing. 19 Commenter Kilpatrick said that his request to 20 unlock his phone when he traveled to Thailand was 21 flatly refused by his service provider. Not all 22 carriers will unlock phones and those that do usually 0092 1 impose conditions or other unreasonable restrictions. 2 Opponents of the exemption have also said that 3 consumers can simply go buy a new phone instead of 4 unlocking and reflashing their existing phone, even if 5 this alternative is perhaps more inconvenient and 6 costly, but buying a new phone is not a mere 7 inconvenience to Cricket customers. 8 As carriers opposing the exemption may allege, 9 many of Cricket’s customers literally live paycheck to 10 paycheck and do not have disposable income to purchase 11 a new phone, even if the phone is a less expensive 12 subsidized model. 13 Cricket customers only have access to a phone 14 when that phone is given to them at no cost by a 15 friend, relative or other acquaintance. Buying another 16 phone simply isn’t an option. 17 In conclusion, the Copyright Office should 18 adopt an exemption to the DMCA’s anti-circumvention 19 provisions that permit the owner of wireless devices to 20 use them on whatever network they choose. 21 In general, locks benefit the carrier at the 22 expense of the consumer, but unlocked phones can 0093 1 provide a huge range of benefits. Consumers clearly 2 support adopting an exemption. As we have seen since 3 2006, when the initial exemption was adopted, the 4 growing number of consumers that ask to keep their 5 phone when changing networks shows that the exemption 6 works, that it is utilized by consumers and that 7 consumers would be harmed in their legitimate use of 8 their property, unless the exemption is adopted. 9 Thank you. 10 MS. PETERS: Thank you. Mr. Gilbert? 11 MR. GILBERT: First off, let me just thank you 12 very much for the opportunity to come speak before you. 13 I know that my submission was received a little bit 14 late, so I especially appreciate you allowing me to 15 come speak. 16 I am not a lawyer, so I don’t know if that 17 makes me the only not lawyer that you’re going to hear 18 from during this entire time, but I am a computer 19 programmer and marketing person. So I hope that my 20 presentation to you will be both interesting and 21 informative. 22 I have paper copies of these that you can have 0094 1 at the conclusion, as well. It’s just a PowerPoint 2 presentation here that I’d like to walk you through. 3 When Apple first launched the iPhone, we 4 immediately decided this was a platform we wanted to be 5 on. In fact, this was the only platform that we wanted 6 to be on. So we feel that we’re going to be able to 7 bring a unique view to this proceeding because we’re, 8 from my understanding, the only developer that was 9 willing to come forward and speak about our 10 experiences. 11 Some of this presentation may be slightly 12 shocking to you. I apologize ahead of time. 13 Just the basics about my company, iCall. We 14 were founded in 2005 by two friends. We’re one of the 15 most popular Voice Over IP Applications on the planet, 16 downloaded almost four million times. We have filed 17 all of our software source codes with the Copyright 18 Office, and we provide a model that allows people to 19 make free or low-cost phone calls from their computers 20 or their iPhones. 21 We subsidize the free phone calling with 22 advertisements and it has a particular appeal to young 0095 1 people and people who are on limited budgets. 2 As I mentioned, the mobile calling product 3 that we’ve manufactured is exclusively available on the 4 iPhone. It is not available on any other device. 5 We have launched -- we’ve been in the App 6 Store now for a couple months and we are absolutely one 7 of the most popular social networking applications in 8 the App Store. 9 Our quality of our service actually exceeds 10 that of a cell phone because it’s digital and it’s not 11 going over radio waves in the traditional manner. You 12 can use our service in any location where you have a 13 wi-fi signal. If you use the jail-broken version, you 14 can use it anywhere that you have a 3G signal. 15 The benefits include incredible discounts on 16 international calling. I could certainly give you 17 examples, but, for example, to call Cuba on AT&T and 18 talk to a relative for 10 minutes will cost the average 19 person somewhere around $20 with AT&T. It will cost 20 more like $2 using our service. 21 We are location agnostic, which means that you 22 can use the application in Thailand or in New York and 0096 1 every call you make to the United States is considered 2 a domestic local home area call. 3 The other feature we offer is that you are 4 able to switch calls from the cell networks directly 5 over to VOIP during the middle of a call which allows 6 consumers to save minutes as well as to solve a lot of 7 problems with shoddy reception. 8 This is where I wanted to talk a little bit 9 about just the development cycle that every developer 10 goes through. I apologize if I’m repeating anything 11 that you already know, but I thought that this quote 12 from Steve Jobs was quite appropriate. 13 “I’ve always wanted to own and control the 14 primary technology in everything we do.” 15 In order to become an Apple developer, first 16 you have to register on their website. That 17 registration is fairly simple. You then wait for Apple 18 to communicate with you and then you provide 19 documentation of your corporate or personal identity. 20 They do this as a safeguard to make sure that they know 21 who is developing applications for their store and who 22 they’re doing business with, and then you pay a fee to 0097 1 activate your account. 2 Developing for the iPhone is not a free thing. 3 The fee ranges, depending upon what type of developer 4 agreement you would like to enter into. 5 Once you become approved to become a 6 developer, you get access to the Apple Developer Portal 7 where you have to install Apple’s Development 8 Certificates. You then go through an interface to add 9 devices to your account. Generally, these would be the 10 devices that you as a developer are planning on testing 11 on because it’s just good practice to test your 12 software before you deliver it to consumers. 13 Third, you genera an application identifier, 14 and fourth, you download the provisioning profile. The 15 provisioning profile is kind of the secret key that 16 allows a phone to run your application. It contains a 17 list of all the phones that are allowed to run a 18 particular application and must be on the phone before 19 an application that is not out of the App Store can 20 run. 21 The development life cycle, once you’ve built 22 your application, is to develop and test. Some 0098 1 application developers don’t test. Then you provision 2 the devices of your beta testers, much in the way that 3 you did with your internal phones. Then you distribute 4 your provisioning profile by e-mail or by the Web and 5 you give that to the pool of beta testers that you have 6 selected and then you keep testing and developing until 7 the product’s ready or at least we hope that you keep 8 testing. 9 And this is the -- now that you are somewhat 10 up to speed on the cycle that goes into developing for 11 the iPhone, I’m going to talk to you a little bit about 12 our experience with it. 13 This again quote, I thought, was quite apt on 14 their website. They state that “the fastest path from 15 code to customer is with Apple.” 16 Okay. On February 1st , 2008, we first began 17 the investigation of putting iCall on to an iPhone. 18 Our realization was this was a very powerful device and 19 that it actually had processing power and memory that 20 exceeded the laptop I used in college and I’m pretty 21 young. 22 We developed a prototype using the jail-broker 0099 1 SDK. There was no application development allowed for 2 the iPhone at this point in time. There was no App 3 Store. There was no SDK and a bunch of hobbyists and 4 hackers who had put together an SDK and figured out the 5 secret commands and headers that are available on the 6 phone. 7 We began developing a prototype and we’re very 8 excited by the way it performed. On March 6th , we 9 submitted our development application using the 10 procedure that I outlined to you earlier and on March 11 6th , they also announced the iPhone SDK. Apple was 12 going to allow developers to build applications for the 13 phone. Prior to that, they’d only been allowed to 14 develop web-based applications which were of limited 15 value and use to the consumer. 16 On April 23rd , our developer application was 17 approved. During this time they contacted us several 18 times to verify that my partner was indeed allowed to 19 sign agreements on behalf of our company. It was a 20 fairly arduous process. 21 We began developing the next day and we 22 developed for approximately a month and a half. When 0100 1 we got to the point where we could begin doing internal 2 alpha testing on the devices that we had registered 3 with the Development Portal, we alpha tested for 4 several months, and then in August, we began beta 5 testing through the platform, through the official 6 Apple platform using the method that I described to you 7 earlier. 8 We had 95 beta testers enrolled. We had 9 thousands of applications. When we opened the beta 10 tester website that allowed people to submit the 11 requests, within two hours we’d had 3,000 people submit 12 requests to beta test our software. There was clearly 13 a high demand for our software. 14 When you’re in the Developer Portal, Apple 15 limits you to 100 devices. You’re not allowed to have 16 more than 100 devices attached to your account and we 17 had five already. So we allocated the remaining 95 to 18 the beta testers that had gotten there first and who we 19 felt had the technical experience to provide us with 20 the useful testing. 21 Out of those 95 beta testers, as is very 22 standard, most of them just take the application and 0101 1 use it for free because they like getting software 2 first. Ten of them were very useful and helpful. 3 On August 22nd , we had an internal meeting and 4 we decided that we were doing a lot of work here and 5 spending a lot of money and we hadn’t really made sure 6 that they were going to be happy with our application. 7 We saw a lot of ways that this might upset their 8 relationship with their carrier provide AT&T and a lot 9 of other places where I could see their getting upset. 10 So we opened a dialogue with them and we were 11 assigned a representative from the Apple Alliance Team. 12 The Apple Alliance Team is in charge of communicating 13 with developers about -- not about code-related issues 14 but about product marketing and branding-related 15 issues, and this open dialogue lasted for several 16 months, as you can see, from August 22nd, 2008, through 17 October 21st of 2008. 18 During that dialogue, we explained the iCall 19 functionality. We told them exactly what we wanted the 20 application to do and exactly how it would provide -- 21 how it would do this. We explained that we intended on 22 following their rules and that we would not violate any 0102 1 of the SDK rules that they had in place. 2 We asked them what APIs are allowed. I have 3 had the opportunity to listen to the testimony from 4 last week and I can tell you that Apple has been 5 perhaps less than truthful or perhaps ill-informed, 6 that they do indeed allow developers to utilize APIs 7 that are not documented. 8 The evangelists and our Apple Alliance Team 9 representative indicated that you can utilize any API 10 call that is found within the headers, even if it is 11 not documented, and that they are not documented 12 because they haven’t had time to document them yet. 13 We also asked whether or not we’d be approved 14 and, further, we wanted to find out whether Apple would 15 sell our product in their store. There are two 16 different kinds of applications, free applications and 17 paid applications, and we wanted to be a paid 18 application, so that we could take a hands-off approach 19 to customer billing. 20 Apple did not want to bill for our application 21 and advised us that we could not offer any kind of 22 limited versions of or software in their store. 0103 1 We asked them what the approval process was 2 like, how long it would take, and they advised us that 3 it would take no longer than seven days. We found 4 small things, like is our icon too similar to yours, 5 too similar to the default phone icon, and then during 6 the submission process, we also had the opportunity to 7 speak with them about why it is that we were not 8 allowed to call our product iCall. 9 Nobody’s ever answered that question, but I 10 think we all have theories about why they don’t call 11 our brand. It is a federally-registered trademark and 12 has been since 1997. 13 On October 15th , we submitted our application 14 to the App Store. When you submit an application to 15 the App Store, there are a variety of options that you 16 check. One of those options that’s particularly 17 important is what version of the operating system and 18 what type of device you would like to allow this 19 application to run on. You can choose between iPods, 20 iPhones and you can go backwards and forwards in 21 versions of the operating system. 22 Every operating system version upgrade tends 0104 1 to make significant changes to things like the audio 2 subsystem, the way the networking is handled, as well 3 as available API calls. So this is an extremely 4 important option. 5 We selected OS2.1. This was the currently 6 available operating system. It was the -- and 99 7 percent of all iPhone users were on 2.1 at this point. 8 On October 16th , Apple opened and tested 9 iCall. We know this because we are providing phone 10 service. We are not a traditional application. So we 11 have settings. We have systems in place to monitor 12 exactly what’s being done on the application as well as 13 in order to implement our own DRM protection on our 14 service. 15 When Apple opened the application on October 16 16th , they did not attempt to make any phone calls. 17 They did not receive any phone calls and they did not 18 change any settings. We know they did not change 19 settings because the settings are stored server-side in 20 the event that a user needs to replace their device or 21 if they delete the application, it’s used later to 22 reinstall it. 0105 1 On October 17 , we received an e-mail 2 notifying us that there was unexpected additional time 3 required to review our application. This e-mail did 4 not include any information, other than the fact that 5 they just needed more time. 6 We e-mailed our Alliance Team and said you 7 promised us seven days, what’s going on, you guys knew 8 about this application, why are we suddenly being held 9 off, and their response was as follows: “Thanks. I 10 will let you know when I hear a response from the 11 developers,” and that was the last time we heard from 12 Apple. 13 Apple goes radio silent from October 22nd , 14 2008, through May 8th of 2009. They don’t respond to 15 our e-mails. They do not answer our phone calls. They 16 do not return voice messages. The Apple iPhone 17 evangelist does the same. The Developer Support does 18 not respond to our support requests. We make repeated 19 phone call case IDs with them and documented those, as 20 well. 21 We are what a variety of applications have 22 been called which is in App Store purgatory. They 0106 1 won’t approve you. They won’t decline you. They just 2 simply won’t answer you. 3 At this point in time, it’s also worth noting 4 that I have spent close to half a million dollars of my 5 own money developing this software. 6 On October 30th , they denied our application. 7 They said the reason was duplicate functionality. When 8 we asked for an explanation of what functionality we 9 had duplicated, they would not answer us. 10 Internally, we had some conversations about 11 what things about our app might be particularly 12 offensive to Apple, other than the name and this actual 13 functionality, and so we changed the buttons to a 14 different color and resubmitted it. I apologize. That 15 was on November 4th . 16 On November 7th , 2008, Apple opened and tested 17 iCall again. This time, however, the tester actually 18 placed a phone call. They called somebody at Apple and 19 the call was successful and they did not receive a 20 phone and they did not change any settings. 21 On November 13th , 2008, the approval was 22 delayed because again the application requires 0107 1 unexpected additional time to review. 2 On December 1st , 2008, Apple opened iCall 3 again. We know when the application gets opened. We 4 track it and attach it to the particular device. They 5 did not make any calls. They did not receive any 6 calls. They did not change any settings. They did not 7 use the application. They opened it and closed it. 8 On January 10th , 2009, they did the same thing 9 again. We believe internally that the reason that they 10 do this is that Apple has a policy that no application 11 can sit in a queue for too long and so by opening and 12 closing it, they keep it alive and active so that they 13 don’t have to decline it. 14 On March 24th , 2009, while I was at dinner 15 with my wife and children, I got an e-mail on my 16 Blackberry stating that we had been approved and that 17 we were now in the App Store. That was quite a 18 surprise to us. 19 My partner was also quite surprised and we 20 were not prepared for this. We had accepted the fact 21 that we were going to be the application that never got 22 approved. So we were extremely happy. We were alive 0108 1 in the App Store approximately 30 minutes after the e- 2 mail was received from them, but, unfortunately, they 3 had released a new operating system, Version 2.2, and 4 when they released this operating system, Version 2.2, 5 they had made substantial changes to the audio 6 subsystem and the way that applications behave inside 7 of the sandbox that Apple provides to them. 8 What this meant was that our application did 9 not work. It did not function in any way, shape or 10 form. You could not switch calls and the audio was 11 unintelligible when you placed and received calls. 12 Core functionality was broken. We had not said that 13 our application was compatible with this version of the 14 operating system. 15 We were compatible with 2.1 and we had been 16 aware that there were changes in the operating system. 17 However, we had been hesitant to remove our application 18 from the queue manually for fairly obvious reasons, 19 because we didn’t think it would ever get back in. 20 As a result our launch bombed. It was a 21 miserable failure. We had nothing but angry customers. 22 We had bank charge-backs. We lost merchant accounts. 0109 1 This was a very, very unfortunate event for us and it 2 damaged our reputation and the brand and the goodwill 3 that we had been building for many years. 4 On March 26th , 2009, we fixed the bugs that 5 caused the 2.2 failure and, I apologize, these slides 6 are out of order. Actually, these are real reviews 7 that were posted by users as a result of Apple putting 8 our application available for an operating system that 9 we had not specified. Again, I apologize. These are 10 the places where it starts to get a little bit 11 offensive and these are all available in the iTunes 12 Store to read still to this day. 13 “Today is March 25th . Once this thing works, 14 I’ll update my review, one star. Certified douche 15 ware. The hype surrounding this app was epic and 16 inspiring. We frantically awaited Apple’s decision and 17 welcome Sedia, all to be donkey-punched repeatedly for 18 the past few days. iCall needs to spend some coin on 19 customer service and, oh, maybe unhobble this partial 20 vapor ware crap app.” 21 Again, I apologize for the language. I am 22 also not happy that this is on my product’s page. 0110 1 Average rating was for two stars. Two stars is very 2 bad for an application. It’s two out of five. 3 We submitted the update to Apple to fix this, 4 to fix this problem on March 27th , so that we are now 5 compatible with the new operating system, Version 2.2, 6 and they opened and tested iCall, did not make any 7 calls, did not receive any calls, and did not change 8 any settings. 9 I think the theme here that we can go away 10 with is that Apple’s not really testing the 11 application. They’re just making sure that it opens. 12 On April 3rd , 2009, our update was out. We 13 are now able to support our customers. This was 14 approximately -- in fact, it was exactly seven days 15 from the date that we submitted it, a critical patch to 16 make our software work and to protect our brand. 17 Since then, the customer experience has 18 continued to improve. We have continued to add more 19 services and features that customers are demanding. 20 Our ratings are improving and our reviews are primarily 21 positive. Unfortunately, it is impossible to reclaim 22 the lost customers who left us and believe that we 0111 1 provide poor software products. 2 And today, May 8th , we would like to submit 3 Update Version 1.2 to the App Store. Unfortunately, 4 Apple has a new policy that all applications must now 5 be compatible with the 3.0 operating system that is in 6 beta testing and we are unable to actually get to 7 install on any of our phones. 8 So as a result, we are not able to provide our 9 customers with an update that allows certain customers 10 to change settings that are fairly important. 11 I appreciate your patience through that 12 timeline. 13 A couple of notes regarding the development 14 that I feel are particularly important. This 100-phone 15 portal limit prevents development. I dropped my phone 16 in November, I believe, and when I dropped it, it 17 screen cracked and I had to have it replaced. This is 18 fairly common, and, unfortunately, because there are 19 already 100 devices in the queue in our portal, I’m 20 unable to add my own device which means that I don’t 21 get to test my own software. 22 We are lucky we still have one functioning 0112 1 phone that was part of our development team in the 2 beginning. We are not able to remove devices or read 3 them. This was Apple’s response to Podcaster when 4 Podcaster used their portal as a means to distribute 5 its application outside of the App Store. 6 So far, the estimated cost of development and 7 marketing for this product has exceeded $750,000 of my 8 own money. 9 I’d like to talk a little bit about the 10 application distribution mechanisms that are available 11 to a developer and I thought this quote was quite apt 12 from Steve Jobs. “Why join the Navy if you can be a 13 pirate?” 14 There are certain drawbacks to being in the 15 App Store and there are certain benefits. While I have 16 been certainly focusing on the negative regarding 17 Apple, they make a wonderful product. I really like 18 the iPhone. I really love my Mac Book Air. I have no 19 personal vendetta with them, but I do believe that this 20 experience needs to be public so that other people know 21 exactly what happens and how heavy-handed and self- 22 congratulatory Apple has been. 0113 1 It’s a very cumbersome and complex process. 2 I’ve developed software for many platforms. I’ve never 3 developed software for a platform where the process of 4 getting the certificates and the validation and all 5 this stuff was actually harder than writing the 6 program. 7 Another item that’s particularly important 8 about the App Store is that DRM for free applications 9 is different from DRM for paid applications. Apple has 10 the ability to do time-expired DRM. They do that with 11 the movie rentals. They have the ability to prevent 12 applications from being used on multiple -- more than 13 one device. They do not implement that. 14 What this means for developers is that there 15 are many standard marketing practices that you cannot 16 use in the Apple App Store. For example, one of those 17 is a loss leader. 18 I cannot give my application away free in the 19 App Store because once I have given it away free, you 20 can e-mail it to your friends and share it with them 21 forever. There is no -- that free application is not 22 tied to an iTunes account. Apple believes that free 0114 1 simply means free forever. 2 The paid applications do not have that same 3 ability. Paid applications are tied to an iTunes 4 account. 5 Obviously from my timeline you can see that 6 there are long waits with no communication. This is 7 very hard when trying to plan product launches, 8 marketing campaigns, and to develop applications that 9 you’re promising to consumers. 10 Developers are at the mercy of Apple’s 11 censors. In the packet I have got here for you, 12 there’s some additional material about other 13 applications that have been rejected from the App Store 14 for content that was not under their control. 15 The other problems with the App Store, Apple 16 does not remove reviews that are off-topic or contain 17 profanity. They provide an option in their store that 18 says Report This Review and you can report the review 19 as being off-topic, as being offensive, containing 20 profanity. 21 We have reported many. Our users have 22 reported many, and Apple has never removed a single 0115 1 review. 2 Updates for security features or bug fixes may 3 or may not be approved and the approval timeline is 4 uncertain. As I mentioned, we would like to update our 5 software but we are unable to do so at this time. 6 We are not allowed to offer limited 7 functionality which is a detriment to consumers because 8 consumers are often allowed to try services before they 9 buy them and as an Apple developer you have to pick and 10 choose. Do you want to be a free app or a paid app? 11 Finally, Apple represents that the apps are 12 well tested and that the platform is stable. This is 13 not true. As from our experience, Apple did not test 14 our application. 15 These are some quotes from other developers 16 that are currently in the App store. Some of these are 17 very large corporations and this is listed -- these are 18 listed in their App Store, in the descriptions of their 19 applications. 20 “Buy Electronics Arts. For best results, 21 reboot your iPhone before playing Tetris. This game 22 takes the iPhone and the iPod really to the limits. 0116 1 Occasionally reboot your device to free all memory and 2 to prevent crashes,” from Volkswagen AG. 3 From Kronos Games, who made Action Bowling 4 which is one of the featured applications that Apple 5 markets quite heavily, they say, “Please reboot this 6 device after installation to resolve start-up issues 7 and random crashes.” 8 And Namco Networks whose famous for things 9 like PacMan says, “To avoid any technical issues, be 10 sure to restart your iPhone, iPod, after installing 11 Star Trigon Lite or any new app.” 12 I mean, as a software developer you don’t tell 13 people that they have to reboot their computer every so 14 often just to make sure your product functions. 15 These are some of the offensive reviews. I 16 won’t read them. The very first one is, “Change the 17 application icon to just a phone,” gave us one star. 18 It’s off-topic. It’s not a review. We’ve reported it. 19 They won’t remove it. And the last one I won’t read, 20 but I will let you read it and it is still there to 21 this day. We have requested repeatedly that it be 22 removed and it is just unbelievable that Apple 0117 1 continues to damage our reputation. 2 Did everybody get a chance to read that? 3 Okay. All right. 4 And we’re getting to the end. I appreciate 5 your patience here. 6 The jail-break and developer, the jailbreak 7 developer and consumer benefits. Consumers really 8 benefit from a jail-broken phone because they get to 9 control it. They get to use this device like it should 10 be used, which is a powerful computer. 11 Distribution is controlled by developers with 12 a jail-broken application and I should mention, we have 13 a jail-broken version of our iCall application. It 14 provides additional functionality that Apple does not 15 allow us to provide. It is able to run in the 16 background. It is able to make phone calls over a 3G 17 network. We encourage the customer to make sure that 18 the 3G network they are on allows them to utilize Voice 19 Over IP over the data networks. 20 AT&T does not, but there are many 3G networks 21 in the world that do allow this. The benefits are that 22 updates are available within minutes. If we find a 0118 1 security flaw, we are able to protect the consumer by 2 delivering an update to them within moments of 3 discovering the flaw. We are not obligated to abide by 4 Apple’s policies when we develop for the Sedia Store 5 and, as I mentioned, there are no restrictions on 6 things like 3G data usage. 7 We are able to access the system and the 8 content on that system in a more traditional computer 9 operating system model. We are able to see, for 10 example, how many processes are running, what other 11 applications may be trying to access the audio 12 subsystem that could interfere with the functionality 13 of our application, and we are able to provide a better 14 response to user crashes because of the fact that we 15 have this information. 16 As well, users are able to have their 17 documents and media interact with the application. Our 18 application per se does not require that but there are 19 many applications that benefit from being able to 20 access your Word documents or, you know, your images, 21 and as I mentioned, fast patch development and crash 22 reporting in a more stable system overall are our 0119 1 experience with the iPhone as have been that of our 2 users. 3 And lastly, I thought that this was just such 4 a fantastic quote from Steve Jobs. He says, “We don’t 5 believe it’s possible to protect digital content.” 6 What’s new is this amazingly efficient 7 distribution system for stolen property called the 8 Internet and no one’s going to shut down the Internet 9 and it only takes one stolen copy to be on the 10 Internet, and the way we expressed it to them, talking 11 about the music industry, is pick one lock, open every 12 door, it only takes one person to pick a lock. 13 You’ll never stop that. So what we have to do 14 is compete with it and that concludes my presentation, 15 unless you have any questions. 16 MS. PETERS: Thank you very much. Mr. Joseph. 17 MR. JOSEPH: Thank you, Madam Register, 18 Distinguished Council. 19 My name is Bruce Joseph. I am here today 20 representing CTIA, The Wireless Association, which 21 represents all sectors of the wireless communications 22 industry, including carriers, MVNOs, content 0120 1 aggregators, equipment manufacturers, and others. 2 Thank you for the opportunity to -- 3 MS. PETERS: We’re happy you’re here today. 4 MR. JOSEPH: Thank you for the opportunity to 5 appear today to oppose the exemptions in Class 5. 6 Your decision in Class 5 should be simple. 7 Proponents simply have made no showing of an adverse 8 effect of any use of a copyrighted work that is within 9 the scope of this proceeding, much less a highly- 10 specific and strong showing of distinct, verifiable and 11 measurable adverse effects. 12 A number of the proponents in Classes 5B 13 through D, which now appears to be a harmonized Class 14 5X, seek to free ride on the investment made by 15 wireless carriers and equipment manufacturers in the 16 creation and widespread distribution of wireless 17 devices operated by operating systems that themselves 18 are often complex and expensive to develop. 19 While proponents in Class 5 wrap themselves in 20 the flags of individual choice and recycling, they are 21 acting for their own commercial purpose. 22 The exemptions seek, in the words of the 0121 1 Register, I know how much the Register likes to hear me 2 repeat her words, the exemptions seek, in the words of 3 the Register just three years ago, to further interests 4 that are, and I quote, “unrelated to the types of uses 5 to which Congress instructed the Librarian to pay 6 particular attention, such as criticism, comment, news 7 reporting, teaching, scholarship and research as well 8 as the availability for non-profit, archival, 9 preservation and educational purposes.” 10 And indeed that was in the context that was 11 far closer to traditional fair use interests than the 12 context we’re talking about in Class 5. 13 Moreover, the wireless industry has met each 14 of the asserted needs that the proponents claim without 15 the need for an exemption. The industry has provided a 16 dizzying array and choice of devices. I do not 17 disagree with Mr. Inglish about that. 18 These include relatively simple phones that 19 are heavily subsidized by the carrier and practically 20 given away for prepaid service, making service 21 available to those who have previously been unable to 22 afford it. 0122 1 Mr. Inglish’s testimony does not describe the 2 industry as it exists today. Most of the major 3 carriers, most carriers today offer pay-as-you-go 4 prepaid service with no credit check and no long-term 5 contract, with inexpensive subsidized phones that, as 6 I’ve said, are practically given away. 7 But the existing devices also include complex 8 platforms that are subsidized to make them affordable 9 and those have opened new markets for diverse copyright 10 owners. 11 Of course, if consumers want unlocked devices, 12 they, too, are available in the marketplace. One of 13 the nation’s largest carriers, indeed, I believe it is 14 the nation’s largest carrier, Verizon Wireless does not 15 lock any of its phones on its postpaid services and 16 that’s, I believe, the number was about 85 percent of 17 the phones it makes available, certainly is the vast 18 majority of its phones, and those phones are typically 19 subsidized, too, or if consumers really care about the 20 ability to change networks, unlocked phones are widely 21 available without the subsidy. 22 Just go to bestbuy.com. The consumer gets to 0123 1 choose. Do they want the carrier to pay for the phone 2 or help pay for the phone or not? And the market has 3 clearly shown a preference. Consumers prefer cheaper 4 subsidized phones. 5 If you adopt a regulation that fosters subsidy 6 theft, you will reduce the willingness of the industry 7 to offer low- and reduced-cost subsidized phones. This 8 will reduce consumer choice and raise prices, harming 9 the very consumers proponents claim that they want to 10 help, and the professed concern about recycling is a 11 red herring. 12 Virtually every company in the industry is 13 taking aggressive steps to foster recycling and there 14 has been no showing that anyone has been stopped from 15 recycling by the prohibition on circumvention. 16 Now, the statute and this office have been 17 explicit. The statute is explicit and this office has 18 been explicit. The burden of proof is on the 19 proponents to show that the prohibition on 20 circumvention causes likely adverse effect on the 21 ability of users of copyrighted works to make non- 22 infringing use. 0124 1 The demonstration of adverse effect must be 2 distinct, verifiable and measurable and, according to 3 the legislative history, where the showing is limited 4 to predictions of the future, adoption of the exemption 5 is limited to extraordinary circumstances where 6 evidence of likelihood of future adverse effects is 7 highly specific, strong and persuasive. 8 Now, the existence of the 2006 exemption does 9 not reduce this burden. As you know, each triennial 10 proceeding is a de novo proceeding and CTIA apologizes 11 that it was not an active participant and did not 12 provide important facts and arguments to the office 13 three years ago. 14 The legislative history and your past 15 decisions also make clear that the focus of this 16 proceeding properly is the interest of individual users 17 to make uses that are essentially fair uses of 18 copyrighted works and the proponents here do not come 19 close to meeting that burden. 20 Much of the arguments by proponents in their 21 submissions go to claimed injury to their commercial 22 business models of inducing cell phone owners to use 0125 1 their services. That alleged adverse effect is not an 2 adverse effect on users of copyrighted works. That 3 alleged adverse effect is not within the scope of fair 4 use concerns protected by this proceeding, and I won’t 5 name them all, but you remember, I just read them, 6 criticism, comment, news reporting, teaching. You know 7 the list. 8 By the way, have I mentioned free riding on 9 subsidies? There is no justification for adopting a 10 regulation that fosters free riding. 11 Second. Many of the proponents mistakenly 12 argue that the exemption is necessary to support their 13 unlawful circumvention services. You’ll recall reading 14 about MetroFlash from MetroPCS, Houdini by Pocket 15 Communications, and various asserted recycling 16 services. 17 If there was any doubt, the new harmonized 18 proposal 5X makes this painfully clear. For example, 19 Cricket’s testimony, written submission, explains the 20 purpose of changing the proposed language from sole 21 purpose of connecting to, and I quote, purpose of 22 enabling as follows, and this is a quote, “The parties 0126 1 that conduct the act of unlocking or reflashing a phone 2 are not actually connecting that phone to a network. A 3 party who unlocks a phone is instead allowing another 4 party to lawfully connect that phone to a network.” 5 In other words, like MetroPCS and Pocket, 6 Cricket and basically the proponents of these 7 categories want to foster circumvention services. 8 Proponents don’t seem to understand that that’s not the 9 subject of this proceeding. 10 Although they argue otherwise, you all 11 certainly are aware that an A-1 exemption does not make 12 circumvention services lawful. Of course, that doesn’t 13 stop proponents from attempting to confuse the public 14 about the effect of the exemption. 15 MetroPCS even goes so far as to argue in court 16 not only that the exemption allows its services but 17 that it preempts tort and contract claims. It is not 18 appropriate and this office should not countenance 19 exemptions that are to be used and that will be used in 20 that manner. 21 Third. Proponents offer no evidence at all 22 that individuals have been harmed by the prohibition on 0127 1 circumvention for their individual use. 2 Currently, there’s no prohibition in effect 3 for individual unlocking of phones. Yet, there is no 4 evidence of substantial use of that exemption. To the 5 contrary, the only evidence that’s been presented is 6 the use of circumvention services which, of course, 7 this proceeding doesn’t address. 8 There is no evidence that any carrier has 9 threatened an individual with Section 1201 liability 10 for individual acts of circumvention for their own 11 purposes and, moreover, despite a loaded petition 12 request that misstated the facts and assumed the 13 desired conclusions, EFF’s request for specific factual 14 examples from individuals who were concerned about the 15 unlocking exemption drew only three comments from 16 consumers, from individuals who were concerned about 17 unlocking and only one of those was an example of 18 somebody who claimed to have used the exemption within 19 the scope that it was permitted to be used. 20 That is certainly not evidence of either 21 substantial harm from the absence of an exemption or 22 substantial use of an existing exemption. 0128 1 Fourth. The evidence before you shows that 2 the desired uses are not blocked. Consumers have 3 extensive options and your rules are clear. 4 Convenience or preferred methods of use is not a basis 5 for an exemption. 6 As you know, and I think this is a quote from 7 the legislative history, an exemption is not warranted 8 simply because some uses are unavailable in the 9 particular manner that the user seeks to make the use 10 when other options are available and that’s not only 11 from the legislative history, you all have relied on 12 it. 13 Many phones, as I’ve mentioned, aren’t locked 14 to begin with, witness the Verizon Wireless phones. 15 Other phones are sold unlocked in Best Buy and carriers 16 do unlock for bona fide customers to make bona fide 17 uses. For example, T-Mobile, the third largest carrier 18 in the country, unlocks hundreds of thousands of phones 19 each year and if all else fails and somebody wants to 20 move to a different network, inexpensive phones are 21 available for use on that network. 22 Now, the threat to copyright interests from an 0129 1 exemption is a real threat. First, it’s not clear to 2 me that this issue should be a focus here. If the 3 access control is not within the scope of Section 1201, 4 then there’s no need for an exemption and this 5 proceeding is already complicated enough without 6 injecting the question of whether a TPM is really an 7 effective technological protection measure. That’s 8 best addressed by the courts, particularly where there 9 are a wide variety of technological protection measures 10 applied and a wide variety of terms under which they 11 are used. 12 But I understand that this has been made an 13 issue and so I will address it. 14 Mobile phones today typically are complicated, 15 multifunction devices, even the inexpensive ones, run 16 by copyrighted operating systems which are integral to 17 the phone. Even the EFF recognizes that modern 18 cellular phones are increasingly sophisticated 19 computing devices. 20 The software to run these phones, like the 21 phones themselves, would not be developed unless there 22 was an assurance that the phone could be sold in 0130 1 quantity and in many cases that assurance depends on 2 the ability of the carriers to commit resources to 3 marketing, resources to advertising and resources to 4 subsidizing those phones, and in that respect, the lock 5 works very much like CSS. 6 Studios have argued for years that if CSS 7 weren’t applied, DVDs would not be created or 8 distributed. In the same way carrier subsidies often 9 are essential to the development of phones and to the 10 software that operates them. The lock is an important 11 tool, among others, to protect that subsidy and to 12 ensure that the subsidy is paid. 13 Further, as Virgin Mobile demonstrated in Palo 14 Alto, I’m at least informed, I wasn’t there, once 15 certain phones are unlocked, that opens all of the 16 copyrighted content on that phone to misappropriation, 17 copying, redistribution, Internet dissemination, what 18 have you, and that includes ring tones, wallpaper, 19 games and other copyrighted content. 20 Moreover, unlocking acts are often not just 21 benign entry of simple codes. Circumvention often 22 involves complex attacks using black box circumvention 0131 1 devices, many of which assume control over the device 2 and once you’ve assumed control over the device, only 3 the hacker’s imagination limits what you can do. 4 Moreover, EFF’s Technical Appendix confirms 5 that the act of unlocking is often infringing. The 6 very example that EFF provides is a case study. Page 7 13 of the Technical Appendix describes the need to use 8 what they call a “patched version of the boot loader” 9 and a “patched version of the firmware” to unlock 10 Apple’s iPhone. 11 But what is a patched version? It’s a 12 modification. It’s a derivative work, and I daresay an 13 unauthorized one at that, that you need to load on the 14 phone, in other words make a copy, in order to unlock 15 the phone. 16 In conclusion, I submit that the proponents 17 have not carried their burden and no exemption in Class 18 5 has been justified. However, CTIA members do not 19 intend to go after individuals who are engaged in 20 circumvention for the sole bona fide purpose of 21 lawfully connecting their own phone for use on a 22 different network, once all contractual commitments are 0132 1 fulfilled, as long as the circumvention does not 2 provide access to copyrighted content on the phone. 3 Thus, as we said in our written submission, 4 CTIA would not oppose a carefully limited exemption 5 that is no broader than the one set forth on our 6 comments, in our comments. 7 Thank you for your consideration of CTIA’s 8 position. 9 MS. PETERS: Thank you. Steve. 10 MR. METALITZ: Thank you very much. 11 For the record, I’m Steve Metalitz, here on 12 behalf of the Joint Copyright Owners and Creators. 13 Let me speak first. Since you already heard 14 from me in Palo Alto, I’ll just be very brief and 15 provide a couple of updates to my presentation there. 16 First, with respect to 5B through D or 5X, as 17 Bruce referred to it, as you know, we, our groups, are 18 not taking a position in opposition to the recognition 19 of an exemption along the lines of the one that you 20 recognized in 2006. 21 I think Bruce is absolutely correct, that the 22 burden is on the proponents to show de novo that they 0133 1 meet the qualifications for that exemption and, of 2 course, he’s made a very forceful argument that they 3 have not and I don’t think there’s -- I’ve made some 4 comments about some aspects of the record that are 5 quite different this time than they were in 2006. I 6 did that in Palo Alto, so I won’t repeat that, but 7 obviously that’s part of your determination when you do 8 the de novo review that the statute requires. 9 Our main focus has been on ensuring that if an 10 exemption is recognized, that it be narrowed 11 appropriately and some of the examples of that are set 12 out in our submission. 13 I will have to say that the presentation and 14 exhibit provided by Virgin Mobile, which Bruce has 15 referred to, is a very significant development in our 16 view in the record because it provides evidence, and I 17 think there was very little such evidence in 2006, 18 that, at least in some cases, circumventing the access 19 controls on the firmware that is involved in connecting 20 to a network or in enabling that connection also at the 21 same time provides unauthorized access to other 22 content, other copyrighted materials, and the firmware, 0134 1 I would agree, is a copyrighted work. 2 But the examples that were given by Virgin 3 Mobile showed that the effect in some cases, at least, 4 may be much broader than that and, of course, that, to 5 us, emphasizes that it is essential not only that if an 6 exemption is recognized, not only that it be limited to 7 a situation in which the sole purpose of circumvention 8 is to enable connection to another network but in which 9 the sole effect is the same. 10 I did, in response to some questions that were 11 posed in Palo Alto, try to get some feedback from our 12 associations about the Virgin Mobile material and the 13 impact of this new evidence and I think I could 14 summarize it as follows. I don’t think this is a 15 comprehensive answer, but it at least reflects a few 16 comments that I’ve received. 17 There are really two concerns here. One is if 18 there’s content on the phone, the phone is locked to a 19 particular network and then if it’s unlocked and take 20 it to another network, is that a problem for the owners 21 of the content or how do they see that as impacting 22 their interests? 0135 1 And the second question is what about the 2 possibility that’s again spelled out in the Virgin 3 Mobile exhibit of being able to port -- after 4 unlocking, being able to port this content to other 5 platforms, to a PC and elsewhere? 6 In the first area, I think the reactions do 7 vary, depending on the particular contractual 8 arrangements under which the material is resident on 9 the phone in the first place. 10 When something is preloaded, for example, you 11 get the phone and it comes preloaded and without any 12 other authorization needed to activate ring tones and 13 use wallpaper, for example, or play games, then in many 14 cases the full economic value of the licensing 15 transaction between the content provider and the 16 handset manufacturer and/or the network has already 17 been liquidated, if you will, so whether it’s taken to 18 another network or not is probably not that 19 significant. 20 But it’s clear again from the Virgin Mobile 21 exhibit that this doesn’t apply just to preloaded ring 22 tones, for example, which is the next-to-last page of 0136 1 their exhibit, but also to downloaded [purchased] ring 2 tones, and I’m not sure exactly what this refers to or 3 what the relationship or the business model was under 4 which these were obtained, but you can certainly see in 5 the case of a subscription service, for example, where 6 your ability to access it might expire if you no longer 7 pay the subscription fee, that if the result is you 8 could take it to another network and continue to use it 9 without paying the subscription fee that may be bundled 10 with your service on the first network, that’s clearly 11 a serious problem for the content owner. 12 So as I say, in that first category, it’s 13 going to depend on the circumstances. 14 I have to say there was unanimous concern 15 among the people I was able to talk to in the two 16 business days that we were not in this hearing about 17 the potential ability to port this content to other 18 places and potentially make it available throughout, 19 you know, send it to all your friends or make it 20 available in a lot of other circumstances. 21 That is almost never the subject matter of the 22 transaction that the copyright owner enters into with 0137 1 the handset manufacturer or the network and therefore 2 there was a serious concern that if an exemption is 3 recognized, it has to rule out any type of 4 circumvention that would allow that type of activity. 5 I also wanted to mention in this regard the 6 discussion and there is some in the 2006 7 recommendation, I believe it came up again in the 8 hearing last week, about whether -- different types of 9 access controls, some are more granular than others, 10 and this characteristic that Virgin Mobile pointed to 11 that one lock unlocks everything isn’t a necessary 12 feature of the design of the phone and it’s often 13 possible, it may always be technically possible, I 14 don’t know, to have a more granular feature so that you 15 could unlock the ability to change networks without 16 unlocking access to other content. 17 The point that was brought home to me and I’d 18 like to convey to you is simply this. Much as we may 19 like to speak about and we are all impressed by the 20 incredible capabilities that phones have now that they 21 didn’t have two-three-five-10 years ago, it’s still the 22 case that most people -- that the selling proposition 0138 1 for most of these devices still is its communication 2 capacity and its ability to access content or to have 3 content resident on the phone. 4 I think it’s a value feature and it may be an 5 important one, but this is not the dog. This is the 6 tail of this transaction and content owners are not in 7 a position to dictate to carriers or handset 8 manufacturers or any of these other parties what DRM 9 format is used. 10 So the idea that content owners could just 11 say, well, we won’t make our content available if the 12 DRM isn’t sufficiently granular, obviously they have 13 that option, but they don’t really have any bargaining 14 power to speak of to get the manufacturers to put in 15 more robust DRM or to give it greater capabilities. 16 So I think we have to approach this in a more 17 realistic manner. Yes, there may be some ways in some 18 circumstances in which content owners could insulate 19 themselves against the risk that if you grant too broad 20 an exemption, some of their content may be put at risk, 21 but in fact if they want to reach that market, they 22 have very little leverage over that particular aspect 0139 1 of it. 2 So I wanted to just give you those additional 3 observations based on some of the discussion that came 4 up in Palo Alto. 5 I’ll speak just very briefly about 5A because, 6 while I found Mr. Gilbert’s presentation fascinating, I 7 really couldn’t see quite what it had to do with 8 Exemption 5A, Proposed Exemption 5A. 9 I would just emphasize that there’s really no 10 question here that while some questions had been raised 11 about the substantiality or the, you know, true 12 copyright nature of the work to which access was being 13 controlled in the unlocking situation, there doesn’t 14 seem to be any question here that the Apple operating 15 system is a very complex piece of software and that the 16 purpose of unlocking access to it is to make a 17 modification, in other words create derivative work, 18 and then the issue becomes is that work -- is that 19 creation of a derivative work permitted by Section 117 20 is any other exception to what would otherwise be a 21 clear infringement of exclusive rights? I don’t 22 believe that the proponents have made that case. 0140 1 And it’s also very clear that the unlocking 2 scenario -- excuse me -- the jail-breaking scenario, if 3 you will, in 5A has a very direct impact on other 4 copyrighted works. 5 I think Mr. Gilbert did refer to the DRM 6 that’s used in -- for paid applications. Some of those 7 paid applications, for example, are games that are 8 produced by members of the ESA and others, and they’re 9 able to use this platform in a protected manner, but if 10 -- it’s clear -- I think it’s undisputed that if the 11 circumvention occurs on the iPhone, for example, and 12 it’s jail-broken, then that gives it the capability to 13 play pirate games, as well, and that, of course, is a 14 serious concern. 15 It’s really no different of a concern for the 16 game industry than the ability to circumvent access 17 controls on consoles or elsewhere that also have the 18 same effect of enabling the playing of pirate games. 19 So I think in their view, it’s the same type 20 of piracy and therefore they have a very strong concern 21 about recognizing this exemption. 22 I’ll just close by reiterating two other 0141 1 points that I made in Palo Alto about 5A. One is, of 2 course, that there is a statutory exemption directly on 3 point and I’d said in Palo Alto that -- or in our 4 submission that the proponents have said nothing about 5 why that exemption did not apply to them. 6 Now I think they have said about two sentences 7 or three sentences. When I see the transcript from 8 Palo Alto, I will know, but the point is that it’s very 9 clear from your prior decisions that the proponents of 10 an exemption have the burden to show, if there’s a 11 statutory exemption in the same area, they have the 12 burden to show that it doesn’t apply to their activity 13 and that they cannot bring their activities within that 14 exemption and certainly until they cross that bridge, 15 it wouldn’t even be appropriate to consider an 16 exemption in this area. 17 And finally, simply to again call your 18 attention to what I find is a very compelling 19 similarity between Proposal 5A and many proposals, I 20 would hazard a guess, it would be at least a dozen, 21 that you have rejected in past proceedings in which 22 proponents simply wanted to take advantage of and use a 0142 1 particular application on a platform it wasn’t designed 2 to run on. 3 Now, I recognize the difference there is they 4 wanted to circumvent access controls on the 5 application. Here, they want to circumvent access 6 controls on the operating system. 7 The goal is exactly the same. It’s exactly 8 the same and you have time after time after time 9 reiterated that this desire to platform shift is not a 10 non-infringing use. There’s no per se right to 11 platform shift and to run an application on a platform 12 for which it was not designed or for which it -- with 13 which it’s not compatible. 14 So I would urge you again to look at this in 15 the light of that very strong line of precedent that 16 you’ve established and to consider that really the 5A 17 proposal is, in effect, no different. 18 Thank you very much. I appreciate your 19 attention. I’d be glad to try to answer any questions. 20 MS. PETERS: Thank you. Do you have any 21 responses to what you’ve heard? 22 MR. METALITZ: I was just going to wait for 0143 1 the questioning. 2 MS. PETERS: Okay. 3 MR. INGLISH: If I have any, I’ll bring them 4 up at the end. 5 MS. PETERS: Okay. 6 MR. INGLISH: Thank you. 7 MS. PETERS: Who’s first? Are you first? All 8 right. Go ahead. 9 MR. CARSON: One of the things you had told us 10 was that this exemption would reduce the industry’s 11 incentive to offer cheap subsidized phones. 12 Can we conclude then, and do you have any 13 evidence then, that in the past three years that 14 incentive has already been reduced or have I 15 misunderstood what you said? 16 MR. JOSEPH: I don’t think you can conclude 17 one way or the other with respect to the past three 18 years, and I do not have any specific evidence. 19 Of course, the burden is on the proponents of 20 the exemption to demonstrate their case that there’s a 21 need for the exemption. 22 MR. CARSON: But this is part of your case. I 0144 1 mean, I don’t think it’s their burden to demonstrate a 2 lack of -- that you will continue to have -- your 3 clients will continue to have an incentive to produce 4 this -- these devices. 5 You are the one who came forward to us and as 6 part of your pitch not to grant the exemption, you said 7 that this exemption would reduce the industry’s 8 incentive to offer cheap subsidized phones. 9 Now, there’s only one entity in the room who 10 really can tell us whether that has happened in the 11 three years we’ve had an exemption and that’s your 12 clients. 13 If you have no information, why should we 14 credit your prediction that if we continue this 15 exemption for the next three years, that incentive will 16 be reduced? 17 MR. JOSEPH: Well, for one thing, they have 18 spent large sums of money to fight parties that are 19 attempting to take the subsidies and as long as those 20 fights continue to be successful, they may well find 21 that they can subsidize, but with the exemption, it 22 reduces the ability. 0145 1 It is one of the tools in the arsenal of the 2 carrier to protect the subsidy and if the protection is 3 weakened sufficiently, you can expect that it would 4 follow as a logical matter that they would reduce the 5 amount that they are willing to subsidize. 6 I do not have specific evidence, but I think 7 it’s a logical conclusion that if you take one of the 8 tools away from them, it will interfere with the 9 ability to subsidize. 10 MR. CARSON: Okay. I follow your reasoning. 11 You tell us, also, that what the commercial services 12 that are here are really trying to do is get an 13 exemption from 1201(a)(2), which, of course, as we’ve 14 said, we said it again this morning, we’re in no 15 position to grant. 16 But let’s assume for the moment that we’re at 17 least persuaded that the kind of activity we’re talking 18 about is non-infringing and that the case has been made 19 that it shouldn’t be subject to liability under 20 1201(a)(1). 21 I mean, the fact of the matter is regardless 22 of whether they might be liable under 1201(a)(2), I 0146 1 assume you would assert that the activities they engage 2 in would give rise to liability under 1201(a)(1), is 3 that correct? 4 MR. JOSEPH: Under 1201(a)(2) or 1201(a)(1)? 5 MR. CARSON: (a)(1). The activities -- they 6 may be offering the service but every time they offer 7 that service and actually -- someone actually accepts 8 that offer, they are going to engage in activity that 9 violates 1201(a)(1). They’re going to circumvent. 10 MR. JOSEPH: The party doing the 11 circumventing, the service. 12 MR. CARSON: The service. 13 MR. JOSEPH: I would take the position they’re 14 violating both 1201(a)(1) -- 15 MR. CARSON: Oh, of course. 16 MR. JOSEPH: -- and 1201(a)(2). 17 MR. CARSON: Okay. So let’s just assume that 18 we’re persuaded by them, we know we can’t do anything 19 about 1201(a)(2), but we’re persuaded they’ve made 20 their case on 1201(a)(1). Isn’t there something to be 21 said for granting that exemption, knowing that we’re at 22 least removing one independent basis for liability for 0147 1 them, even though we can’t do anything for them under 2 1201(a)(2)? 3 That’s based on the assumption they’ve made 4 their case and maybe they have, maybe they haven’t, but 5 what I’m really trying to explore here is does the fact 6 that there is an independent basis for liability under 7 1201(a)(2), just as, for example, there may well be an 8 independent basis for liability under trademark law, 9 does that really have any relevance to us when we’re 10 trying to figure out whether an exemption should be 11 granted under 1201(a)(1)? 12 MR. JOSEPH: I believe it does. I believe it 13 does because of what we’ve seen the carriers doing. We 14 have seen arguments made in court. 15 Now, you can say you don’t think a court will 16 buy that argument because you have 1201(e) and yet you 17 are the expert agency and when you decide to create an 18 exemption for 1201(a)(1), you’re going to provide 19 reasoning and that reasoning is going to be influential 20 to a court in a 1201(a)(2) case. 21 So that even though you believe you have no 22 authority and I believe you have no authority over 0148 1 1201(a)(2), I don’t believe there is -- I believe there 2 is still an adverse effect on 1201(a)(2) activities and 3 I think you should be very careful about that because 4 you weaken the provision of 1201 that Congress did not 5 give you authority to create exemptions for. 6 MR. CARSON: Well, I’ll get to you in a 7 moment, Steve, but to follow up on that, I assume then 8 that if we were not to heed all of your warnings about 9 what a terrible idea this is, you would at least be, if 10 not mollified, might take some comfort if, in any 11 ruling we made, we went out of our way to make it clear 12 that not only does this not have any impact on 13 1201(a)(2) but in fact, anything we say and do couldn’t 14 possibly have any impact on 1201(a)(2) liability? 15 MR. JOSEPH: Or on any liability with respect 16 to contract claims or -- 17 MR. CARSON: Sure. 18 MR. JOSEPH: -- on any liability with respect 19 to tort claims -- 20 MR. CARSON: Sure. 21 MR. JOSEPH: -- or on any -- or trademark 22 claims, and you are not asserting a federal policy of 0149 1 -- 2 MR. CARSON: Sure. 3 MR. JOSEPH: -- communications law. 4 MR. CARSON: Which we said three years ago, by 5 the way. 6 MR. JOSEPH: That would -- 7 [Laughter.] 8 MR. JOSEPH: And obviously it didn’t 9 necessarily work, at least in terms of what the 10 carriers are trying. That would obviously provide some 11 comfort, but I don’t think it would provide all of the 12 comfort, and you still see -- you would still see the 13 carriers promoting the fact that we have this exemption 14 and this is something that you consumers can go try to 15 do, download. 16 You would be creating and causing an incentive 17 for the proliferation of unlawful tools that are 18 prohibited by 1201(a)(2), but you’d be creating the 19 demand for those tools by saying -- by creating a 20 circumstance where the carriers would be incentivized, 21 the carriers that want a free ride on the subsidy, to 22 say go over to Walmart, buy the phone for a $1.99 0150 1 that’s essentially being given away because another 2 carrier’s paying for it, and then go online and figure 3 out how to unlock that phone. 4 MR. CARSON: But, of course, every time we 5 come up with an exemption or 1201(a)(1), aren’t we 6 providing people an incentive to go out and find a 7 service that’s all operating illegally under 8 1201(a)(2)? 9 MR. JOSEPH: I can’t answer that without 10 looking at each and every one of the exemptions. 11 You’ve got to take them on a case by case basis and 12 consider the extent to which that incentive is created. 13 MR. CARSON: Okay. Steve, you had something 14 you wanted to say. 15 MR. METALITZ: I was just going to say that if 16 you were concerned about the spillover effect, if you 17 will, about (a)(2), I’m not, you know, gainsaying what 18 Bruce has put forward here, but one way you could do 19 that is to, as we’ve recommended, is to limit the scope 20 of this exemption to individual users because then you 21 would at least know that the people who were exercising 22 the exemption would not ordinarily be the people who 0151 1 would be engaged in the (a)(2) violation. So that 2 degree of separation would have occurred. 3 MR. JOSEPH: And by the way, if I might add, 4 that is precisely -- that’s similar. I don’t know 5 whether Steve is adopting everything that we -- that 6 CTIA proposed in the exemption that it indicated it 7 would not oppose, but that is within the scope of what 8 we indicated we would not oppose. 9 MR. CARSON: Understood. Okay. Bruce, when 10 you were talking about the threat to copyright, to your 11 client’s copyright interests, I just want to make sure 12 I understand the first point you made. I may not have 13 heard it clearly or it may just not have sunk in. 14 Your first point, as I took it down, was that 15 this shouldn’t be the focus if the access control isn’t 16 within the scope of 1201. Did I get that right? 17 MR. JOSEPH: That’s correct, yes. Well, I 18 don’t know because you stopped short. 19 MR. CARSON: Oh, well, maybe I didn’t get it 20 all. Complete the sentence for me or elaborate then 21 just to make sure I understand the point you’re making. 22 MR. JOSEPH: There have been arguments made, 0152 1 and I don’t know whether they’re arguments that have 2 any purchase, so I don’t want to belabor the point, 3 that these access controls really aren’t advancing a 4 copyright interest and therefore they’re not entitled 5 to protection under Section 1201. 6 If that’s the case, then there’s no need for 7 an exemption because if they’re not entitled to 8 protection under 1201 -- I’m not saying that is the 9 case, but I’m saying that that’s an argument that 10 really shouldn’t be a part of this proceeding because 11 if in fact they are not subject to Section 1201 or 12 entitled to protection under Section 1201, then there’d 13 be no need for an exemption and you don’t have to grant 14 the exemption. 15 On the other hand, if they are entitled to 16 protection over 1201, then we’re in the proceeding that 17 we’re supposed to be in and the proponents have the 18 burden of demonstrating that there’s an adverse effect 19 on their interests, their copyright-related interests. 20 That’s what I was saying. 21 MR. CARSON: Okay. But isn’t there, at least 22 hypothetically, whether we have it here or not, I don’t 0153 1 know, a case that’s somewhere in the middle where you 2 have an access control that is protecting access to a 3 copyrighted work and yet it’s quite clear that the way 4 in which it is doing it or the purpose for which it is 5 doing it really has nothing to do with protecting 6 copyright interests. 7 Without taking a position on whether the cases 8 came out right or wrong, we certainly know about the 9 Lexmark, we certainly know about Chamberlain v. 10 Skylink, and it might be helpful for you to distinguish 11 for us those situations or just tell us the courts got 12 it wrong from your client’s situation. 13 MR. JOSEPH: Well, first of all, I don’t think 14 I need -- I mean, I will get to it. I’m not telling 15 you that I’m not going to answer your question, but, 16 first, let’s put it in context. 17 In each of those cases, the case was brought 18 in court and the court decided that the access control 19 was not protected by Section 1201. It was not the 20 subject of this very specific narrow proceeding that 21 Congress has already given you every three years with 22 more than enough difficulty and tough issues for you 0154 1 all to be concerned about in the context of whether or 2 not there’s a substantial interference with the 3 proponents’ copyright interests. 4 Now, so what I’m saying is those cases 5 actually are examples that the courts themselves are in 6 a position to deal with that issue. 7 Now, the short answer to your question is in 8 those -- what we’re dealing with here is software that 9 is not 13 lines of code that serves no purpose, other 10 than preventing access or use of a device. What we’re 11 dealing with here are relatively complex and in some 12 cases extremely complex operating systems that are 13 being circumvented and that are then being used without 14 authority. 15 So I think you’re dealing with a different 16 factual circumstance, but I think the cases you’re 17 citing are examples of why it’s not properly part of 18 this proceeding. It’s properly part of a circumvention 19 case. If somebody’s circumventing and they’re sued, 20 the they’re going to be able to defend on the ground 21 that this is not an access control that’s protected by 22 Section 1201. It’s within the scope of Section 1201. 0155 1 MR. CARSON: Of course, here, you have made 2 the case, which we may or may not accept, that the 3 access controls in place here actually are protecting 4 protectable copyrighted works, the operating system, if 5 nothing else, and yet is there anything to the notion 6 that the whole reason the access control is there is 7 not really to protect the operating system but, rather, 8 it’s to protect the phone itself, to prevent that phone 9 from being used somewhere else? 10 What we’re really saying is the use of an 11 access control and an assertion of legal back-up for 12 the use of that access control under Section 1201 in 13 order to control the use of hardware, not to use the 14 control of software? Not to control the use of 15 software? 16 MR. JOSEPH: I don’t think that’s an accurate 17 characterization. I mean, what you see are phones that 18 are very expensive with software and there’s as much -- 19 the software -- the hardware in these phones isn’t all 20 that complicated. 21 I mean, as EFF said, these phones are becoming 22 increasingly complicated computing devices. They’re 0156 1 run by software and there’s a copyright interest in the 2 development of that software and, by the way, you talk 3 about my client’s copyright interests, well, CTIA does 4 represent the equipment manufacturers, also, but it’s 5 not just -- 1201 doesn’t say that the party that shows 6 up here actually has to be the party that owns the 7 copyright. They can be acting in furtherance of other 8 copyright -- 9 MR. CARSON: Sure. 10 MR. JOSEPH: -- interests, and there clearly 11 is a copyright interest in the development of that 12 software. 13 MR. CARSON: Okay. Can you tell us anything 14 about the extent to which the same access control is 15 used on cellular phone devices to protect both the 16 firmware and/or operating system on the one hand and 17 other copyrighted content, ring tones, video, whatever, 18 the extent to which the same TPMs are used and the 19 extent to which it might be separate TPMs that are 20 used? 21 MR. JOSEPH: Yeah. If, by asking about 22 extent, you’re asking about quantification, I can’t. I 0157 1 think you saw a very strong presentation from Virgin 2 Mobile which is one of CTIA’s members with an example 3 of where -- 4 MR. CARSON: Mm-hmm. 5 MR. JOSEPH: -- unlocking the phone unlocks 6 essentially everything. 7 MR. CARSON: Yeah. 8 MR. JOSEPH: It is my understanding, and 9 recognizing that I’m a lawyer and not an engineer or a 10 technologist, that even in the -- in cases of other 11 phones, unlocking the phone is a first step to getting 12 access to what’s on the phone and so you are -- you 13 begin to chip away at layers of protection and the fact 14 that unlocking the phone -- in one case, the case that 15 Virgin Mobile demonstrated basically gives you 16 everything on a silver platter doesn’t mean -- that’s 17 not the only circumstance in which the phone lock is 18 the first step to getting access to what’s on the 19 phone. 20 And, indeed, in looking at the circumvention 21 tools, it was clear just from watching the videos that 22 they take -- that are on the Internet, go on YouTube 0158 1 and search for them or, if you’d like, we can send you 2 some examples. I didn’t have them to read on the 3 record because I wasn’t sure that they’d still be on 4 YouTube after I read them on the record. 5 But you can -- the black boxes do take control 6 of the phone and once you have control of the phone, 7 what you do with that control is subject to the 8 imagination and the skills of the hacker. So no, we 9 can look and see if we can get you any quantification, 10 but I don’t have any as I sit here. 11 MR. CARSON: Steve? 12 MR. METALITZ: I just wanted to add that 13 there’s one thing already in the record that sheds some 14 light on this which is the Exhibit A to the EFF 15 February submission where it discusses how 16 circumvention is accomplished, both in the unlocking 17 scenario and in the jail-breaking scenario, and I was 18 struck by the fact that exactly the same tool is used 19 in both cases. 20 So that’s another example and it’s not in 21 Virgin Mobile, that’s in Apple. It’s another example 22 where apparently -- I don’t know that the same act of 0159 1 circumvention unlocks both, but use of the same tool 2 unlocks both. 3 MR. CARSON: Okay. That’s all I’ve got. 4 MR. GOLANT: Thanks. Let me first direct my 5 questions to Cricket. I just have one. 6 On Page 8 of your testimony today, you say 7 that “not all carriers will unlock a phone. Those that 8 do usually impose conditions or other unreasonable 9 restrictions.” 10 Could you elaborate on what those unreasonable 11 restrictions would be? 12 MR. INGLISH: Yes. As we understand from our 13 customers who give us this information, that when they 14 call their carrier to ask for the unlocking, they’ll 15 ask are you a current customer, have you completed your 16 contractual term, have you paid your ETF, and those are 17 the types of things we’re talking about as being 18 unreasonable. 19 MR. GOLANT: Okay. 20 MR. INGLISH: And many times they just get the 21 run-around. 22 MR. GOLANT: All right. Mr. Gilbert, I read 0160 1 in the “Washington Post” yesterday about an article 2 that was entitled “It’s 3.0 Or Die for New iPhone 3 Apps,” and in the article, it says, “After iPhone OS 4 3.0 becomes available to customers, any app that’s 5 incompatible with iPhone OS 3.0 may be removed from the 6 App Store.” 7 Do you know anything about this with your 8 experience? 9 MR. GILBERT: Yes, and this is in fact the 10 entire reason we are currently unable to update our 11 application that runs in the 2.2. 12 MR. GOLANT: Rather than suspend, they 13 actually remove -- 14 MR. GILBERT: Yes. 15 MR. GOLANT: -- the application? 16 MR. GILBERT: Yeah. They’re suggesting that 17 they would remove all the applications that aren’t 18 compatible with the newest operating system. 19 MR. GOLANT: And so that if I purchased this 20 from Apple and it’s not compatible with 3.0, then I 21 lose that service on my iPhone? 22 MR. GILBERT: That is correct. 0161 1 MR. GOLANT: Okay. 2 MR. GILBERT: Yes. 3 MR. GOLANT: Now, moving on to Bruce, let me 4 ask you a series of questions. 5 You had stressed that consumers are very 6 interested in cheap phones, but you admit that the 7 iPhone’s pretty popular and that’s a rather expensive 8 device. So don’t you think we should also take into 9 consideration the fact that maybe a lot of consumers 10 out there want an expensive phone for a lot of the 11 features they have rather than the subsidized cheap 12 phones? 13 MR. JOSEPH: Well, I mean, certainly there is, 14 as in many market, a range of demand and a range of 15 consumer interests. Different consumers want different 16 things. 17 With respect to the cheap phones, I was 18 addressing, among other things, the specific types of 19 customers that the proponents of Exemption 5X were 20 advocating for. 21 Certainly, phones, such as the more 22 complicated phones, the more expensive phones, have a 0162 1 demand and they are also heavily subsidized. Indeed, 2 when Apple first came out with the iPhone, my 3 understanding was the model was different, but they’ve 4 moved back and this is in the FCC’s report that we 5 cite. We don’t cite it for this particular 6 proposition, but it’s in the FCC’s February Wireless 7 Industry Report which, by the way, talks about how 8 competitive the wireless industry is today. 9 But the iPhone moved from a non-subsidized 10 model where it was costing something in the range of 11 $400 to a subsidized model where now an iPhone is 12 available for, I think, less than half that or roughly 13 half that. 14 So even with respect to those phones, the 15 carrier is paying a big chunk of the cost to get that 16 phone in the hands of consumers. 17 Would we have -- I’m not going to sit here and 18 speculate because I don’t have the data of whether we 19 would have an iPhone 3G or the next generation of 20 iPhone but for the subsidy model, but certainly Apple 21 in its own conclusion about what the best way to deal 22 with its phones was moved -- decided in its agreement 0163 1 and its relationship with AT&T to move to a subsidy 2 model. 3 MR. GOLANT: Okay. Now, let me ask you some 4 questions about other comments that were filed in this 5 proceeding. I’m particularly interested in your view 6 of the PISC, Public Interest Spectrum Coalition, 7 comments. Are you familiar with those? 8 MR. JOSEPH: I am. I’ve certainly read them. 9 MR. GOLANT: I was just wondering what your 10 viewpoints were on that since they were filed 11 contemporaneous with your reply comments. 12 MR. JOSEPH: Right. Well, I believe they 13 mischaracterized the FCC’s current position. The FCC 14 has not applied the open access rules to wireless 15 carriers, except in the C-block where they were very 16 specific and, indeed, phones -- the C-block is subject 17 to open access rules. 18 Moreover, it’s not at all clear that open 19 access policies mean that -- are inconsistent with a 20 subsidy lock model for certain devices. It means your 21 network has to be open and available and it means that 22 open devices have to be available, but if you’re going 0164 1 to essentially pay for somebody’s device on part of the 2 trade, part of the deal being that they will use your 3 service, it’s not at all clear that that’s entirely 4 inconsistent with a form or with the FCC’s 5 understanding of open access. 6 Indeed, in the February report specifically on 7 the wireless industry, the FCC noted that subsidies 8 have led to significant reductions in consumer costs. 9 So I don’t believe that the Public Interest -- the -- 10 whatever the name of the group that you referred to, I 11 don’t have their name memorized, accurately reflected 12 any communications policy that would lead one way or 13 the other to a decision with respect to an exemption in 14 Class 5. 15 MR. GOLANT: Okay. Well, speaking of the FCC, 16 I raised this in Palo Also. 17 I saw that the Rural Cellular Association had 18 filed a Petition for Rulemaking regarding exclusivity 19 arrangements between commercial wireless carriers and 20 handset manufacturers, and I was wondering whether or 21 not any of your clients or you have filed in that 22 particular proceeding. 0165 1 MR. JOSEPH: I don’t know the answer to that 2 question. I know that I personally have not filed 3 anything in that particular proceeding, but I’m not in 4 a position to comment either, as I sit here, because I 5 just don’t know as to either my law firm or CTIA -- 6 MR. GOLANT: Okay. 7 MR. JOSEPH: -- who is my client in this 8 particular proceeding. 9 MR. GOLANT: Fair enough. Well, let me ask 10 you about -- you mentioned Virgin and you said that 11 they’re a member of CTIA and in Stanford, I asked if 12 they were a member and they said yes, but we kind of 13 disagree with what the comments were from CTIA and 14 that’s why we filed separately, and I was wondering. 15 Do you know if Virgin has signed on to the 16 very specific exemption that you had proposed in your 17 comments for CTIA? 18 MR. JOSEPH: I am -- I’m sitting here 19 hesitating because I’m not sure of a direct -- you 20 know, a clear direct answer to your question. I 21 believe that the best answer to it is the one that 22 Virgin gave you and as I understand it in Palo Alto, 0166 1 they expressed reservations about the exemption that we 2 were proposing and that they had indicated they were 3 going to have to return and consider it and would get 4 you a response. 5 So as I sit here, -- 6 MR. GOLANT: Right. 7 MR. JOSEPH: -- I don’t -- I cannot represent 8 to you that they have signed on to that proposal that 9 we have made. 10 My understanding is, if anything, they would 11 expect -- they would oppose either any exemption or 12 would expect a more -- even narrower exemption than the 13 one that we have proposed, but that’s just my 14 understanding and your best source of information about 15 Virgin would be Virgin. 16 MR. GOLANT: Okay. Now, under your specific 17 proposal, how would I as an individual use it, if I had 18 a cell phone? What steps would I have to take to get 19 my phone to another network? 20 MR. JOSEPH: Well, it’s an interesting 21 question and I’m not sure whether you can answer -- 22 whether it’s really significantly any different than 0167 1 how would you use any of the other proposed exemptions. 2 MR. GOLANT: Don’t I have to go to somebody to 3 do it because I couldn’t do it myself or do I download 4 something from the Internet? Is there some list out 5 there that helps me out, at least insofar as the 6 exemption existing today? 7 MR. JOSEPH: There are many places on the 8 Internet that describe what you can do to unlock 9 phones, I believe, and I have seen some of them. Many 10 of them require tools, tools that are violative of 11 1201(a)(2), but some people will have -- I mean, I 12 think that’s an underlying issue with respect to all 13 1201(a)(1) exemptions, and it’s inherent in the 14 statute. 15 Some people will have the ability to 16 circumvent, some people will have the ability to 17 circumvent without assistance and without tools, and 18 others will not, and I don’t think our proposal, which 19 again is a -- you know, we are willing to not oppose 20 this. We’re not affirmatively advocating it, is any 21 different than any others in that regard. 22 MR. GOLANT: Okay. Well, let me move back to 0168 1 the FCC’s Petition I just named and let’s go through a 2 series of hypotheticals. 3 Say, for example, this is just in the comment 4 stage on a petition for rulemaking, the FCC hasn’t 5 issued an NOI or an NPRM or anything like that, but 6 let’s say, for example, that they do decide to go 7 forward and break that exclusivity between handset 8 manufacturers and wireless carriers, and let’s say we 9 do grant the Exemptions 5A through 5D. 10 So that would mean that I could choose the 11 phone I want on the network I want with the 12 applications I want and then, alternatively, I can use 13 the phone that I got and unlocked it and then use an 14 app Skype and a wi-fi area network maybe a city has 15 offered so I can make free phone calls with the device 16 I want with the applications I can desire, such as 17 Skype or iCall. 18 Is that something that -- does that make 19 sense? 20 MR. JOSEPH: First of all, I’m not sure that 21 your hypothetical leads to the -- I mean, we would have 22 to sit down, look at what the petition is asking for 0169 1 and analyze -- 2 MR. GOLANT: Mm-hmm. 3 MR. JOSEPH: -- it in the context of both what 4 it is asking for and what the exemption that’s being 5 sought in 5A through D would grant, and, frankly, I’ve 6 got to say that is more complicated than I feel 7 comfortable winging off the top of my head. 8 If you’d like to submit that one in writing so 9 that we can sit down, focus on it, look at the 10 petition, consider what the ramifications would be and 11 give you a considered answer, that would, I think, be 12 preferable. That’s obviously a complicated set of -- 13 MR. GOLANT: No. That’s all right. 14 MR. JOSEPH: -- what ifs. 15 MR. GOLANT: I was just trying to think this 16 through. 17 And my last question to you, and this was 18 raised also in Stanford, what is the application or the 19 use of Section 117 in this particular proceeding? 20 Maybe Rob or David can elaborate on what I mean by 21 that. 22 [Laughter.] 0170 1 MR. CARSON: Maybe not. 2 MR. GOLANT: No. In other words, there was -- 3 say, for example, that the operating system was 4 modified, I believe the arguments went that 117 grants 5 you as the owner of the device the ability to modify 6 that in order to make use of what you purchased. 7 MR. JOSEPH: Well, are you asking me for my 8 legal view as to whether or not 117 does grant you the 9 right -- 10 MR. GOLANT: Yes. 11 MR. JOSEPH: -- to modify? 12 MR. GOLANT: Yes. 13 MR. JOSEPH: Well, the short answer is likely 14 not and, you know, if I had to give an absolute answer, 15 I would say no, but again, 117 is a specific -- you 16 know, has been construed in somewhat different ways by 17 different courts under different fact circumstances. 18 What I understand to be the majority view and 19 the prevailing view is that the modification has to be 20 essential to use of the software with the device and 21 when you have a device that is operating -- and looking 22 back at the Con-2 report, it spoke of in the manner 0171 1 contemplated by both the purchaser and the seller and 2 all of the software that we’re talking about here 3 operates precisely as contemplated by the purchaser and 4 the seller at the time the phone was sold. So that 5 alone is likely to be disqualifying for a 117 defense. 6 Moreover, you have a very interesting question 7 about whether or not the owner of the phone is the 8 owner of the software or a licensee of the software and 9 whether that would qualify and there certainly is case 10 law out there suggesting -- and that would in part -- 11 by the way, that would in part depend on the specific 12 agreement between the phone buyer and the carrier and 13 they vary across the industry. 14 So, you know, I don’t know that there’s 15 necessarily any one model that’s used, and you would 16 have to analyze that on a case by case basis, but there 17 certainly are some cases that suggest that where there 18 are severe restrictions or significant restrictions on 19 use, such as don’t use the phone on a different 20 network, that that is one indicium, at least, that you 21 don’t have ownership of the kind that Section 117 was 22 contemplating. 0172 1 So I hesitate to give you an absolute answer, 2 but certainly I think the directional indication is 117 3 is not applicable. 4 MR. GOLANT: Okay. One final question. I 5 just remembered this. Is there -- 6 MR. CARSON: You did say that that was your 7 last question. 8 MR. GOLANT: I know. 9 [Laughter.] 10 MR. GOLANT: I know. I just remembered. Is 11 there not a proceeding at the FCC regarding early 12 termination fees? 13 MR. JOSEPH: Again, you’re driving me into 14 communications law as opposed to copyright issues, and 15 I pretend to be a copyright lawyer. I don’t pretend to 16 be a communications lawyer. 17 MR. GOLANT: You know, in each of these steps, 18 I mean we can unlock the device. You can get the 19 device you want, but then if you’re under contract and 20 you have to pay whatever is required under these 21 agreements between AT&T or whoever, so I was just 22 trying to figure out all the steps to ultimate freedom 0173 1 for the use of a cell phone. 2 MR. JOSEPH: Well, ultimate freedom for the 3 use of a cell phone that somebody else paid for, is 4 that what you’re talking about? 5 MR. GOLANT: No. I’m just saying in terms of 6 what the FCC’s policy as it relates in this particular 7 zone of interest. 8 MR. JOSEPH: Let me ask you. If I may have 9 your indulgence for one second. I may have somebody 10 who knows the answer to your question here. 11 [Pause.] 12 MR. JOSEPH: I am informed that there is an 13 ongoing FCC proceeding, there is an ongoing Foxtrot 14 Charlie Charlie proceeding on early termination fees, 15 but it is in its very early stages. 16 MR. GOLANT: Very good. Well, thank you very 17 much for your time. I apologize for any of these 18 questions that may have been without any -- you know, 19 you couldn’t prepare for these. 20 MR. JOSEPH: The question -- that’s your job, 21 right? I need to know what you are concerned about and 22 interested in or else I can’t persuade you that we are 0174 1 right. 2 MR. GOLANT: Right. Oh, absolutely. Well, 3 Rob, it’s all yours. 4 MR. KASUNIC: All right. Well, I guess I 5 will, since you asked for help. 6 If you could go back to the Section 117 issue, 7 and in particular, one of the things we’ve been talking 8 about is at the last hearing in Palo Alto, is what 9 constitutes under 117, is what constitutes ownership, 10 and at least one of the hearings, we had both sides, I 11 believe this was in the one involving EFF and Apple, 12 that the case of Krause v. Titleserv would -- whatever 13 the proper interpretation of that case is, that that 14 case is controlling in terms of the issue of whether a 15 program that was -- or whether something is in fact 16 owned by the user or this is just a license. 17 MR. JOSEPH: Well, Krause is a decision of the 18 nd 19 2 Circuit which may be controlling in New York and it 20 may be controlling -- I’m not sure I can rattle off all 21 nd 22 of the states in the 2 Circuit, but I don’t think it’s 0175 1 controlling anywhere else. 2 There is the DSC case which is a federal 3 circuit case, doesn’t -- tends to move -- tends to 4 point in the opposite direction where the court looked 5 to the indicia of ownership, including what rights you 6 have and what rights you don’t have. 7 So I don’t think I’m prepared to say that 8 Krause has settled the law on what ownership is. In 9 fact, I’m not prepared to say that and I don’t know how 10 you can draw the conclusion that a single decision by 11 one Court of Appeals settles the law. 12 MR. KASUNIC: Well, you can get two parties to 13 agree that they feel it is. So I was hoping that we 14 could get this quickly settled but apparently not. 15 MR. CARSON: Rob doesn’t want to have to read 16 any other cases. 17 [Laughter.] 18 MR. KASUNIC: Now, one other thing that came 19 up in relation to that was, and you mentioned, as well, 20 that one of the indicia would be the purpose for which 21 it was sold, and I think we had some discussion of this 22 in relation to Virgin, but I wonder how broadly do we 0176 1 construe that language. 2 That was italicized in some of the comments 3 and focused on in relation to that statement in the 4 Con-2 report. How broadly can we construe that word or 5 that phrase in terms of the purpose for which it was 6 sold? 7 I mean, in the context of a cell phone, for 8 instance, where the -- at one level anyway, the purpose 9 for which that is sold is to make the phone work. At 10 another level, if you go into a particularized business 11 model that maybe it was to make the phone work in a 12 particular business model, but I don’t know, I don’t 13 see any indication in Con-2 that gives us any guidance 14 as to which of those two levels, those two, as I look 15 at them, abstractions of that phrase would be binding 16 on us or instructive to us in any way. 17 So I’m not sure how that actually provides any 18 guidance. Do you have any thoughts on that? 19 MR. JOSEPH: Well, I would love to be able to 20 sit here and say case X tells you how to do that and it 21 is my failing perhaps as a copyright lawyer that I am 22 not able to do that, but I will say that, and we can go 0177 1 back and look to see if we can find any cases that will 2 shed light on that proposition, but where you have a 3 clear contractual provision that this phone is being 4 sold and this software is for use on this particular 5 network, it’s not very difficult to move to the next 6 step that the appropriate level of abstraction is the 7 level of abstraction that both the buyer and the seller 8 agreed on. 9 MR. KASUNIC: But the problem is here that 10 we’re trying to look at the question of whether or not 11 the program is licensed or sold. So the license is the 12 contract and if we’re looking to the contract to 13 determine the meaning of that, then it’s reading -- 14 we’re trying to decide to what extent the contract 15 limits you or is this something that actually is -- 16 should be viewed as something being sold rather than a 17 license term. 18 But then if we have to go back and look at the 19 license term in terms of what your ability to do what 20 was sold to you is, it’s -- we’re really in a circular 21 situation in that case. 22 MR. JOSEPH: I’m not sure you are because I 0178 1 think you’re mixing two different questions. The first 2 question was is the software licensed or sold and among 3 the factors that the courts have said to look at is the 4 question of whether the software was subject to 5 substantial limitations in its use. 6 But beyond that, you get the second question 7 which is a second -- which is an independent question 8 under Section 117, it’s not the same question, as to 9 whether or not the modification is an essential step in 10 the utilization of the device and I believe, if I’m not 11 mistaken, that it’s in the context of that essential 12 step analysis which is different than the licensed 13 versus sold analysis that the Con-2 language concerning 14 the purpose for which it was sold is relevant. 15 The purpose for which it was sold therefore 16 comes into the question of how do you construe 17 essential step and I don’t think it’s circular. 18 MR. KASUNIC: From whose perspective do you 19 look at that? From the user’s perspective, the purpose 20 for which it was sold would be to make the phone work. 21 From the copyright owner’s in that case, it would be to 22 limit the business model, right? 0179 1 MR. JOSEPH: Well, the user’s, from the user’s 2 perspective, it is also I am getting this phone 3 essentially for nothing and I recognize that -- or for 4 cheaper than I would otherwise have to pay for it in 5 the case of an iPhone or an expensive phone and I 6 recognize that as part of doing that, I’m acquiring the 7 phone for the purpose of using it on the network of the 8 person who paid for this phone for me. 9 So I don’t think the user is looking at the 10 purpose in a vacuum either. 11 MR. KASUNIC: But at least in some of the 12 cases and if you -- there is the subsidy for the phone, 13 but if you -- even if you changed -- you want to use it 14 for a different purpose, you’re still bound by the 15 contractual terms in many cases that would require you 16 to pay the early termination fees. 17 So there is at least some balancing in terms 18 of the subsidy that’s given to the phones and the fact 19 that if people switched to another carrier, that they 20 have to pay the original carrier some of that subsidy 21 back, maybe all of it back. 22 Do you have any knowledge of to what extent 0180 1 the termination fees interact with what the amount of 2 the subsidy? 3 MR. JOSEPH: The termination fees do interact 4 and, of course, in the context of a prepaid phone, in 5 the context of prepaid service, which the CTIA carriers 6 offer, there is no contract and there is no early 7 termination fee. 8 So the only approach available to ensure that 9 the carrier recovers that which it has paid for is 10 through the use of the lock, through the use of the 11 technological protection measure. 12 Beyond that, early termination fees are 13 sometimes difficult to collect. They -- and that’s the 14 subject that goes into what the FCC is currently 15 looking at, among other things. I didn’t know the FCC 16 was looking at, but I did understand that that was a 17 question and now that I know that the FCC is looking at 18 it, I can answer that question. 19 But my understanding is that there is a 20 relationship and it is another means for postpaid 21 phones of attempting to ensure that the contract is 22 honored, but it’s not the only means and there’s 0181 1 nothing in the Copyright Act that says that a copyright 2 owner is limited to a single means of protecting its 3 interests. 4 In fact, 1201 itself adds a secondary means 5 because the primary means of protecting a copyright 6 owner’s interests is and always has been an 7 infringement suit, but 1201 exists as an ancillary, 8 secondary protection. 9 MR. KASUNIC: Moving to the other copyrighted 10 content and this would include you, Steve, as well, we 11 had some discussion again about this in Palo Alto, but 12 I’m trying to get a sense -- so we’ve had some 13 testimony and, Bruce, you raised here as basically, I 14 think, the only specific case that you pointed to, 15 Virgin Mobile’s use of -- or the fact that if a phone 16 is unlocked, it may expose other copyrighted content 17 and the only specific case -- there may be -- I’m not 18 hearing anything clear in terms of to what extent 19 completely other carriers’ content is completely 20 unlocked, if someone opens the lock to move to a 21 different service. 22 So are you aware or can you quantify in any 0182 1 way beyond Virgin Mobile the extent to which that would 2 occur? 3 MR. JOSEPH: No, I can’t. Carriers are not 4 eager to say that the only protection we have for our 5 copyrighted content on the phone is this lock and, as I 6 sit here, I don’t have an answer for specifics beyond 7 Virgin Mobile. They have come forward. They’ve said 8 it. 9 MR. KASUNIC: Are you aware of other carriers 10 having additional DRM or other forms of protection on 11 copyright content contained on phones? 12 MR. JOSEPH: I am aware that that does -- that 13 is done in certain cases, yes. 14 Now, by the way, when I say copyrighted 15 content, again we’re excluding the operating system and 16 the operating software because, among others, for 17 example, TracFone has a complicated and proprietary 18 billing and charging system that is -- that run its 19 phones and that is part of what’s circumvented and you 20 get access to with some of the TracFone hacks. 21 But if you’re talking by copyrighted content 22 about sound recordings, ring tones, and the like, there 0183 1 are in some cases other DRMs that are applied. Again, 2 I don’t know that Section 1201 says you’re limited to 3 one. 4 MR. KASUNIC: It says that you are -- 5 MR. JOSEPH: Limited to a single layer of 6 protection. 7 MR. KASUNIC: Of course not, but -- and that’s 8 -- I mean that’s one of the issues that was raised and 9 that is a question that I put to you. 10 Is there any reason why that would be -- 11 because part of the problem that occurs then is if 12 someone -- in order to accomplish what may be a non- 13 infringing use for one particular -- in one particular 14 area, there’s only one lock used, then the argument 15 opens up that this exposes other content to that act of 16 circumvention, but it’s not clear that there’s any 17 need, except what we heard from Virgin, basically the 18 cheapness, I think, of the chip set and the expense 19 that would be involved to change that, that limits 20 applying technological protection measures to the 21 entire bundle. 22 So it does seem that at least some other 0184 1 carriers do segregate the protections. So there would 2 be one form of protection for the operation of the 3 phone, other protection for the copyrighted content on 4 it. 5 MR. JOSEPH: Well, the answer to that is yes, 6 but I’m troubled a little bit to the extent your 7 statement implies that there’s something deficient in 8 what Virgin Mobile is doing because you have a wide 9 range of different phones and those phones have a wide 10 range of different capabilities, and the phones -- when 11 I say that I’m aware of phones that do apply second- 12 level more granular DRMs to some of the content on the 13 phones, I’m thinking more of the higher-end more 14 complicated phones. 15 I don’t have a specific answer for you with 16 respect to phones of the kind that Virgin Mobile was 17 talking about. 18 MR. METALITZ: Rob, could I just -- 19 MR. KASUNIC: Sure. 20 MR. METALITZ: -- weigh in on that? I don’t 21 have any more factual information to offer. 22 My understanding is that some -- you know, we 0185 1 have the Virgin Mobile testimony and I understand some 2 phones don’t have that feature, but I would be 3 concerned about the suggestion that a particular class 4 of works in the statute can be defined in terms of the 5 robustness or the granularity of the technological 6 protection measure that’s used to control access to it. 7 I’m not sure that -- I can’t think of an 8 instance where you have defined a particular class of 9 works in that way. It strikes me as unlikely that 10 Congress intended that, but I guess I’d want to go back 11 and look at the legislative history a little bit, but 12 if you’re suggesting that if you use the cheap chip 13 set, it’s okay to circumvent but not if you use -- 14 MR. KASUNIC: Now, let me save you some time 15 in that because I’m not suggesting either of those, 16 that I’m not characterizing this as being deficient in 17 any way or that this is -- that defining a particular 18 class, that the only question is if part of the 19 evidence of the opponents of the exemption is that this 20 exposes other kinds of content in order to accomplish a 21 particular goal, which can be limited by the particular 22 class if for that particular purpose, the exemption 0186 1 applies, is to giving to unlocking the phone, then 2 there at least has to be consideration of the fact that 3 this could have perhaps been accomplished in other ways 4 so that the amount of weight that would be placed on 5 the fact that other content is being exposed has to be 6 balanced with the fact that there may have been other 7 ways of -- and that other copyright owners have at 8 least considered ways of doing this. 9 And I guess that leads me to the question I 10 have to you, Steve, because you made the statement that 11 copyright owners are really the tail of the dog. This 12 is not -- there are -- have no bargaining power or 13 little bargaining power in this situation and really 14 don’t have any ability to encourage or require more 15 robust DRM. 16 But aren’t we saying that this is -- isn’t 17 this a fairly -- just in terms of looking at 18 newspapers, I see this cell phone industry is a pretty 19 competitive environment where there seems like full 20 page ads every day for various carriers. 21 Isn’t there a great deal of competition 22 amongst carriers and doesn’t that give copyright owners 0187 1 at least some level of bargaining power in terms of who 2 they’re going to license their content to under certain 3 conditions? 4 MR. METALITZ: Yes, if I said they have no 5 bargaining power and no leverage, then I probably 6 overstated what I was told, but I think it is pretty 7 limited. 8 I mean take Virgin Mobile. That’s something 9 where we know we have some facts in the record. I 10 think they said they were the fifth largest, if I’m not 11 mistaken, service. 12 Now we know that if you make your works 13 available on Virgin Mobile and if someone unlocks the 14 phone, they’re going to -- they may gain access to a 15 lot of your works. 16 I mean, yes, I suppose copyright owners could 17 and some might say, well, you’re not going -- we’re not 18 going to put any of our stuff on those phones. Others 19 would say, well, gee, we don’t want to cut out, you 20 know, the fifth largest means of distributing this. We 21 can ask them to upgrade their protection to give us 22 better protection, but we know that comes with a cost 0188 1 and we’re not prepared to pay them to do it. 2 So -- and because the music industry or the 3 game industry is also a competitive marketplace. That 4 could limit the ability of any single recording label 5 or game publisher to insist on this. 6 All I’m saying is that I hope you won’t 7 fashion -- if you recognize an exemption in this area, 8 I hope you won’t fashion it on the basis that in the 9 marketplace copyright owners can protect themselves to 10 a greater extent than is really the reality. 11 MR. KASUNIC: Well, but one of the other 12 points that Bruce just made about the multiple layering 13 of protection that is envisioned by the statute and 14 that there is technological protections and then 15 there’s copyright infringement. 16 So in the case where it’s established that 17 there is some kind of bundling of protection that 18 encompasses something for which a non-infringing use 19 could be made and, on the other hand, some other 20 copyrighted content of which there doesn’t appear -- I 21 mean, I guess we should at least put this into some 22 perspective, too, because what we’re talking about is 0189 1 -- I think the testimony I -- I could -- from what I 2 heard, it’s wallpaper and ring tones. 3 MR. METALITZ: And games. 4 MR. KASUNIC: And games that are included on 5 Virgin’s service. 6 Well, this probably is not the -- given the 7 fact that we have things like the -- with the 35,000 8 applications on iPhones and others, this is probably 9 not going to be the main incentive for figuring out 10 ways to circumvent, is to get at that wallpaper, ring 11 tones and the games on Virgin Mobile handsets. 12 MR. METALITZ: That’s probably true. I think 13 that helps to reinforce my point that the content part 14 of this is a small part and therefore one that really 15 can’t influence or have much impact on which protection 16 method is chosen. 17 MR. KASUNIC: Okay. Well, and I guess to 18 finish that point that you were saying that there 19 always is, even were there to be an exemption that 20 would get through the technological protection measure 21 encompassing the bundle, there is still always, of 22 course, the secondary backdrop of one of copyright 0190 1 infringement if anybody copies any of the copyrighted 2 content. So we do have that. 3 MR. METALITZ: I think you have that in the 4 background throughout this, but Congress clearly felt 5 that was -- that copyright owners should have greater 6 protection than that and so I agree, though, that -- 7 MR. KASUNIC: But that goes back -- 8 MR. METALITZ: -- copyright infringement is 9 always available. 10 MR. KASUNIC: And that goes back to the issue 11 that should you want to have greater protection of 12 those types of works, that you could put protection on 13 those and there would be nothing that would interfere 14 if there was an exemption for the other copyrighted 15 work for which the non-infringing use was intended to 16 be made. 17 MR. METALITZ: I’m not sure who you is in the 18 sentence you just said. 19 MR. KASUNIC: Okay. 20 MR. METALITZ: The copyright owner of the 21 content cannot put greater protection if it’s putting 22 its material on Virgin Mobile or distributing it 0191 1 through Virgin Mobile. I guess, based on the 2 testimony, it’s a take it or leave it. You have this 3 MSL or you don’t. 4 MR. KASUNIC: Okay. But we also heard that 5 just about every carrier now is offering prepaid 6 phones. So again, we’re back to the situation where 7 there’s plenty of competition for getting that 8 copyrighted content. 9 For -- on the -- now, we -- I guess I’d just 10 like to -- for Bruce, we obtained some agreement from 11 Steve in another session that -- and correct me if I’m 12 wrong -- that if an exemption exists through that the 13 Librarian creates, the use of a tool by a user that may 14 violate that tool, the creation of which may violate 15 Section 1201(a)(2), the use of that tool by a user does 16 not violate anything if it’s being used to fulfill that 17 exemption, is that -- I just want to make sure that -- 18 because we’re hearing a lot about the interrelationship 19 between 1201(a)(1) and 1201(a)(2). 20 MR. METALITZ: It doesn’t violate 1201(a)(1). 21 I wouldn’t say -- I don’t think I said it wouldn’t 22 violate anything. 0192 1 MR. KASUNIC: Well, the user who is using the 2 tool, if they’re not manufacturing or trafficking in 3 it, is not violating (a)(2) either, right? 4 MR. METALITZ: That’s correct. But there are 5 a lot of other statutes that may apply here. So I’m 6 not saying that it is -- you can never incur any 7 liability for using that tool. I am saying that if the 8 exemption applies, then there’s no (a)(1) liability, 9 even if the tool’s manufacture is a violation of 10 (a)(2). 11 MR. KASUNIC: Well, I guess what statutes 12 would apply to a user using that? 13 MR. METALITZ: Well, I’m not sure that it 14 would apply in the phone situation, but I think where 15 this came up, it was involving a computer and the 16 Computer Fraud and Abuse Act says that under certain 17 circumstances, if you obtain unauthorized access or 18 access in excess of what you were authorized to do and 19 if certain damage results, then you are liable civilly 20 and in some cases criminally. 21 So that scenario could be carried out by using 22 an (a)(2), 1201(a)(2) tool, even in a situation where 0193 1 an (a)(1) exemption applies. 2 Now, the Congress said that in most of the 3 statutory exemptions, you’ll see that they only apply 4 if they don’t violate another law and in some cases the 5 Computer Fraud and Abuse Act is specifically called 6 out, but I don’t think any of the exemptions that 7 you’ve recognized have that limitation. 8 So I’m hesitant to say that acting within the 9 scope of an administrative exemption is a -- makes you 10 immune from any other liability. It does make you 11 immune from liability under 1201(a)(1) during the 12 three-year period in question. 13 MR. KASUNIC: Okay. Bruce, you mentioned that 14 many of these -- the purpose of this exemption for many 15 seems to be to engage in 1201(a)(2) activity, to 16 basically be service -- providing a service or devices 17 that would enable others to circumvent rather than 18 actual -- the 1201(a)(1) act of circumvention, correct? 19 MR. JOSEPH: I certainly did say that that 20 appears to be the case from reading the testimony. 21 MetroPCS in its testimony talks extensively about 22 MetroFlash and it almost appears as if that is its 0194 1 reason for seeking the exemption. 2 You see similar discussion in Pocket, although 3 they’re not quite as explicit, and Cricket talk about 4 performing the service at all but does attempt to 5 justify the change in the Joint Proposal 5X to enable 6 for the very reason that appears to be to foster 7 circumvention services, recognizing that the person 8 who’s doing the connecting isn’t the person who’s doing 9 the circumventing. So yes. 10 MR. KASUNIC: Well, I should probably bring 11 you all into the conversation. 12 Darin, is that -- I mean, how do you respond 13 to that, that this really is not -- this forum is not 14 really providing you with the remedy that you need 15 because this activity is actually involving other kinds 16 of prohibitions? 17 MR. INGLISH: Sure. I think an exemption 18 under 1201(a)(1) is independent of 1201(a)(2) and by 19 giving an exemption here, someone that’s providing the 20 services still has arguments under 1201(a)(2) that are 21 unrelated to 1201(a)(1). 22 The statute in 1201(a)(2) says that it is 0195 1 primarily used, but when you break a lock, the breaking 2 of the lock in and of itself does not allow you to 3 connect to another carrier’s network. The breaking of 4 the lock simply allows you to go into the phone and 5 update the PRL, the Preferred Roaming List. It doesn’t 6 affect the software on the phone, the boot loader or 7 the operating system. 8 The PRL is simply a file that gets updated. 9 So I don’t believe that by having an exemption under 10 1201(a)(1) that it affects the 1201(a)(2) argument. 11 MR. KASUNIC: And isn’t that true, Bruce, that 12 that seems to have been the case so far anyway, because 13 haven’t most actions that have been brought against 14 those kind of entities that are trafficking or 15 distributing been successful, and has 1201(a)(2) been a 16 component of those actions? 17 MR. JOSEPH: 1201(a)(2), I believe, -- they 18 have been successful. 1201(a)(2), I believe, has been 19 a component. 1201(a)(1) has also been a component 20 because it’s been clear that the unlocking wasn’t 21 occurring for the sole purpose and in that regard the 22 courts have been getting, we believe, the office’s 0196 1 intent of three years ago correct. 2 That’s not to say, however, that there hasn’t 3 been harm. The cost of bringing those actions is quite 4 high. The burden of bringing those actions is quite 5 high, and the 1201(a)(1) exemption is pointed to and -- 6 first of all, pointed to, and second of all, the 7 popular wisdom is that the Copyright Office said that 8 this was okay, which furthers a sense that going out 9 and unlocking phones is something that ought to be 10 done. 11 So you are creating a proliferation of 12 unlawful conduct by the existence of the current 13 exemption. 14 MR. KASUNIC: So do you think -- are you 15 saying that the availability of these services is 16 primarily due to the exemption and would not exist but 17 for that exemption? Did they not exist prior to the 18 exemption? 19 MR. JOSEPH: I have not done the -- and CTIA 20 has not done the kind of scientific study that would 21 allow me to answer a causal question. 22 I believe, however, and I think this was 0197 1 similar to the question that David opened the 2 questioning with, I believe, however, that the logic is 3 inescapable that the existence of the (a)(1) exemption 4 fosters an environment in which it is believed that 5 this activity is okay. 6 I do believe that the number of services that 7 offer the -- offer a wireless service that depends or 8 that is seeking to advocate the kinds of unlocking that 9 we’re talking about here have increased. 10 I’m not sure how long Cricket has been in this 11 model or where it has been, but you’re hearing a lot 12 more about them in the last three years than you heard 13 before and I think that’s fostering an increase in 14 unlawful unlocking services. 15 So I can’t give you to say they wouldn’t 16 exist. I do think it is an environment that fosters 17 it. 18 MR. KASUNIC: To the extent that they do exist 19 as a result of the exemption, to what extent do you 20 think -- and I pose this to everyone. To what extent 21 do you think that this -- it’s relevant that there is 22 perhaps a problem within Section 1201, a practical 0198 1 problem that exists in that if an exemption is created, 2 in most cases, the vast majority of individuals do not 3 have the technological ability to circumvent in order 4 to accomplish the non-infringing use? 5 So there is the availability certainly under 6 1201(a)(2) to go after anyone manufacturing or 7 trafficking those devices, but the reality is that that 8 -- and this came up in the context of the CSS and DVDs, 9 that there’s a great number of tools available for 10 which there have not been actions taken against a great 11 many of those, but that’s really -- since there are 12 very few people who independently would be able to 13 accomplish any exemption, that that’s just the 14 practical reality. 15 How do we reconcile these seemingly inherently 16 contradictory messages that Congress sent us? 17 MR. METALITZ: Well, the first question is do 18 you need to reconcile this in order to do the job 19 Congress assigned to you. I think the answer is no, 20 you have a clear assignment and some reasonably clear 21 standards for how to carry it out. 22 The second point I would make, which I think, 0199 1 at the risk of being a little hyper-technical here, 2 there isn’t a total symmetry between 1201(a)(2) and 3 1201(a)(1). It is certainly possible -- you could 4 certainly conceive of circumstances in which someone 5 would engage in circumvention without using the tool 6 whose manufacturer is prohibited by 1201(a)(2). 7 1201(a)(2) requires one of three things, that it 8 be primarily designed or produced for the purpose of 9 circumventing, have only limited commercially 10 significant purpose or use other than to circumvent, or 11 to be marketed in connection with circumvention. 12 Congress considered but did not enact a 13 statute that said any tool that is capable of 14 circumvention is prohibited under 1201(a)(2). 15 So a tool provided by manufacture and provided 16 by A can be used by B to circumvent if the tool doesn’t 17 meet one of those three criteria. So this is not some 18 type of logical conundrum or paradox that can’t be -- 19 you know, that doesn’t have a way out. 20 But I think the more important question is 21 whether -- what, if any, role that ought to play in 22 your determinations under -- in the rulemaking 0200 1 proceeding, and I would submit that you can keep your 2 focus where Congress intended it on 1201(a)(1) and 3 carry out the rulemaking by applying those standards. 4 I also wasn’t clear on what significance, if 5 any, you were attributing to the fact that there are 6 tools that we think violate 1201(a)(2) but that have 7 not been the subject of enforcement actions, but I 8 wasn’t sure what relevance that had to the question you 9 were posing. 10 MR. KASUNIC: Just that the independent cause 11 of action allows those tools to be -- actions to be 12 brought against those makers of those and for those 13 tools to be taken away. 14 MR. METALITZ: It does allow that, but there 15 may be -- there are a lot of practical considerations, 16 of course, about that. 17 MR. JOSEPH: If, for example, they are 18 distributing -- they’re in the United States, they’re 19 accessible in the United States, you can get 20 jurisdiction over them. You can figure out who they 21 are, et. cetera, and in the case of software that may 22 not be always the case. 0201 1 I actually disagree a little bit with Steve, 2 that you shouldn’t take (a)(2) into account at all 3 because it seems to me that where the creation of an 4 (a)(1) exemption fosters unlawful conduct under (a)(2), 5 that should be a factor weighing against the granting 6 of the (a)(1) exemption and where the parties that are 7 seeking the (a)(1) exemption are doing so in 8 furtherance of unlawful activity under (a)(2), you 9 should look with a great deal of skepticism upon their 10 claims of the need for the (a)(1) exemption. 11 So I don’t think the two are entirely 12 independent. 13 MR. KASUNIC: but then that -- there is 14 something -- if we’re -- either we can or we can’t look 15 to (a)(2). If we can look at it in terms of how the 16 adverse effects, it seems kind of odd that we shouldn’t 17 look at it in any other context. 18 So I guess that’s just more of a -- I think 19 I’m done. 20 MS. PETERS: Okay. Then we are done with this 21 panel, and thank you very much. 22 MR. JOSEPH: Thank you. 0202 1 MR. INGLISH: Thank you. 2 MR. METALITZ: Thank you. 3 MS. PETERS: 15-minute break until the next 4 panel. 5 [Recess.] 6 MS. PETERS: Okay. This is the last part of 7 our series of hearings and I guess we’re going to start 8 with you, Megan. 9 Proposed Class 2 10 MS. CARNEY: Four years ago, in an attempt to 11 unclutter the area underneath our TV, I thought I could 12 build a PC that would act as TIVO, play our DVDs and, 13 as an added bonus, help us share all those cool videos 14 on YouTube. I have given up this quest because I 15 discovered that to build anything reasonable would also 16 be illegal. 17 Vent TV is a fine replacement for TIVO but it 18 can’t play DVDs and there aren’t many options available 19 for Linux systems. I could use an Apple product. It 20 could play DVDs but there’s not much available for 21 video recorder software, certainly not anything as 22 cheap or as popular as Vent TV. There still isn’t. 0203 1 I could have used Windows XP Professional but 2 I also couldn’t play DVDs on that unless I bought extra 3 software. In 2008, when the Netflix membership we had 4 already purchased suddenly started streaming video, I 5 returned to my efforts and I gave up for a second time. 6 Despite the great new services the content 7 companies have claimed to have made available, it is 8 still true that anything I built would also be illegal 9 if it were to be reasonably useful. 10 It’s only television and movies. So why would 11 I, not representing anyone, bother to fly to D.C. for 12 one day to argue for the ability to watch more of them 13 more conveniently? Because the “Princess Bride” is one 14 of my favorite stories, because I love to watch nature 15 TV shows and learn biology, because I learned to love 16 math from Square One, because they’re an important part 17 of our culture. Access to them should be limited only 18 insofar as it is required to tempt people into creating 19 more of them. 20 Tinkerers and builders should not be 21 criminalized for making non-infringing uses of content 22 that has been legally purchased, but these arguments 0204 1 aren’t even laid out. I am here today to respond to 2 the arguments of the commenters. 3 The American Association of Publishers argued 4 that consumers would never purchase streaming 5 subscriptions that they didn’t have the hardware to 6 view in the first place. This argument ignores the 7 fact that most consumers have multiple devices on which 8 it is possible to view multimedia content. 9 Having restrictions where it is available on 10 one but not the other is inconvenient to the consumer 11 and frustrating. 12 Specifically with Netflix, however, the 13 streaming subscription is automatically included in all 14 of their plans. All Netflix subscribers are allowed to 15 use their online streaming service. It’s not something 16 you purchase in addition to the subscription, provided, 17 of course, that they have the right platform. 18 They also argue that I had a plethora of 19 viewing needs and that to expect to serve all of these 20 at virtually no cost does not justify exemption. I 21 would argue there’s a large market for a device that 22 would replace all of the various single purpose 0205 1 consumer devices that sit ear our televisions these 2 days and that this market is under-served. This is 3 what I mean when I talk about the substantial harm 4 caused by not granting this exemption. 5 The only platform that comes close is a Media 6 Center edition version of Windows but its DRM has 7 proved difficult to deal with for most consumers. 8 Competition in this arena is hard to come by because of 9 the difficulty of reaching license agreements with 10 various content creators, the same content creators, I 11 would point out, who claim to be making this easy on 12 consumers. As somebody who knows computers and plays 13 with them, I can tell you it’s not, and if it’s not 14 easy for me, it’s certainly not easy for the average 15 consumer. 16 All of the commenters that oppose this 17 exemption argue that this control causes no substantial 18 harm because anything anyone would want to get their 19 hands on is available via other means. 20 A cable subscription is double or triple the 21 cost of a Netflix membership. To argue that I should 22 pay $60 a month for a show I want to see every once in 0206 1 awhile is hardly reasonable. 2 As for the local DVD rental place, requiring 3 somebody to open an additional account with an 4 additional company when they have already legally 5 purchased a subscription is a little silly. Just 6 because it is possible with significant time and money 7 and resources to overcome the restrictions on platform 8 controls does not mean it’s reasonable to expect 9 consumers to do so. 10 At this point, I expect the commenters would 11 like to jump in and say they have a lot of new services 12 and ideas planned that are going to roll out to address 13 these platform restrictions issues. These are the same 14 platform restrictions issues that they are attempting 15 to argue don’t really exist in the first place. 16 Regardless, they say they are doing their best 17 to come up with options that will work with all 18 consumers. This argument only works if one assumes 19 that standard market forces are promoting healthy 20 competition. 21 Time Warner even goes so far to say that the 22 platform restrictions will spur creativity by 0207 1 competitors looking to get in the game. If this were 2 true, then Netflix would have a streaming client for 3 Apple laptops that have PBC chips. There is no such 4 client because it would compete with Apple’s own movie 5 rental service and Apple refuses to license its digital 6 rights management to Netflix. 7 There is one dominant commercial platform in 8 the personal computer business and that’s Windows. 9 There is one niche commercial platform that is 10 significant and that is Apple. If operating systems 11 were only in the business of building a playground for 12 applications to run in, then it might be true that 13 competition would spur reasonable alternatives, but 14 both Apple and Microsoft have businesses that include 15 movie rental and streaming video, interests that run 16 counter to making it easy for other companies to 17 compete. 18 If the restrictions were lifted, the 19 commenters claim they would less willing to roll out 20 new streaming services for fear of having their 21 products end up on peer-to-peer networks. 22 First, let’s address the supposed willingness 0208 1 to allow streaming video. Netflix was started in 1997. 2 The DMCA was passed in 1998. That means that the 3 protections content creators claimed were necessary to 4 allow them to roll out streaming video have been 5 available for 11 years. Despite this, it was only in 6 2008 that Netflix was able to complete a licensing deal 7 that allowed them to begin streaming movies on demand 8 to TIVO. 9 It was consumer demand that dragged the video 10 content companies into movies on demand, not a 11 willingness to venture into a new area because of 12 protections offered by the DMCA. 13 Regarding the content companies’ fear of lost 14 revenue, most online music sales have already dropped 15 digital rights management restrictions and any 16 accompanying protections offered by the anti- 17 circumvention clause. It was simply bad for business. 18 Consumers will do the right thing if it’s easy 19 and most consumers would prefer to buy their music from 20 a reputable source instead of downloading it illegally 21 for the same reason I prefer to get my groceries from a 22 store instead of a dumpster. 0209 1 All of this discussion is worth nothing, of 2 course, if the American Association of Publishers claim 3 that technological incompatibility is not an access 4 control at all is true. The AAP points to the ruling 5 on the Internet Archives 2006 exemption request for 6 computer programs and video games distributed in 7 formats for obsolete operating systems or hardware as a 8 condition of access. 9 They claim that this ruling would indicate 10 that platform restrictions under video streaming are 11 not an access control at all and therefore no debate is 12 needed. 13 The current exemption being discussed is 14 fundamentally different. In the case of the computer 15 games being considered in 2006, the entirety of the 16 copyrighted content resided on the user’s computer. 17 The game was not sent to the user in short sections 18 which were removed from memory after that section of 19 the game had been played. In other words, access to 20 the code in the game was not being controlled by a 21 server outside the user’s computer. 22 In the case of streaming video, the server’s 0210 1 controlling access to the content and in the case of 2 Netflix streaming video, the server will only grant 3 access if the user’s platform meets certain 4 requirements. Thus, the streaming video server is 5 making a specific platform a condition of accessing the 6 content. This is different than the proposed 2006 7 exemption where the games were designed to work on a 8 specific platform but that platform was not a strict 9 requirement enforced by the content creator. 10 The Library of Congress defines an access 11 control mechanism as a technological measure employed 12 to protect access to a given work. The streaming video 13 server employs a technological measure which makes a 14 specific platform requirement. 15 Put another way, a user is only authorized to 16 stream video if they are running an approved platform. 17 Therefore, access to the work with an unapproved 18 platform is unauthorized and would require 19 circumventing the technological measure. 20 This exemption is, indeed, about an access 21 control, but more importantly, this exemption is about 22 protecting consumer choice. The content companies are 0211 1 not offering the solution all the consumers want. The 2 companies that could possibly create those solutions 3 are discouraged by anti-competitive forces. Platform 4 restrictions harm consumers by imposing a high cost of 5 access for copyrighted works. These restrictions 6 primarily exist due to anti-competitive forces and 7 there is not a reasonable non-infringing alternative. 8 New software and hardware costs anywhere from 9 hundreds to thousands of dollars. The two major 10 players in the platform market, Microsoft and Apple, 11 both have interests in preventing independent streaming 12 services. 13 The fact that expensive, inconvenient, non- 14 infringing alternatives exist does not make them 15 reasonable. Content creators demonstrate this by their 16 own admission that new services are necessary to meet 17 consumers’ needs. 18 The purpose of copyright law is to achieve a 19 balance between encouraging creation and allowing the 20 public to benefit from that creation. The approval of 21 this exemption, I believe, would preserve that balance. 22 MS. PETERS: Thank you very much. 0212 1 Mr. Williams? 2 MR. WILLIAMS: Good afternoon. My name is 3 Matt Williams, and I am an attorney with the law firm 4 of Mitchell, Silberberg and Knupp, LLP. I’m here on 5 behalf of the Joint Creators and Copyright Owners. 6 I appreciate this opportunity to express our 7 opposition to Ms. Carney’s proposal and your allowing 8 me to give Steve Metalitz a break. 9 Given that this is the last hearing in this 10 week’s marathon, I will try to be brief. 11 I would like to begin by highlighting that it 12 is Ms. Carney’s burden to establish that it is more 13 likely than not that during the next three years her 14 ability to make non-infringing uses of audio-visual 15 works will be adversely affected by the Section 16 1201(a)(1) prohibition. 17 Neither her brief, prior submission nor her 18 testimony today, I think, satisfies that burden. 19 In addition, I would like to point out that no 20 responsive comments were filed in support of Ms. 21 Carney’s proposal which indicates that her views 22 regarding the streaming video and marketplace are not 0213 1 widespread. 2 Before addressing the specific flaws with the 3 proposal, I would also like to stress that Congress 4 instructed the office to consider the positive as well 5 as the negative effects of the Section 1201(a)(1) 6 prohibition. 7 In Section 3 of our submission as well as the 8 submissions of MPAA and Time Warner, we describe a wide 9 variety of innovative streaming video services that are 10 currently available in the marketplace and I would 11 suggest that all of these exciting new services, 12 including some of the services Ms. Carney is 13 criticizing, are exactly the kinds of services that 14 Congress intended the DMCA to facilitate. 15 The Register has previously concluded as much 16 in 2003 by stating that the fact that copyright owners 17 are able to tether works to particular platforms is 18 likely to encourage some copyright owners to make their 19 works available in digital format. 20 As we see it, there are several specific flaws 21 with Ms. Carney’s proposal and I would like to 22 highlight a few of them now. 0214 1 First. Ms. Carney has failed to establish 2 that access controls are causing the problems that she 3 claims to be encountering. In 2006, as Ms. Carney 4 mentioned, the Register rejected a proposal made by the 5 Internet Archive because the Archive failed to 6 establish that operating systems were being used as 7 access controls. 8 The Register concluded that operating systems 9 are designed to permit access, not to deny it, and that 10 technological incompatibility is not the same thing as 11 an access control. 12 Here, Ms. Carney is complaining about 13 technological incompatibility and it is unclear which 14 access control she’s asking to circumvent. I think the 15 2006 conclusion remains valid in this context. 16 Second. Ms. Carney’s assertions regarding the 17 use of technological incompatibility to stifle 18 competition appear to be incorrect, given the current 19 state of the marketplace. 20 Although she cites an interview on a website 21 called Hacking Netflix to support the claim that Apple 22 is refusing to enable a Netflix Watch Instantly feature 0215 1 to work with Apple operating systems, Ms. Carney’s own 2 submission admits that the newer versions of the Apple 3 operating system are compatible with the Netflix 4 service. 5 Third. Ms. Carney’s portrayal of the 6 limitations of various operating systems in the chart 7 attached to her submission appears to be inaccurate and 8 she admits that at least one version of Vista enables 9 her to engage in all of the activities she wishes to. 10 Those four specific activities that she mentioned are 11 enabling Netflix Watch Instantly Function, playing DVDs 12 without additional software, serving as a DVR, and 13 enabling Hulu video playback. 14 Moreover, this question of which devices or 15 operating systems enable all of Ms. Carney’s desired 16 activities is one that is entirely irrelevant for the 17 purpose of this proceeding. 18 Ms. Carney is essentially asking the Librarian 19 to conclude that Ms. Carney is entitled to receive 20 every video streaming service, play every DVD and 21 record all the videos she watches online or on her 22 television by purchasing one inexpensive device or 0216 1 operating system. 2 As the Register has previously concluded in 3 the context of proposals related to Linux devices and 4 elsewhere, when alternative formats for viewing works 5 are readily available, an exemption is not warranted. 6 Ms. Carney is simply wrong that there is no 7 reasonable non-infringing way to accomplish the 8 activity prevented by platform requirements. She in 9 fact has access to many reasonable means and I think as 10 her testimony demonstrated, the main concern here is 11 inconvenience and frustration, I think that’s her 12 quote, as well as her cost. 13 Finally, I would like to point out that the 14 proposed exemption lacks clearly-defined contours. For 15 example, although it is limited to purchase material, 16 Ms. Carney includes Hulu in her submission which is a 17 free access site as far as I’m aware. 18 In conclusion, Ms. Carney’s proposal complains 19 of mere inconveniences that do not even come close to 20 justifying an exemption. The prohibition on 21 circumventing access controls is not likely to prevent 22 her from viewing streaming video in the next three 0217 1 years and granting an exemption in this area would 2 penalize copyright owners and technology providers that 3 are rapidly developing an exciting area of the market 4 that is constantly increasing the number of copyrighted 5 works available to consumers at little or no cost. 6 As expressed by MPAA and Time Warner in their 7 submissions, copyright owners appreciate consumer 8 desire for access in a variety of formats and they are 9 working to meet that demand. 10 Thank you, and we also appreciate that you 11 came to D.C. to make your case. 12 MS. PETERS: Ms. Carney, do you want to 13 respond to anything they say or do you want to just 14 answer questions? 15 MS. CARNEY: Just one short thing. I mean, I 16 think if there were really competition in this arena, 17 there would be more than one choice and, I mean, he’s 18 right, there is a version of Windows that will do all 19 these things, but the fact that there’s only one 20 platform, I mean, at least appears to me to mean that 21 there’s not competition, that there’s not enough 22 choices for consumers, especially when that one 0218 1 platform has been notorious for having tricky DRM 2 issues with respect to upgrading hardware which changes 3 the fingerprint essentially of the operating system 4 which means that Windows Vista has to reauthorize you. 5 So it’s -- I would just say that one thing 6 before you guys start. 7 MS. PETERS: Okay. 8 MR. KASUNIC: I guess I’m hearing assertions 9 that your problem is really one of software 10 incompatibility rather than technological protection 11 measures. 12 So could you (a) respond to that and (b) sort 13 of clarify for us what technological measures and 14 access control to copyright works specifically do you 15 have a problem with in this context? 16 MS. CARNEY: That would be the measures on the 17 streaming server which require a specific platform. 18 So, essentially, in order to get to the streaming video 19 you’d have to circumvent that. You’d be circumventing 20 an access control. 21 MR. KASUNIC: So there is something that sort 22 of gets between you and the content which, if you 0219 1 remove that, whatever that technological measure it is, 2 that content could be in fact streamed on other 3 platforms? Is that what you’re saying? 4 MS. CARNEY: Sure. I don’t -- 5 MS. PETERS: Just walk us through like what 6 you would do and what’s missing. You want to see 7 something and if you could just walk us through what 8 you want to have happen. You want to see something. 9 You go on to a computer. You have an impediment. You 10 need to circumvent. What do you do, and then what do 11 you get? 12 MS. CARNEY: Well, for instance, I have an 13 Apple laptop, but I bought it three or four years ago, 14 maybe five years ago now. So it’s not an Apple laptop 15 with an Intel chip which means that we’ve had a Netflix 16 subscription that includes streaming video for two 17 years now and basically my laptop can’t use it. 18 Until we upgraded our TIVO, our TIVO couldn’t 19 use it. So the TIVO HD will stream it and Netflix has 20 a number of devices. For instance, you could buy a 21 iRoku which will stream TIVO for you but it won’t do 22 much else, right, and he pointed out that I used Hulu 0220 1 in my charts. 2 I was just trying to demonstrate that the 3 stuff available on Hulu isn’t the same as the stuff 4 available on Netflix. So pretending that Hulu is a 5 replacement for Netflix streaming video is not exactly 6 accurate, but you asked me to walk through -- walk you 7 through what happens. 8 You basically open up a Web browser and you go 9 to Netflix’s site and you log in, so it authenticates 10 you for your account, and then you go to your list of 11 things you want to watch and then when you click on 12 something you want to watch, Netflix installs something 13 on your system which it talks to in order to authorize 14 you to view the content on the list. 15 Now, it won’t install that thing if it’s not 16 Windows or Apple with an Intel chip. 17 MS. PETERS: So you try to go on with your 18 Apple computer and it doesn’t work for you? 19 MS. CARNEY: It won’t even attempt to install 20 any sort of client. 21 MS. PETERS: Okay. And the exemption would 22 allow you to do what? To make it work? 0221 1 MS. CARNEY: Oh, it would allow someone to 2 build a program which would be able to access the 3 Netflix streaming site and circumvent the DRM, 4 basically, to watch stuff that they had legally 5 purchased. 6 MR. KASUNIC: Is there content that’s 7 available from Netflix just in streaming that is not 8 available on DVD? 9 MS. CARNEY: I wasn’t able to answer that 10 question. I looked around and I don’t know. 11 MS. PETERS: But it’s somebody else who would 12 build the program that you would then -- 13 MS. CARNEY: I have no plans to write it. I 14 just -- I think that somebody should be able to build 15 it, if they want. 16 MS. PETERS: Okay. I got it. 17 MR. CARSON: So what exactly is the access 18 control that you say needs to be circumvented? 19 MS. CARNEY: I don’t have the details of the 20 Netflix program, but the streaming server will not 21 stream to you if you are not on one of the approved 22 platforms. 0222 1 MR. CARSON: And if you removed whatever that 2 obstacle was, would your software actually be able to 3 play that stream? 4 MS. CARNEY: Sure. In theory, you could write 5 software that would play streams from Netflix on Linux, 6 but in order to do so, you would have to circumvent 7 their DRM. 8 MR. KASUNIC: But is it clear that this is -- 9 that there’s something preventing that or that the 10 software that Netflix is going to put on your computer 11 is software that has been created for a different 12 operating system, an Intel-based or Intel-based 13 computers? So it has that program. 14 So, in essence then, aren’t you really asking 15 them to build more robust programs that are available 16 in any format? 17 MS. CARNEY: Well, I certainly understand that 18 Netflix as a company feels like it needs to concentrate 19 its efforts on the most popular platforms and certainly 20 as a company they have a right to choose to concentrate 21 their resources in that way. 22 But as a user, I feel like if there’s a 0223 1 program out there that could be written to access this 2 content -- 3 MS. PETERS: It almost sounds like 4 interoperability. It’s your computer is not -- it’s 5 old and it doesn’t have the current operating system of 6 Apple which is what the Netflix authenticating service 7 is looking for. You’re saying it’s the Intel chip. 8 MS. CARNEY: It’s -- I don’t know exactly what 9 the client that gets installed on the operating system 10 does. 11 MS. PETERS: Okay. 12 MS. CARNEY: But since they won’t even 13 download a client to my operating system, it’s not 14 really that there’s -- I think it’s not really that 15 there’s an access control in the computer itself. 16 MS. PETERS: It almost sounds like obsolete 17 hardware. 18 MR. KASUNIC: I’m not sure about this, but it 19 seems like to a certain extent, does this have to do 20 with the decision of when to purchase certain 21 equipment? And I think for most consumers, there’s 22 always the decision of, for instance, if someone was 0224 1 thinking of getting an Apple iPhone, well, you know 2 that there may be a different version coming out in six 3 months and if you want to get the added features that 4 are going to be coming out on the new phone, although 5 you may want one now, there’s some benefit to waiting 6 for six months so that you have all of those features. 7 What is -- isn’t what you’re asking for, no 8 matter when you buy a particular device or software 9 with that, that you be able to reap the benefits of 10 anything that afterwards is developed without having to 11 upgrade or get the new hardware? 12 MS. CARNEY: Well, first of all, my laptop may 13 not have been purchased in the last couple of years, 14 but it certainly runs most other programs fine. So in 15 that respect, it’s not obsolete. It simply doesn’t 16 have a system on it that has a DRM program that’s 17 blessed by Netflix and that’s why it won’t run the 18 Netflix streaming video. 19 Now, as to what you seem to be pointing to as 20 an interoperability issue, if there’s an access control 21 on the server that refuses to allow me to get to the 22 content simply because of my operating system, well, 0225 1 that’s an access control and if I were to get around 2 it, I believe that would be a violation of the DMCA. 3 So I think there certainly could be a client 4 written to make this work on any operating system, but 5 again I don’t think it would be legal to write that 6 under the current law. 7 MR. CARSON: Are you offering Netflix as an 8 example or is that really what your complaint is about, 9 about the Netflix streaming service? 10 MS. CARNEY: Netflix is just the easiest 11 example. There are certainly other services that 12 stream only to specific platforms and I assume some of 13 these charge subscription fees. 14 Hulu has actually done a great job of 15 overcoming some of these platform issues because they 16 work on Linux. They work on Macs and they work on 17 Windows. However, Hulu doesn’t have a lot of past 18 versions of shows. It tends to have current stuff 19 which is great, you know, for those of us who don’t 20 have cable, but it’s certainly not as complete as the 21 catalog of something like, say, Netflix or another 22 streaming service could offer. 0226 1 MR. CARSON: Matt, do you have any information 2 whether with respect to the services we’re talking 3 about so far, do you have a point of view or any 4 information to share on the extent to which there are 5 in fact access controls that prevent the kind of use 6 that Megan would like to engage in? 7 MR. WILLIAMS: I think that Netflix probably 8 uses an access control to ensure that only subscribers 9 can access content. I don’t believe that she’s 10 established that they have an access control in place 11 to prevent her operating system from connecting. 12 They have worked to enable operating systems 13 to connect and now Apple’s newer versions do connect. 14 There’s at least two, I believe, instead of one 15 versions of Vista that will connect and so I think they 16 have made efforts to enable access to operating 17 systems. 18 There is no access control that I know of that 19 they’re using to prevent other operating systems from 20 connecting. It’s just they’re not compatible with -- 21 MS. CARNEY: So are you saying that if I wrote 22 a client tomorrow that would let me stream Netflix 0227 1 video on a Linux system, that the MPAA would have no 2 objection to that? Because if there’s no access 3 control that I’m circumventing, then they wouldn’t care 4 if I wrote that client, right? 5 MR. WILLIAMS: I’m saying that you haven’t 6 established that or identified any access control that 7 you’re asking for permission to circumvent. I’m just 8 not clear on what it is that you want to do and so I 9 can’t really address your question. 10 MR. CARSON: Matt, let me ask you this because 11 I certainly can’t identify -- I’m not aware of any 12 access control there either, but why would I be? 13 Are you representing to us that there isn’t 14 any or are you in the same position that I am? You 15 just don’t know? 16 MR. WILLIAMS: I just don’t know, and I know 17 that I’ve looked at these websites that they are 18 touting the number of operating systems that they’re 19 trying to get onboard. I didn’t see any evidence that 20 they’re discouraging, you know, trying to limit 21 themselves to prevent competition. I didn’t see that. 22 MR. CARSON: Megan, have you looked at any of 0228 1 our past rulings in past rulemakings? 2 MS. CARNEY: I have a little bit, yes. 3 MR. CARSON: Okay. I mean, do you know that 4 one of the things we’ve said pretty consistently is 5 that if you want to get an exemption, it’s your burden 6 to establish that there is in fact an access control? 7 Do you think you’ve given us enough information to 8 evaluate that? Because I have to say I don’t see it in 9 front of me. 10 So it’s sort of hard for me to make a judgment 11 when I have what’s basically a conclusory assertion 12 that there’s an access control out there. Well, maybe 13 there is, maybe there isn’t. I just don’t think I have 14 that information in front of me. 15 MS. CARNEY: Well, if there were no access 16 control, then my laptop should be able to stream that 17 content, right? Somebody would have come up with a 18 client to -- 19 MR. CARSON: Not necessarily, not necessarily. 20 I mean, I don’t know if that’s -- that might be one 21 reason why. Another reason just might be that the 22 software you have, the operating system you have is one 0229 1 that’s been -- that’s not the current one that’s being 2 marketed and people who are making these kinds of 3 things are focusing on the currently marketed operating 4 systems. 5 I just don’t know is my point, and one thing 6 that we’ve said in the past and maybe you could 7 persuade us to change it, but you’ve got to be the one 8 to persuade us to change it, is that if you want to 9 make a case for us, you’ve got to give us enough 10 information for us to understand that there is in fact 11 a technological measure that controls access that you 12 would need to circumvent or someone would need to 13 circumvent in order to engage in this activity. 14 I mean, there’s a lot of things you have to 15 prove but that’s the first thing, and so far, so far I 16 don’t see it. If it’s put in front of me, I’ll see it, 17 but I haven’t see it yet. 18 MS. PETERS: Have you contacted Netflix to 19 find out why it doesn’t work or what you would have to 20 do to make it work? 21 MS. CARNEY: Oh, well, the reason it works on 22 the Intel chips is because there’s a digital rights 0230 1 management software that works on the Intel chips that 2 Netflix has been able to license to put in their client 3 to allow the streaming. 4 So there is no -- because Apple didn’t license 5 its digital rights management software in the PPC chip 6 to Netflix to make the client -- 7 MS. PETERS: I got it. 8 MS. CARNEY: -- and so that’s specifically in 9 the case of Netflix. 10 MR. CARSON: Okay. How do you know that? How 11 do you know what you just told us? 12 MS. CARNEY: Oh, well, there was the online 13 source and that’s basically what I was told when I 14 contacted Technical Support when I had an issue with 15 it. 16 MR. CARSON: Okay. So there’s something 17 online that actually would give that -- give us that 18 information, but you’ve not pointed us to that at all, 19 correct? Is it in the comments? 20 MS. CARNEY: It’s in the initial comments. 21 MR. CARSON: Okay. Good, good. All right. 22 Good. 0231 1 MS. CARNEY: But as far as the access control 2 issue, if it’s denying me access, the server is denying 3 me access to the content based on the fact that I don’t 4 have a specific operating system, it’s not just that 5 it’s attempting to give me content that my computer 6 can’t understand or that my computer is crashing when 7 it runs, it’s not giving me the content at all. 8 MR. KASUNIC: Can I ask a question, Matt? If, 9 just trying to get a sense if there could be or is an 10 access control involved in the Netflix example, if 11 there was a proprietary player that is being offered by 12 Netflix that is only available for -- if it meets the 13 requirements, so you can download a proprietary player 14 in which to access the streaming video, wouldn’t that 15 constitute a protection measure for access for the 16 content that is then being streamed through that 17 proprietary player and given the fact that that would 18 be the only means of accessing the streaming content? 19 MR. WILLIAMS: I guess it very well might be 20 an access control in that scenario, but I don’t know 21 that that would inevitably be the case. 22 MR. KASUNIC: Okay. 0232 1 MR. WESTON: I had a question for Ms. Carney. 2 Are you aware -- in the prior testimony, we’ve had a 3 lot of people talking about how there’s, for instance, 4 the codes easily available to decrypt DVDs and there’s 5 codes easily available to decrypt cell phones that we 6 heard earlier today. 7 Are you aware of any codes that do the thing 8 that you are looking to do? 9 MS. CARNEY: I am not, but to be honest, I 10 haven’t looked around a lot for it. I feel like if -- 11 I don’t want to do something illegal just to watch TV. 12 So, I mean, I would like to have it be legal but if 13 it’s not, there’s some things I guess I just don’t want 14 -- 15 MR. WESTON: I just thought maybe -- a 16 bulletin board or something that people have mentioned, 17 not that you personally have used it. 18 MS. CARNEY: Oh, no, I don’t know of anything, 19 but I really haven’t looked around. So it’s possible 20 that something exists. Most other DRMs have been 21 cracked in some way, shape or form. So it’s actually 22 likely, but I don’t really know. 0233 1 MR. WESTON: Okay. 2 MR. CARSON: I’d like to ask you. I’ve 3 followed that link and I’m looking at it on this device 4 and maybe I’m not looking at the right thing, but you 5 might be able to quickly confirm for me whether we’re 6 talking about the same thing. 7 The link that you provided in your testimony 8 takes, today at least, takes me to the following pretty 9 short statement. 10 “Netflix blames Apple for lack of Watch 11 Instantly on the Mac. Takes on Tech interviewed 12 Netflix’s VP of Corporate Communications Steven Swasey 13 at CES and they talked about the LG partnership, the HD 14 DVD/Blu-ray battle, Watch Instantly Macintosh support, 15 and more. Swasey blamed Apple for the delay in 16 launching Watch Instantly for the Mac since Apple will 17 not license the FairPlay digital rights management 18 technology.” 19 Is that what you’re referring to? 20 MS. CARNEY: Mm-hmm. 21 MR. CARSON: Now, FairPlay, as I understand 22 it, and I’m hardly an expert, FairPlay is a digital 0234 1 rights technology that Apple has, not that Netflix has, 2 not that is being -- not that is there to protect the 3 content streamed by Netflix. It has something to do 4 with Apple’s own players, correct? 5 MS. CARNEY: True. What I was referring to 6 with that point is the fact that because Apple has an 7 interest in the streaming video business, the 8 marketplace for Apple to license its digital rights 9 management to Netflix or to any other company that 10 wants to stream video, they have an interest in keeping 11 competitors out basically. 12 MR. CARSON: So is it FairPlay you’re trying 13 to circumvent? It doesn’t sound to me like that would 14 be the case. 15 MS. CARNEY: No, because FairPlay is no part 16 of the Netflix system, it wouldn’t be part of this. 17 MR. CARSON: Then I get back to my earlier 18 question. What evidence do we have that there is some 19 kind of digital rights management attached to the 20 Netflix stream which you need to get past in order to 21 watch that? Because this just tells me that Apple’s 22 got some digital rights management of its own that’s 0235 1 got nothing to do with what Netflix is streaming. 2 MS. CARNEY: The point I was trying to get to 3 with that was that the marketplace is skewed by the 4 fact that the operating system makers in this case, 5 Apple and Microsoft, both have interests in streaming 6 video businesses themselves. 7 MR. CARSON: Okay. The point -- I’m sorry. 8 Go ahead. Finish. 9 MS. CARNEY: But in terms of access control, I 10 think the proprietary player is probably as good of an 11 analogy as you’re going to get for what Netflix has 12 done. They have basically released a streaming 13 service, provided players for certain platforms, and 14 they will refuse to even attempt to show you the 15 content if you don’t have that specific platform with 16 that little bit of code they put on your system that 17 lets you play the content. 18 So that -- and I’m not a lawyer certainly, but 19 in terms of a technological measure that protects 20 access to the work. Netflix’s, through technology, 21 protecting access to the work and not allowing me to 22 access it because I have an Apple laptop with a PPC 0236 1 chip. 2 MR. CARSON: Okay. The one thing I heard from 3 you that may be a suggestion of a technological 4 protection measure is your reference to that little 5 piece of code that lets you play it. What’s your 6 source that there is that little piece of code that 7 lets you play it and beyond that, what makes that 8 little piece of code a technological measure that 9 controls access to a work? 10 MS. CARNEY: It installs something on Windows 11 systems when it plays. What exactly the nature of that 12 code is I don’t know. 13 MR. CARSON: Okay. 14 MS. CARNEY: But it -- 15 MR. CARSON: What’s your source for that, 16 though? Because, I mean, I’m hearing you assert it, 17 but I need more than your bare assertion that it 18 exists. What’s your source for that fact? 19 MS. CARNEY: I watched it installed. I mean, 20 it does install something on the Windows OS that plays 21 content. If you need an outside source for that, I 22 didn’t bring one. 0237 1 MR. CARSON: Well, I’ve just not heard 2 anything that persuades me that what you’re talking 3 about is an access control. Something is installed on 4 the computer, okay, but I don’t know what it is. I 5 heard you in the same response talk about incompatible 6 operating systems and how Apple -- how Netflix designs 7 it to play on only one operating system. 8 We’ve had plenty of assertions in the past, in 9 past rulemakings about that and what I think has been 10 pretty clear to us is that, from our point of view 11 certainly, and you have the burden of persuading us 12 differently, the fact that something is designed to 13 play only on one operating system and interacts only 14 with one operating system does not constitute a 15 technological measure that controls access. It’s just 16 that it’s -- 17 MS. CARNEY: Well, maybe we should look at a 18 different example. 19 MR. CARSON: Yeah. Lets. 20 MS. CARNEY: Instead of a streaming -- 21 MS. PETERS: Dead-ending. 22 MR. CARSON: If we want to do anything for 0238 1 you. 2 MS. CARNEY: Let’s say instead of a streaming 3 service, we were talking about a file and that this 4 file contained video and that this video file was 5 designed to work on Windows only. Now, if I moved that 6 file to a Mac and attempted to play it, there would be 7 no technological access control preventing me from 8 playing it but it wouldn’t play because it was designed 9 to work with Windows. That’s technological 10 incompatibility. 11 MR. CARSON: Mm-hmm. 12 MS. CARNEY: In this case, what the Netflix 13 streaming server is doing is it’s not even giving me 14 access to the video because I don’t have the correct 15 operating system. So it’s not that the content’s 16 there. My operating system is just unable to play it. 17 I’m not even given the opportunity to see the content 18 on my computer. 19 MR. CARSON: Your computer couldn’t play it 20 because you don’t have the operating system that 21 interacts with the stream, correct? 22 MS. CARNEY: I don’t know that it couldn’t 0239 1 play it. If I don’t see the stream, then how could I 2 ever decode the video? 3 MR. CARSON: How do we know that this code 4 that you’re talking about is actually preventing you 5 from seeing the video? I mean, there could be any 6 number of reasons why you can’t see the video, starting 7 with the fact that you’ve got incompatible software. 8 MS. CARNEY: The streaming server won’t stream 9 video. As to the specifics of the code that disallows 10 that, I am not party. I would have no way of knowing 11 but that’s the best example I can give you. 12 MR. CARSON: Okay. If you’ve read any of our 13 past decisions, you know that another thing that I 14 think we’ve said in each of the rulemakings is mere 15 inconvenience is not sufficient to make the case. 16 Now, you’ve talked about the inconvenience, 17 but I’m not sure you’ve gone beyond that. Explain to 18 us why this is more than an inconvenience. 19 MS. CARNEY: Well, because if you look at the 20 various services they’ve talked about and there are a 21 bunch of them, none of them covers all of the possible 22 situations and I think that to expect somebody to 0240 1 invest a large amount of time and money to cover 2 everything they want is unreasonable. 3 I mean, it’s not just about convenience, it’s 4 about resources. It’s about being able to have a 5 choice as a consumer and aside from investing time and 6 money, as I said, I don’t think market forces are at 7 play. I don’t think that there’s competition in the 8 marketplace for people to develop things because of 9 restrictions like the streaming video restriction. 10 The fact that there’s only one platform 11 available that will do everything I want and that 12 platform is known for having difficulties, I mean 13 that’s a pretty sad state of affairs for the average 14 consumer. 15 MR. CARSON: Okay. You may or may not have 16 read our first rulemaking decision, but in that case we 17 had people who tried to make the case to us that 18 because DVDs protected by CSS cannot be played on Linux 19 machines, we should issue an exemption allowing people 20 to play on Linux machines and we made a determination 21 there which I think we have continued in each of the 22 subsequent rulemakings that the fact that you can’t 0241 1 play a particular medium, particular work on the 2 platform of your choice is not sufficient to justify an 3 exemption as long as there are other platforms 4 available. 5 So I gather you’re asking us to change our 6 minds on that principle, is that correct, or is there 7 some way we can get where you want us to go without 8 departing from that principle? 9 MS. CARNEY: I think it’s a slightly different 10 question when you’re talking about one video versus 11 when you’re talking about an entire library. I mean, 12 conceivably, for us now that we have a TIVO that does 13 Netflix streaming, we basically have cable and we have 14 cable for the cost of a Netflix subscription which is, 15 you know, 16 bucks a month and that’s a pretty cool 16 thing and that is the kind of marketplace solutions I 17 would like to see come up, and I feel like these 18 restrictions, specifically streaming video is one of 19 them, make those solutions not come up as often and 20 when you’re talking about one DVD, I think that, as I 21 said, I think that’s a different issue than if you’re 22 talking -- 0242 1 MR. CARSON: Aren’t we actually talking about 2 all DVDs? 3 MS. CARNEY: Well, one work at a time, though, 4 versus an entire library. 5 MR. CARSON: Well, I assume you watch them one 6 work at a time, too. If you could watch Netflix, you 7 wouldn’t be watching 27 different streams at once, 8 you’d do it one at a time, right? 9 MS. CARNEY: I feel like it’s a different 10 issue. I think that this is an issue that has to do 11 with consumer choice, that has to do with market 12 competition, that has to do with market forces, and I 13 think it’s important to let the consumers have at least 14 the chance for a company to build something that makes 15 sense. 16 I mean, it seems to me that it’s kind of, I 17 guess silly is the best word I can think of, that 18 underneath my TV, if I want to do more than two or 19 three things, I have to have a pile of five or six 20 boxes. I mean, you have a DVD player, you have your 21 DVR, you have something that streams video maybe if 22 your DVR doesn’t stream video. 0243 1 This is -- it just doesn’t seem like a burden 2 that we should put on consumers to me. 3 MR. CARSON: I understand. 4 MS. PETERS: Anyone else? 5 [No response. 6 MS. PETERS: Well, thank you very much. You 7 have done yeoman’s work for four days. I think it’s 8 only what, two panels that you weren’t on and this one 9 that you didn’t have to speak on. That’s pretty 10 amazing. 11 But this concludes the hearings. Obviously, 12 as we start to work through all of the evidence and all 13 of the arguments, there may well be questions that we 14 might send to you, but thank you very much. 15 MR. METALITZ: Thank you, all the members of 16 the panel. 17 MS. PETERS: Thank you. 18 [Whereupon, at 4:37 p.m., the Rulemaking 19 Hearing was adjourned.] 20 21 22 0244 1 CERTIFICATE OF COURT REPORTER 2 3 I, Natalia Kornilova, the officer before whom 4 the foregoing hearing was taken, do hereby certify 5 that the witness whose testimony appears in the 6 foregoing pages was recorded by me and thereafter 7 reduced to typewriting under my direction; that said 8 the hearing is a true record of the proceedings; that 9 I am neither counsel for, related to, nor employed by 10 any of the parties hereto, nor financially or 11 otherwise interested in the outcome of this action. 12 13 14 15 16 NATALIA KORNILOVA 17 NOTARY/COURT REPORTER 18 IN AND FOR THE DISTRICT OF COLUMBIA 19 20 21 22