Russian Firm Cleared in Digital-Piracy Trial

In a blow to anti-piracy efforts, a federal jury acquitted a Russian software company Tuesday of violating U.S. law by selling a program that picked the locks on Adobe Systems Inc.’s electronic books.

ElcomSoft Co. of Moscow was the first company to be tried criminally under the 1998 Digital Millennium Copyright Act, which makes it illegal to break the locks on digital books, music and movies even for legal purposes. The San Jose jury rejected all five charges, finding that the company did not intend to violate the law.

Legal analysts said the verdict suggests that prosecutors will have a tough time using the DMCA against technology developers and hackers without solid proof that the defendants knew they were breaking the law.

“That’s going to be very hard to prove without a memo saying, ‘Gee, this is illegal, but we should do it anyway,’ ” said copyright attorney Jonathan Band.

Said ElcomSoft lawyer Joseph Burton: “Companies are going to be a little bit more careful ... and certainly federal prosecutors will more carefully consider when they’re making decisions about charging somebody.”

Copyright holders still can use the DMCA to bring civil lawsuits against those who develop circumvention techniques. And unlike criminal cases, such lawsuits can be won without proving any intent to break the law.

But Evan Cox, an attorney and copyright expert, said lawsuits often aren’t much of a deterrent. Bringing criminal charges “is an important tool, and I think it has been weakened by this case,” Cox said.

The DMCA was designed to boost online commerce by addressing copyright holders’ concerns about Internet piracy. Among other things, the statute outlaws the manufacture, sale or use of any tool that picks the locks on digital files.

Opponents say it leaves consumers unable to make backup copies of the digital goods they buy, transfer their music to portable devices or make other “fair uses” of copyrighted material.

Many copyright holders, on the other hand, rely on electronic locks to protect goods they deliver online. And their greatest concern, Cox said, is the emergence of simple tools that “consumers are easily and casually going to use to unlock things and hand them to all their friends.”

Privately held ElcomSoft’s main products are designed to help businesses and law enforcement officials recover damaged files or break open scrambled documents that were protected by lost software keys.

According to court documents, ElcomSoft began selling an “Advanced eBook Processor” on June 20, 2001, that could strip the locks off of e-books in Adobe’s format. Those locks help publishers prevent their books from being copied to other computers or devices, printed, edited or excerpted.

The purpose of ElcomSoft’s program, according to the company’s Web site, was to let e-book buyers read their purchases wherever they wanted. The program was on the market less than a week when ElcomSoft pulled it in response to Adobe’s complaints. Nonetheless, Adobe took the case to the FBI.

On July 16, 2001, FBI agents arrested Dmitry Sklyarov, a programmer for ElcomSoft, after he spoke to a hacker convention in Las Vegas. A federal grand jury indicted him and ElcomSoft the following month; prosecutors eventually agreed to drop the charges against Sklyarov in exchange for his testimony.

U.S. District Judge Ronald Whyte in San Jose made two key rulings in the case, one favoring the prosecution and the other favoring the defense.

In May, Whyte ruled that the DMCA’s anti-circumvention provisions were constitutional even though they applied to technologies that helped consumers make fair use of the scrambled files they purchased. This ruling echoed a decision from a New York appeals court.

Last week, however, Whyte instructed the jury that ElcomSoft could be acquitted if it honestly but erroneously believed it wasn’t violating the law. And as Burton stressed to the jury, company executives thought the product was legal because it was designed for fair uses.

The jury deliberated for less than seven hours over two days.

“When you are bringing good cases under new statutes, sometimes you are going to lose, and that’s what happened here,” said Kevin Ryan, U.S. attorney for the Northern District of California.

Fred von Lohmann of the Electronic Frontier Foundation, an online civil liberties group that supported ElcomSoft, said jury verdicts don’t have much value as precedents, so it will be hard for other companies to use the acquittal in their cases. “It’s great news, but I don’t think it’s going to let other folks in the future off the hook,” he said.

Adobe spokeswoman Holly Campbell said the San Jose-based company was disappointed by the verdict.

“As we increasingly move from a paper-based to a digital society, we will find more and more instances where laws designed to protect the rights of authors and publishers will be challenged in light of the new capabilities technology provides,” Campbell said. “These cases will be an important part of developing appropriate laws and guidelines that continue to protect the rights and freedoms of individuals and corporations alike.”