Media Copyright Law Put to Unexpected Uses
Under pressure from the entertainment industry, Congress passed a bill in 1998 to restrain Internet piracy. The law made it illegal to break the digital locks shielding a piece of intellectual property -- an electronic book, say, or a CD or DVD.
Just as Congress hoped, the Digital Millennium Copyright Act is proving a potent weapon. The recording industry, for example, is successfully using the law to force an Internet service provider to surrender the name of an alleged pirate.
But Hollywood isn’t the only industry that can wield this sword. Companies that have nothing to do with the entertainment world have discovered the law’s broad reach.
Dow Chemical Co. used the DMCA to shut down a Web site that attacked the company. Wal-Mart Stores Inc. and other retailers invoked it to remove the details of forthcoming sales from a site for bargain hunters.
Apple Computer Inc. cited the DMCA to stop one of its dealers from producing and selling software that allowed Apple’s new DVD-burning technology to be used on earlier models of its Macintosh computers. Apple didn’t explain its motivation, but commentators noted that upgraded older machines meant fewer sales of new Macs.
“The DMCA started with the noblest of intentions, but it is becoming the bright shiny new toy of enterprises looking for a way to stifle competition and to control what they might consider unfavorable information,” said Mike McGuire, a policy analyst with research firm GartnerG2.
If the DMCA isn’t modified, intellectual property experts warn, companies could claim violations when competitors made compatible products that linked up with their own. The result, they say, would encourage monopolies and severely curtail consumer choice.
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Lawsuits Filed
The first lawsuits that use the DMCA in this fashion already have been filed.
In a case that is roiling the $40-billion printer market and could establish a precedent for many other industries, printer manufacturer Lexmark International Inc. is using the DMCA to sue Static Control Components, a North Carolina company that helps small printer-supply firms compete with Lexmark.
Lexmark claims that Static Control has violated its intellectual property by duplicating a special security device that links Lexmark’s printers and its toner cartridges.
By the end of this week, a judge in Lexmark’s hometown of Lexington, Ky., will rule on the company’s request for a preliminary injunction. Although the case is likely to continue for years, the decision will reveal the judge’s initial impressions about the relative strengths of the two foes’ arguments.
“It’s going to have either a chilling effect or a warming effect,” said Static Control attorney Skip London.
Lexmark, which was sold by IBM Corp. in a 1991 leveraged buyout, makes most of its money not with printers but from the so-called aftermarket, which means ink and toner cartridges. It’s an old and lucrative business model developed by King Gillette for razors with two parts: a handle and a replaceable blade. Gillette’s innovation was to give away the razor, which kept people coming back to buy blades.
In 2002, Lexmark’s revenue from the sale of printers increased less than 1% from 2001. But its sales from laser and inkjet printer supplies jumped 19%. They now represent more than half the company’s total revenue. As Chief Executive Paul Curlander put it in a 1999 interview, “Almost everything you do is geared toward capturing the aftermarket.”
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Aftermarket Control
One way Lexmark started trying to control its aftermarket in the late 1990s was by selling cartridges for standard and discounted prices. One cartridge, for instance, cost both $183 and $153. If a buyer bought the cheaper cartridge, he had to agree not to sell it to a local printer-supply shop that could refurbish it, refill it and sell it back. The only options were to return the empty cartridge to Lexmark or throw it out.
Lexmark says refilled cartridges are bad for the customer because they use untested ink and can result in poor print quality. And they’re bad for the printer manufacturer because it gets blamed.
The refillers and rechargers, which tend to be small firms that have only a handful of employees, dispute those quality assumptions. And they certainly have found a niche. According to one industry study, 41% of large and medium businesses use recycled cartridges, which cost about 30% less than new cartridges.
Furthermore, the recyclers say, their approach is the ecologically correct one. They note that it takes 3 quarts of oil to make a new cartridge, and that each cartridge that is remanufactured by them keeps 2 1/2 pounds of plastic from the garbage heap.
A few years ago, Lexmark came up with a technological way to make sure that customers didn’t get their discounted cartridges refilled. It added security chips to the cartridge and the printer. If the chips didn’t execute a secret handshake, the cartridge wouldn’t work. If the cartridge had been refilled, the chips wouldn’t let the printer operate.
Although the recycling business was initially threatened by this, Static Control soon provided a solution with its own chip, which mimicked Lexmark’s. That meant Lexmark printers would accept secondhand cartridges made by Static Control’s customers.
“They tried to keep us out, we got in, and they didn’t like it,” said Static Control founder and CEO Ed Swartz.
Lexmark responded with a lawsuit, filed at the end of December. Lexmark is accusing Static Control of violating the DMCA by deciphering its access code in order to mimic the secret handshake.
The recharging industry believes its entire existence would be threatened by a Lexmark victory. “Like it or not, we as an industry are at war,” proclaimed the February issue of Imaging Spectrum Magazine.
For Lexmark, the disdain is mutual. “The rechargers wouldn’t be around if it weren’t for the intellectual property investments we’ve made,” spokesman Roger Rydell said.
Lexmark executives declined to discuss the legal aspects of the case. Yet even some of its opponents concede that the company’s DMCA claim is at least plausible.
“If Lexmark didn’t use this law, it would be a bad business practice for them and tantamount to malpractice on the part of their lawyers,” said Peter Jaszi, an American University law professor who has filed a brief on behalf of Static Control.
Yet should Lexmark prevail, Jaszi added, “this is just the entering wedge. So much stuff in our environment is computer-enabled in one way or another.” For example, he asked, why wouldn’t auto companies install a chip in their tires to make sure that consumers couldn’t use any other brand when they had a flat?
The DMCA has been a source of contention since it was passed, with some critics contending that it created a chilling effect on researchers, and others asserting that it reduced a consumer’s traditional right to do just about whatever he wanted with material he had paid for. But these recent cases take the law far afield.
“We never contemplated” cases such as Lexmark’s when the DMCA was written, Rep. Howard Berman (D-Van Nuys) said last week at a Silicon Valley panel that examined the law. But he said that didn’t mean the company couldn’t legitimately use it. “Let some of these things play out in court decisions,” Berman said.
Another panelist, Rep. Zoe Lofgren (D-San Jose), took a more critical view of Lexmark, saying she didn’t intend to buy any of its printers. “There is a marketplace role in this,” Lofgren said, suggesting consumers “march with their feet.”
This month, the fight gained an additional arena. The Copyright Office, which was given some authority over the DMCA by Congress, is looking into the issue.
The Copyright Office has the power to create DMCA exemptions, but they tend to be limited. It’s unclear whether an exemption in this case would completely shield Static Control.
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Hewlett-Packard Co., the largest printer maker, says it wouldn’t use the DMCA to defend its turf the way Lexmark is doing. “Normal copyright law and normal patent law is enough,” said HP senior vice president Pradeep Jotwani. “Remanufacturers and refillers have a valid space in this market. All of our printers accept remanufactured cartridges and will print with them.”
But HP, as Jotwani acknowledges, is not quite so welcoming as this might seem. It puts chips in cartridges for its high-end 4600 color printer, for instance. If the chip is then deactivated by a remanufacturer, the toner display shows a question mark rather than the level of ink. When the toner will run out becomes a matter of guesswork.
The DMCA has other useful features for companies that want to pursue certain types of complaints.
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There’s a Catch
One provision of the law protects Internet service providers from liability in copyright infringement cases. Just as a phone company is not liable for illegal conversations conducted over its network, a service provider, search engine or bulletin board isn’t accountable for posted material that violates a copyright.
The catch is, as soon as the site is told it is harboring offending material, it must be removed immediately.
This aspect of the DMCA came into play in mid-November, when the Web site FatWallet.com said Wal-Mart, Target Stores Inc., Best Buy Co., Staples Inc., OfficeMax Inc., Jo-Ann Stores Inc. and Kmart Corp. all were asserting that it had posted their copyrighted material.
FatWallet is a site that enables consumers to calculate the best deal on a toy, video game or computer. But FatWallet was providing information not only about current deals but also, thanks to sources it declined to reveal, future ones. By Nov. 15, for instance, it had posted Wal-Mart’s Thanksgiving ad.
Wal-Mart complained that its intellectual property -- the prices it assigned to each item -- was being violated.
FatWallet attorney Megan Gray said the charge was ridiculous. “Facts like price tags cannot be copyrighted. Any court would have said that. But the DMCA allows companies a shortcut where they don’t have to prove their case to get action,” she said.
Tim Storm, FatWallet’s founder, removed the offending material to spare himself the expense of a long court case. “It’s pretty expensive to be right,” Storm said.
The group behind a Web site devoted to attacking Dow Chemical also decided it would be easier to surrender. The parody site was concerned mostly with the 1984 leak of gas from Dow subsidiary Union Carbide’s plant in Bhopal, India, a disaster that lead to thousands of deaths.
Dow said the site was “blatantly violating” its intellectual property rights under the DMCA by using “trademarks, images, texts and designs” taken directly from Dow’s own site. Once again, merely making the charge was sufficient. The parody site’s Internet service provider pulled the plug immediately.
All these uses of the DMCA are “kind of screwy,” said intellectual property lawyer Bob Ellis. “The DMCA was designed to protect things that deserved to be protected. A toner cartridge is not intellectual property.”
Nevertheless, the cases keep coming. Chamberlain Group, a manufacturer of automatic garage-door openers, is suing a competitor, Skylink Technologies. Chamberlain says Skylink violated the DMCA by producing a remote control device that works with Chamberlain’s doors.
“No one is stealing Chamberlain’s software and using it to build their own garage doors,” said Skylink lawyer David Djavaherian. “We’re just allowing the purchaser to access their own garages.”
For Lexmark, at least, the DMCA issue may soon be moot. It has patented a monitoring and disabling device, one that it says will take care of the remanufacturers once and for all.
The patent, awarded in 2000, is for an apparatus that fits into an inkjet cartridge. When a processor determines that the ink supply has run out, capacitors send an electrical jolt through the ink nozzles, frying them.
Suppose a remanufacturer tried to refill the cartridge before the sensors detected it was empty and destroyed it? Lexmark thought of this too. Merely opening the cartridge causes it to self-destruct.
