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JULY 19, 2004
Edited by Richard S. Dunham Piracy Wars: Hollywood Turns Its Guns On Tech For three years, Hollywood and Silicon Valley have maintained an uneasy truce. Beset by illegal copying, makers of movies, music, and software focused on file-swappers -- not companies that made the technology pirates use. But all that changed in April, after a U.S. District Court in California threw out the studios' case against Grokster Ltd., saying the company could not be blamed if its software was used to make illegal copies. West Indies-based Grokster and other file-swapping networks thumbed their noses at movieland, trumpeting on their Web sites that a U.S. court had deemed them legit. Those boasts broke the détente -- and now Hollywood & Co. want revenge. On June 22, top Senate Judiciary Committee members Orrin Hatch (R-Utah) and Patrick Leahy (D-Vt.), took aim at Grokster and its ilk with legislation that would make it a crime to "induce" people to violate copyright -- by implying, for example, that downloading pirated music is legal. Hatch and Leahy have the backing of Senate Majority Leader Bill Frist (R-Tenn.), Minority Leader Tom Daschle (D-S.D.), recording and movie industry heavies, and even Microsoft Corp. (MSFT ). That might be enough to squash the Groksters of the world, but the Inducing Infringement of Copyrights Act of 2004 is stirring up formidable opposition. In a July 6 letter to Hatch, 43 tech companies and trade groups, including Intel (INTC ), eBay (EBAY ), Google, MCI (MCIA ), Sun Microsystems (SUNW ), and Verizon Communications (VZ ) said the bill could let content owners use lawsuits to kill off nascent technologies they find threatening. It might even undo the Supreme Court's 1984 Betamax decision, which declared that makers of VCRs couldn't be held liable if people used the machines to tape TV programs. "This gives Hollywood an extremely powerful litigation tool that will freeze investment in technology," says Philip S. Corwin, a lobbyist for Sharman Networks, distributor of KaZaA file-sharing software. File-Swapping Marches On Content owners say they have no beef with gadgets such as DVD burners or Apple Computer Inc.'s (AAPL ) iPod. Sure, Hollywood has sparred over such devices before -- witness the heat Apple took for its edgy "Rip. Mix. Burn." ad campaign a few years back. But this time, "the target is the bad actors that have hijacked technology," says Mitch Bainwol, a former Frist aide who now runs the Recording Industry Association of America, which helped draft the bill. Hollywood wouldn't be calling in its chits if it weren't suffering setbacks. The RIAA has spent millions of dollars suing thousands of individuals over illegal file-swapping, but peer-to-peer downloads still measure in the millions. And political pushback is building. In the House, Representative Joe Barton (R-Tex.) -- who is sympathetic to consumer complaints that content owners are overreaching -- has replaced a starstruck Billy Tauzin (R-La.) as chairman of the Energy & Commerce Committee. And electronics makers are joining forces with P2P companies and consumer groups to try to turn back limits on copying. "The whole fight is escalating," says Gary Shapiro, CEO of the Consumer Electronics Assn. "This is a battle royal." Hollywood vs. the Valley -- a clash of titans indeed. But for the movie, music, and software industries, the real foe is technology -- and all the campaign contributions in the world can't hold back that tide. By Lorraine Woellert CAPITAL WRAPUP The Law Of The Sea Faces Choppy Waters When the Senate Foreign Relations Committee approved the 1982 U.N. Law of the Sea Convention in February, it looked like clear sailing for the pact. The accord, whose rules for navigation rights, commerce, and environmental protection of the seas took effect a decade ago, was a top Bush treaty priority. The Navy, industry, and environmentalists were on board. And the pact had been fixed in 1994 to meet U.S. objections to seabed mining rules. But the GOP's right wing could doom passage, according to congressional sources, because White House political guru Karl Rove wants to placate Bush's political base. The deal: Conservatives won't blast Bush for nation-building in Iraq if he doesn't push the treaty. The Republican right fears the accord would reduce U.S. sovereignty and hobble the Navy -- though the Pentagon disagrees. A top Administration official says the Senate leadership controls the voting schedule but doesn't deny Rove's role. GOP treaty backers fret the U.S. won't be at the table with the 145 signatories to protect its interests when the pact is open to amendment in November.   CAPITAL WRAPUP What's In A Name? Utah Dems See Hope Utah is one of the most Republican states, but there is one magic name for Democrats: Matheson. The late Scott Matheson was a revered governor from 1977 to 1985. His son Jim is the state's only Democratic congressman. This year, another son, Scott Jr., is running for governor. But times may be changing: He's trailing Republican Jon Huntsman Jr., son of a billionaire industrialist.
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