Basically, one lesson that technology companies certainly could learn from the Induce Act is that if you are going to exploit a seemingly gray area do it quickly, get a lot of consumer adoption and you will be insulated from new legislation or rules that might otherwise have blocked your technology. Case in point: Tivo and iPod. The Tivo allows users to digitally copy television programming and send it to a personal computer or another Tivo. The iPod+iTunes lets users copy music from compact disc and move the music around from one computer to another and to their iPod (another computer essentially). These incremental expansions of what a consumer can do with his or her content exist in a gray area of the law. If there are no rules designed specifically to cover a functionality then new law has to be made, and there is the trick. If a product gains a foothold in the market and its functionality is in this gray area, then the law will permit this expansion of rights and typically follow consumer adoption.
On the face of the issue the Induce Act represents a real threat to the future of both Tivo and iPod. This Act has been introduced by Senator Orin Hatch from Utah and is being considered by his committee, the Senate Judiciary Committee. The Induce Act could possibly make it a violation of the copyright act to make copies of television or even music recorded from compact discs. American citizens have assumed that copying a CD is a fundamental right and just like using a VCR. Many Americans are even familiar with the fact that Sony was taken to court over the betamax and won against the Hollywood studios. If the consumer’s basic notions of existing usage are not permitted then there may be a large number of unhappy voters.
The Induce Act creates a new form of copyright infringement called "Inducing Infringement", which would make it a violation of copyright law to create a device that could induce someone to create an illegal copy of a copyrighted work. According to Jason Schultz of the Electronic Frontier Foundation, "the only reason the iPod and Tivo could be spared is because everyone will care." Mr. Schultz states that the RIAA has given assurances to the consumer electronics industry that it will not sue Apple for the iPod under this new law. However, this may be cold comfort to Apple. Apparently, there is no specific grandfather clause or other exemption in the law as of yet.
Although the Induce Act raises some serious issues about how far copy protection laws will go, I am inclined to believe the content community if they have said they will not go after iPod and Tivo with the new law - and that Apple will demand some specific exemption be written into law. Even at the hearing for the Induce Act, speaker after speaker mentioned the importance of the iPod and Tivo. Indeed, the leason is that if you run fast enough in these gray areas of the law, you will be rewarded. iPod stayed in the gray, napster went to far and was smacked. Tivo stayed in the gray, ReplayTV went to far and was smacked. It must be pointed out that the Induce Act is far from gaining serious momentum on Capitol Hill and it will not be until the Spring before there is any clear indication that this bill will make it to a vote.
Another example of the principle of pushing your product into uncharted waters and reaping the benefits can be found in the FCC endorsement of a technology Tivo is set to roll out this Fall. The recent ruling by the FCC allows a user of a Tivo products to record digital broadcast content that has a broadcast flag set and then a user of the product can move the content from their Tivo to another Tivo to a PC (presumably for an additional fee). In July of next year, network content that is sent in digital TV format will likely have this broadcast flag set. The broadcast flag is supposed to prevent redistribution to the Internet. Tivo apparently provides enough protection against this possibility that the FCC approved its technology (along with 12 other technologies) for use with broadcast flag digital TV content. The Tivo application was opposed by the Motion Picture Association of America, the NFL and other major sports associations. The MPAA and others saw the Tivo functionality as an expansion of rights of the users. But because Tivo has a large user base (reportedly 1.6 million subscribers in April and projected to be 3 million by end of the year) it was able to persuade the FCC to approve its technology. The Tivo technology opens up an exciting possibility to users of remote access of their television content - and another headache for the content owners.
In the never-ending back and forth struggle between technology and entertainment it seems that no strategy is bulletproof. However, the strategy of pushing slightly ahead the functionality of products into areas that expand consumer usage but do not necessarily infringe the work of Hollywood has been a winning one. The FCC all but seemed forced to go along with Tivo’s scheme (in fact it did not reject any of the protection schemes proposed by 13 companies). And, for all the expansion of copyright powers in the Induce Act, the authors do not appear ready to take on early adopters of the iPod and Tivo nations. Be assured venture capitalists and entrepreneurs are already staking out the next battle grounds.
Arnold writes articles on law and technology for Mjuice and lives in Los Gatos, California You can email Arnold at 
