Tuesday, April 03, 2001 9:46:20 AM
Testimony of Victor Shear, Founder and CEO, InterTrust Technologies Corporation, Before United States Senate Judiciary Committee April 3, 2001
WASHINGTON, April 3 /PRNewswire/ --
InterTrust Technology Corporation (Nasdaq: ITRU) today delivered the following
testimony to the United States Senate Judiciary Committee on online
entertainment and copyright law discussing the critical role Digital Rights
Management (DRM) solutions will play in the future peer-to-peer Filesharing
Technologies.
On behalf of InterTrust, I wish to thank Senators Hatch, Leahy, Feinstein,
Thurmond, and all the members of the Committee for the opportunity to testify
this morning on the important issue of on-line entertainment and copyright
law. I would like to tell the Committee about how InterTrust Technologies
Corporation has developed Digital Rights Management technologies that in the
field of copyright protection will secure four objectives:
-- give consumers new freedom to enjoy music and other forms of content,;
-- give copyright owners and other value chain participants the means to
manage and protect their rights in published works;
-- give effect to elements of law, such as copyright exceptions, for
ensuring that rights are managed in accordance with public interest;
-- provide users with the means to manage their legitimate personal rights
and interests.
InterTrust is the leading provider of peer-to-peer Digital Rights
Management (DRM) technology. This technology ensures the neutrality,
security, commercial reliability, and trusted interoperability of applications
and services used to protect and manage rights in all forms of information,
including the creative works under consideration here. Our enterprise is
focused on the rapidly evolving area of digital commerce in information; our
aim is to provide a framework of commercial trust comparable in scope, and at
least as reliable, as the systems of trust that underpin commerce in the
physical world.
The focus of this Committee extends beyond a simple re-examination of the
particulars of the Napster case to the broader questions it raises. I
respectfully submit that, from that perspective, InterTrust has a particularly
valuable contribution to make. Given our unique position in the DRM arena, we
believe we can assist the Committee in considering the complex issues before
it.
Background on InterTrust Technologies Corporation
I founded InterTrust in January 1990. The goal was to provide solutions
to many of the complexities involved in realizing the full potential of
electronic commerce. It seemed clear that digital commerce would require
mechanisms enabling the dynamics of traditional commerce to be seamlessly
translated into the electronic world. My associates and I coined the
expression Digital Rights Management to describe the requisite mechanisms. In
effect, we were looking towards a world in which, where and as appropriate,
commerce could be digitally "virtualized". Over the last 10 years, InterTrust
has developed the concept of Digital Rights Management ("DRM") and has grown
from myself and a handful of researchers to a fully-fledged commercial
enterprise employing more than 350 people worldwide. Approximately
$340 million of working capital has been provided to InterTrust by its
investors, and all of this capital is dedicated to the creation of a digital
rights management framework for digital commerce and participant conduct.
The impact of the Internet has meant that the initial and most visible
applications of InterTrust's technology have been for digital music, video,
and publishing. Literally any digital information that is shared or stored
will ultimately be implicated, however. This includes, for example, medical
records, enterprise workflow, financial interactions, and the policy
management of any stored or communicated information -- policies ranging from
privacy rights to enforcing government regulations to reliably automating
commercial interests.
As concerns electronic distribution of entertainment products and
services, InterTrust has been a very active member of the Secure Digital Music
Initiative (SDMI) since its inception, and its employees have chaired SDMI's
Portable Device Working Group and its Screening Group. We played the role of
primary developer of the Intellectual Property Management Protocol (IPMP),
which became an MPEG-4 standard for electronic devices. We have strategic
alliances and partnerships with a number of major enterprises including Adobe,
AOL, Bertelsmann, Blockbuster, Compaq, Creative, Diamond Rio, Enron,
Mitsubishi, Nokia, Philips, Samsung, Texas Instruments, Universal Music and
numerous others. They are all actively working with InterTrust DRM technology
to further the enjoyment of music, video, published text and other information
products on PCs, portable music players, cable systems and mobile phones.
InterTrust works with these and other companies to help establish standards,
and, through InterTrust's MetaTrust Utility, to help ensure that consumers and
commercial organizations can enjoy a consistent degree of reliability,
integrity, and interoperability when they expose their interests through
digital interaction. We pride ourselves on working with individuals and
companies, large and small, that have interests in, or rights related to,
digital information that need rights management.
Online Entertainment and Digital Rights Management
Great creators are normally great communicators, their individual voices
collectively embodying and expressing the values and passions of their
culture. Using digital technology expedites the accurate dissemination and
reception of creators' works and, when employed in the proper context, digital
technology can also support the universe of rights associated with most
creative works -- the rights of creators, value chain members, users, and
societal organizations. Although digital technology can greatly enhance the
communication of creators' works, unless it is properly employed, its use
creates severe problems. Digital technology, when improperly used, can deny
content creators and their successors the commercially essential return for
labor and right to manage and exploit property. The improper use of digital
technology -- when employed as a vehicle for the unfettered purloining of
copyrighted content -- directly undermines the basic building blocks of modern
society, the respect for the rights of others, as well as proper return for
one's creative output and labor. Moreover, such improper use directly suborns
the stable economic basis necessary for further development of art.
Ultimately society loses out as the basic "glue" of commerce and
democracy, the civil interaction between multi-party rights and interests and
the maintenance of a market for goods and services, is undermined in the
service of convenience and self-interest. At times it appears there's a call
to revolt, "free the content," when such a call -- if extended beyond fair use
-- obscures the real issues and would seek to legitimize people taking for
free whatever they want. Others' rights be damned!
Although the impetus for this hearing may be "file-sharing" and the recent
Court of Appeals decision affecting it, it is not just about Napster. It is
about the changes that digital technology is bringing to the worlds of art,
entertainment and information. It is also about the kind of society that
electronic communities and digital technology, used in concert with copyright
law, can create. Many people are just now beginning to realize how profound
those changes and possibilities are. In under two years and with very little
in the way of direct investment, an electronic community of some 60 Napster
million file sharers was created. Ordinary consumers used the Napster system
to obtain unauthorized copies of copyrighted music without payment when most
of them, at least previously, would never have considered buying pirated CDs
in the physical world. Other communities are springing up worldwide where
individuals communicate electronically and eschew any reference to traditional
principles of commerce and property rights.
The Digital Millennium Copyright Act, which this Committee was
instrumental in enacting, was the first in the world to tackle the challenges
of digital technology. Yet for all its thoroughness, we are probably even now
past the point where we could claim that copyright law alone is sufficient to
establish adequate mechanisms for the protection and management of rights in
creative works (though it is essential that legislators continue to develop
the body of digital copyright laws and regulation). Despite shorter revision
cycles for law, the ability of the creative community to enforce the rights in
their works has never really caught up with the technologies enabling anybody
to make and distribute unlawful digital copies. The situation is now being
considered by some leading academics as one in which copyright law may in
practice become virtually irrelevant.
Society simply cannot afford to accept copyright law becoming irrelevant.
And we cannot afford to set the extraordinary example of dispensing with the
rights of content providers because we are unwilling to develop a framework
for proper commercial and civil behavior. There is therefore an urgent need
for a partnership between technology and law that effectively maintains the
underlying commercial and social principles of modern free society. With
respect to online entertainment the partnership must provide a workable
framework for the efforts of our musicians, writers, actors and artists. We
need a partnership between government and content commerce participants that
accommodates and satisfies the legitimate expectations of American citizens
-- including any limitations on exclusive rights appropriate for an
intelligent public policy.
Sophisticated DRM technology such as InterTrust's can provide the
mechanism to help effect this partnership. While technical complexities and
challenges abound, the mission is achievable: to provide a combination of
technical mechanisms and social compacts that allow the transfer of the basic
features of traditional commerce into the digital market place. The means to
achieve this goal are now at hand, and the means to continue developing a
flexible, free, and safe commercial digital environment, are readily
accessible. There are, of course, new and complex commercial, economic and
social issues to be addressed. But this cannot deflect us from the simple,
basic responsibility that we all have, to not settle for over-simplifications
that result in distorting, unfair, and socially and commercially flawed
solutions. Rather, we must strive to allow the digital world to live up to
the principles most all of us believe are the minimum standards we would
demand in the traditional, non-digital world.
The basic principles of granting rights to creators to control the use of
their work and of maintaining trusted systems for commerce remain as valid as
ever. We should not ignore the opportunities as they arise of reviewing
current copyright limitations and other accommodations that were made before
the advent of effective digital rights management to ensure they continue to
serve these principles. We should also be ready to reshape these limitations,
where necessary, to fit the emerging digital marketplace. Above all we should
be driven by a simple principle: to maintain a free and effective commercial
society that, in a balanced fashion, supports the rights of all participants.
Digital Rights Management Technology
It is important to understand from the outset that when talking about DRM
technology we are not referring to simple mechanisms that, say, carry
protected material from a server to a client in return for a payment, locking
the material to a single device. Such a proposition offers nowhere near the
degree of flexibility and coverage necessary to support either traditional or
new business offerings. Post delivery, persistent protection of commercial
interests, flexibility in use of content across devices and locations, and
flexible interaction with content, are all priorities for content value chain
participants. In the context of music as it relates to Napster, users want to
play music on-line or off-line, and they want the right and ability to combine
music into play-lists that are used to create a specific personal or group
music experience, for use wherever and whenever they wish.
The technology system that InterTrust has developed protects content, in
the instance of this discussion music, on a persistent basis throughout its
commercial lifecycle. It does this by binding rules governing content use
with governed content. This tamper resistant association persists regardless
of the channel through or platform upon which the music is played, and the
number of handlers of the content, the duration of time, or the physical
location of the content. InterTrust technology creates a zone -- independent
of time, place, or device -- where music is governed by technology and where
rights-holders, including consumers, are free to express and protect their
rights through the freedom to establish differing rules reflecting their
individual interests.
Within this technical protection zone, digital information such as music
can be offered to consumers via a virtually limitless range of models: sale of
downloads; subscriptions; pay-per-listen; superdistribution (consumer A
delivering material to consumer B and so on); and file sharing. This freedom
is also available for the implementation of a richly diverse range of policies
that govern usage, and any consequences of usage, in relation to groups of any
nature, such as special interest groups. To accommodate statutory limitations
on copyright, special consumption rules can be created, either through law or
through accepted practice of rights-holders, for particular consumers or
classes of users: for schools and universities; for libraries and archival
institutions; and for consumers with special needs such as the blind.
Whatever the needs, whatever the relationship between different participants
the digital information remains persistently protected while freely available
according to agreed rules of use.
If this protection is to remain effective throughout the lifecycle of the
content then it follows that it must be possible to change the rules relating
to use. Material can have a succession of different owners. It can change in
value; it can be traded for different purposes; it can be used on multiple,
different devices; and it can be loaned to other parties. Our system
anticipates and accommodates all these possibilities. In our system, digital
information and the rules governing its use by a particular user can exist and
move independently of each other, coming together to give effect to the
agreement between supplier, distributor, and consumer, and respecting whatever
rules may be applied by government, or, for example, by financial
institutions.
An efficient system of protection must not only accommodate a wide variety
of business offerings. It must also support the complex value chains through
which many of the offerings are delivered. The architecture InterTrust has
developed supports value chain relationships based on traditional commercial
principles -- we call this digital enabling of value chains "chain of handling
and control." This means that each actor in the value chain is able to create
the rules it wishes to apply to the material in question within the scope of
authority granted to the participant by the previous or governing actors in
the value chain. A publisher could establish the commercial terms for a work
within the authority granted by the author; the distributor could then set
rules within the scope of authority granted by the publisher and so on through
the value chain, all in accordance with law and accepted practice.
Requirements of Digital Rights Management
We believe there are a number of precedent requirements for effective
digital rights management of content. First, it must provide creators of
digital information the ability to manage and protect their rights throughout
content lifecycles and however content may be exploited. This means that a
DRM system must be secure and resilient to tampering, and certain elements of
the protection system must accompany the copy of the work as it is passed from
party to party, format to format, platform to platform.
Second, it must support commercial flexibility so that it can accommodate
the arrangements struck between copyright owners, their customers,
distributors, retailers and other value-adding participants. This means that
a rights management system must provide content creators and/or publishers the
means to allow consumers choices appropriate to the commercial circumstance.
Consumers must be able to enjoy copyrighted works, and the system must permit
consumer arrangements to vary based on the terms agreed to by the content
commerce participants.
Third, it must provide a neutral and trusted environment in which
technology assures these agreed upon arrangements. The rights management
technology must be unimpeachably neutral, that is it may not in any way subtly
or secretly advantage any hidden interests, and further, it is essential that
the rights management technology not advantage any out-of-context interests of
the rights management technology provider. Consequently, for example, neither
a rights holder, nor a consumer, nor the rights technology provider should be
able to alter or tamper with any agreed upon commercial arrangements once
agreed or impede the expression of a parties' rights or interest.
Unless a rights management system meets these requirements -- that is,
unless the trust system is itself unimpeachably trustable -- it will fail to
satisfy the legitimate interests of businesses, consumers, and government.
Further, unless a rights management system is able to maintain its trust
attributes regardless of the underlying digital commerce platform, device, or
application, it will fail one of two tests. Either the system will (A) lack
reliability in protecting participant rights, since a loosely coupled array of
rights systems, without a unifying maintained rights environment, will readily
succumb to hackers; or the system will (B) lack interoperability, and
consumers and commercial participants alike will lose the convenience and
efficiency essential to content commerce, and risk having their interests
suborned to the interests of a party controlling a narrow, proprietary
environment.
In the domain of music, InterTrust DRM technology is now capable of
permitting consumers to listen, record, and distribute music online in ways
that do not compromise the rights of artists, record labels, and other
copyright owners. It is capable of managing the rights in copyrighted works
in a secure manner in the context of peer-to-peer distribution. Its
technology supports the ongoing effort of Digital World Services (DWS), a
Bertelsmann subsidiary, and the Universal Music Group, as well as many other
interests both large and small, enabling them to implement new business models
for the distribution of music on-line. A leading international music group,
Daft Punk, for example, recently accompanied the release of its latest album
with a novel application of InterTrust technology. The band is encouraging
traditional retail relationships and creating digital economy value for its
fans by enabling those fans who have purchased the CD to access the group's
web site and to download additional music -- at no further cost, but protected
with InterTrust DRM.
Effective DRM solutions require more than sophisticated technology. They
also require credibility and trust. That is why InterTrust restricts itself
to building a platform that supports third party businesses. It is not itself
a distributor of copyrighted works; a builder of commercial consumer
applications, such as electronic music players; or a credit card transaction
processor. InterTrust's MetaTrust Utility, the core of InterTrust's business
interests, functions as a utility. It facilitates -- but refrains from
intruding into -- the business models and distribution channels for
copyrighted works. Its function is not to dictate the arrangements for
digital rights management, but to establish and maintain a platform that
ensures the neutrality, security, commercial reliability, and trusted
interoperability of services, software applications, and devices used for the
protection and management of rights in digital information of all kinds. A
trusted, neutral infrastructure is essential to the long-term effectiveness of
DRM solutions, and to their acceptance by copyright owners, distributors, and
consumers alike.
Conclusion
DRM technologies should give consumers new options for legitimately
acquiring and enjoying music and other forms of online entertainment, while
ensuring that copyright owners and other commercial participants have the
means to manage and protect their rights. Enabling peer-to-peer distribution
of music and other copyrighted works without compromising copyright is an
obvious example. In our view, sophisticated DRM solutions must support the
fundamental principle of any effective copyright system: that of striking the
correct balance between protecting the rights and interests of copyright
owners while promoting the interests of the wider community and facilitating
the efficient and flexible dissemination of, and greater access to, music and
other copyrighted works.
Ultimately, the reality of sophisticated DRM technology is about far more
than Napster, online entertainment and copyright law. Policy makers,
consumers, and business globally will come to realize that the "Napster issue"
isn't just about music and the Internet. It is about constructing a civil
digital society in the Internet Age, where rules created for and by its
citizens can be implemented and respected wherever and whenever legitimate
interests are in play. It is this simple proposition that InterTrust is
helping to make a reality.
In closing, InterTrust once again thanks the Committee for the opportunity
to present testimony on this important issue, and looks forward to working
with members of the Committee as they consider the important issues related to
online entertainment and copyright.
About InterTrust Technologies Corporation
InterTrust Technologies Corporation is the leading developer of
peer-to-peer, distributed digital rights management (DRM) technology. Its
general-purpose DRM trust platform serves as a foundation for trusted
peer-to-peer and client server e-commerce. InterTrust holds numerous patents
in the area of trusted systems technology and peer-to-peer rights management,
and licenses its technology and patents in the form of software or hardware
and tools to partners. These partners provide digital commerce services and
applications that together form, a global digital commerce network branded as
the MetaTrust Utility(tm). InterTrust is the neutral administrator of the
MetaTrust Utility network, defining and enforcing the rules which maintain the
security, commercial reliability, and trusted interoperability of devices,
services, and applications deployed on the platform. For more information,
please visit the InterTrust website at http://www.intertrust.com.
The statements contained in this release that are not purely historical
are forward-looking statements within the meaning of Section 21E of the
Securities and Exchange Act of 1934, including statements regarding
InterTrust's expectations, beliefs, hopes, intentions or strategies regarding
the future. All forward-looking statements included in this document are
based upon information available to InterTrust as of the date hereof, and
InterTrust assumes no obligation to update any such forward-looking statement.
Actual results could differ materially from current expectations. Factors that
could cause or contribute to such differences include, but are not limited to,
the factors and risks discussed in InterTrust's reports filed from time to
time with the Securities and Exchange Commission.
NOTE: DigiBox, the InterTrust logo, MetaTrust, and The MetaTrust Utility
are registered trademarks of InterTrust Technologies Corporation, and
TrustChip, RightsChip, InterRights Point, MetaTrust-Certified, Rights/PD and
Rights/System are trademarks of InterTrust Technologies Corporation, all of
which may or may not be used in certain jurisdictions. All other brand or
product names are trademarks or registered trademarks of their respective
companies or organizations.
SOURCE InterTrust Technologies Corporation
WASHINGTON, April 3 /PRNewswire/ --
InterTrust Technology Corporation (Nasdaq: ITRU) today delivered the following
testimony to the United States Senate Judiciary Committee on online
entertainment and copyright law discussing the critical role Digital Rights
Management (DRM) solutions will play in the future peer-to-peer Filesharing
Technologies.
On behalf of InterTrust, I wish to thank Senators Hatch, Leahy, Feinstein,
Thurmond, and all the members of the Committee for the opportunity to testify
this morning on the important issue of on-line entertainment and copyright
law. I would like to tell the Committee about how InterTrust Technologies
Corporation has developed Digital Rights Management technologies that in the
field of copyright protection will secure four objectives:
-- give consumers new freedom to enjoy music and other forms of content,;
-- give copyright owners and other value chain participants the means to
manage and protect their rights in published works;
-- give effect to elements of law, such as copyright exceptions, for
ensuring that rights are managed in accordance with public interest;
-- provide users with the means to manage their legitimate personal rights
and interests.
InterTrust is the leading provider of peer-to-peer Digital Rights
Management (DRM) technology. This technology ensures the neutrality,
security, commercial reliability, and trusted interoperability of applications
and services used to protect and manage rights in all forms of information,
including the creative works under consideration here. Our enterprise is
focused on the rapidly evolving area of digital commerce in information; our
aim is to provide a framework of commercial trust comparable in scope, and at
least as reliable, as the systems of trust that underpin commerce in the
physical world.
The focus of this Committee extends beyond a simple re-examination of the
particulars of the Napster case to the broader questions it raises. I
respectfully submit that, from that perspective, InterTrust has a particularly
valuable contribution to make. Given our unique position in the DRM arena, we
believe we can assist the Committee in considering the complex issues before
it.
Background on InterTrust Technologies Corporation
I founded InterTrust in January 1990. The goal was to provide solutions
to many of the complexities involved in realizing the full potential of
electronic commerce. It seemed clear that digital commerce would require
mechanisms enabling the dynamics of traditional commerce to be seamlessly
translated into the electronic world. My associates and I coined the
expression Digital Rights Management to describe the requisite mechanisms. In
effect, we were looking towards a world in which, where and as appropriate,
commerce could be digitally "virtualized". Over the last 10 years, InterTrust
has developed the concept of Digital Rights Management ("DRM") and has grown
from myself and a handful of researchers to a fully-fledged commercial
enterprise employing more than 350 people worldwide. Approximately
$340 million of working capital has been provided to InterTrust by its
investors, and all of this capital is dedicated to the creation of a digital
rights management framework for digital commerce and participant conduct.
The impact of the Internet has meant that the initial and most visible
applications of InterTrust's technology have been for digital music, video,
and publishing. Literally any digital information that is shared or stored
will ultimately be implicated, however. This includes, for example, medical
records, enterprise workflow, financial interactions, and the policy
management of any stored or communicated information -- policies ranging from
privacy rights to enforcing government regulations to reliably automating
commercial interests.
As concerns electronic distribution of entertainment products and
services, InterTrust has been a very active member of the Secure Digital Music
Initiative (SDMI) since its inception, and its employees have chaired SDMI's
Portable Device Working Group and its Screening Group. We played the role of
primary developer of the Intellectual Property Management Protocol (IPMP),
which became an MPEG-4 standard for electronic devices. We have strategic
alliances and partnerships with a number of major enterprises including Adobe,
AOL, Bertelsmann, Blockbuster, Compaq, Creative, Diamond Rio, Enron,
Mitsubishi, Nokia, Philips, Samsung, Texas Instruments, Universal Music and
numerous others. They are all actively working with InterTrust DRM technology
to further the enjoyment of music, video, published text and other information
products on PCs, portable music players, cable systems and mobile phones.
InterTrust works with these and other companies to help establish standards,
and, through InterTrust's MetaTrust Utility, to help ensure that consumers and
commercial organizations can enjoy a consistent degree of reliability,
integrity, and interoperability when they expose their interests through
digital interaction. We pride ourselves on working with individuals and
companies, large and small, that have interests in, or rights related to,
digital information that need rights management.
Online Entertainment and Digital Rights Management
Great creators are normally great communicators, their individual voices
collectively embodying and expressing the values and passions of their
culture. Using digital technology expedites the accurate dissemination and
reception of creators' works and, when employed in the proper context, digital
technology can also support the universe of rights associated with most
creative works -- the rights of creators, value chain members, users, and
societal organizations. Although digital technology can greatly enhance the
communication of creators' works, unless it is properly employed, its use
creates severe problems. Digital technology, when improperly used, can deny
content creators and their successors the commercially essential return for
labor and right to manage and exploit property. The improper use of digital
technology -- when employed as a vehicle for the unfettered purloining of
copyrighted content -- directly undermines the basic building blocks of modern
society, the respect for the rights of others, as well as proper return for
one's creative output and labor. Moreover, such improper use directly suborns
the stable economic basis necessary for further development of art.
Ultimately society loses out as the basic "glue" of commerce and
democracy, the civil interaction between multi-party rights and interests and
the maintenance of a market for goods and services, is undermined in the
service of convenience and self-interest. At times it appears there's a call
to revolt, "free the content," when such a call -- if extended beyond fair use
-- obscures the real issues and would seek to legitimize people taking for
free whatever they want. Others' rights be damned!
Although the impetus for this hearing may be "file-sharing" and the recent
Court of Appeals decision affecting it, it is not just about Napster. It is
about the changes that digital technology is bringing to the worlds of art,
entertainment and information. It is also about the kind of society that
electronic communities and digital technology, used in concert with copyright
law, can create. Many people are just now beginning to realize how profound
those changes and possibilities are. In under two years and with very little
in the way of direct investment, an electronic community of some 60 Napster
million file sharers was created. Ordinary consumers used the Napster system
to obtain unauthorized copies of copyrighted music without payment when most
of them, at least previously, would never have considered buying pirated CDs
in the physical world. Other communities are springing up worldwide where
individuals communicate electronically and eschew any reference to traditional
principles of commerce and property rights.
The Digital Millennium Copyright Act, which this Committee was
instrumental in enacting, was the first in the world to tackle the challenges
of digital technology. Yet for all its thoroughness, we are probably even now
past the point where we could claim that copyright law alone is sufficient to
establish adequate mechanisms for the protection and management of rights in
creative works (though it is essential that legislators continue to develop
the body of digital copyright laws and regulation). Despite shorter revision
cycles for law, the ability of the creative community to enforce the rights in
their works has never really caught up with the technologies enabling anybody
to make and distribute unlawful digital copies. The situation is now being
considered by some leading academics as one in which copyright law may in
practice become virtually irrelevant.
Society simply cannot afford to accept copyright law becoming irrelevant.
And we cannot afford to set the extraordinary example of dispensing with the
rights of content providers because we are unwilling to develop a framework
for proper commercial and civil behavior. There is therefore an urgent need
for a partnership between technology and law that effectively maintains the
underlying commercial and social principles of modern free society. With
respect to online entertainment the partnership must provide a workable
framework for the efforts of our musicians, writers, actors and artists. We
need a partnership between government and content commerce participants that
accommodates and satisfies the legitimate expectations of American citizens
-- including any limitations on exclusive rights appropriate for an
intelligent public policy.
Sophisticated DRM technology such as InterTrust's can provide the
mechanism to help effect this partnership. While technical complexities and
challenges abound, the mission is achievable: to provide a combination of
technical mechanisms and social compacts that allow the transfer of the basic
features of traditional commerce into the digital market place. The means to
achieve this goal are now at hand, and the means to continue developing a
flexible, free, and safe commercial digital environment, are readily
accessible. There are, of course, new and complex commercial, economic and
social issues to be addressed. But this cannot deflect us from the simple,
basic responsibility that we all have, to not settle for over-simplifications
that result in distorting, unfair, and socially and commercially flawed
solutions. Rather, we must strive to allow the digital world to live up to
the principles most all of us believe are the minimum standards we would
demand in the traditional, non-digital world.
The basic principles of granting rights to creators to control the use of
their work and of maintaining trusted systems for commerce remain as valid as
ever. We should not ignore the opportunities as they arise of reviewing
current copyright limitations and other accommodations that were made before
the advent of effective digital rights management to ensure they continue to
serve these principles. We should also be ready to reshape these limitations,
where necessary, to fit the emerging digital marketplace. Above all we should
be driven by a simple principle: to maintain a free and effective commercial
society that, in a balanced fashion, supports the rights of all participants.
Digital Rights Management Technology
It is important to understand from the outset that when talking about DRM
technology we are not referring to simple mechanisms that, say, carry
protected material from a server to a client in return for a payment, locking
the material to a single device. Such a proposition offers nowhere near the
degree of flexibility and coverage necessary to support either traditional or
new business offerings. Post delivery, persistent protection of commercial
interests, flexibility in use of content across devices and locations, and
flexible interaction with content, are all priorities for content value chain
participants. In the context of music as it relates to Napster, users want to
play music on-line or off-line, and they want the right and ability to combine
music into play-lists that are used to create a specific personal or group
music experience, for use wherever and whenever they wish.
The technology system that InterTrust has developed protects content, in
the instance of this discussion music, on a persistent basis throughout its
commercial lifecycle. It does this by binding rules governing content use
with governed content. This tamper resistant association persists regardless
of the channel through or platform upon which the music is played, and the
number of handlers of the content, the duration of time, or the physical
location of the content. InterTrust technology creates a zone -- independent
of time, place, or device -- where music is governed by technology and where
rights-holders, including consumers, are free to express and protect their
rights through the freedom to establish differing rules reflecting their
individual interests.
Within this technical protection zone, digital information such as music
can be offered to consumers via a virtually limitless range of models: sale of
downloads; subscriptions; pay-per-listen; superdistribution (consumer A
delivering material to consumer B and so on); and file sharing. This freedom
is also available for the implementation of a richly diverse range of policies
that govern usage, and any consequences of usage, in relation to groups of any
nature, such as special interest groups. To accommodate statutory limitations
on copyright, special consumption rules can be created, either through law or
through accepted practice of rights-holders, for particular consumers or
classes of users: for schools and universities; for libraries and archival
institutions; and for consumers with special needs such as the blind.
Whatever the needs, whatever the relationship between different participants
the digital information remains persistently protected while freely available
according to agreed rules of use.
If this protection is to remain effective throughout the lifecycle of the
content then it follows that it must be possible to change the rules relating
to use. Material can have a succession of different owners. It can change in
value; it can be traded for different purposes; it can be used on multiple,
different devices; and it can be loaned to other parties. Our system
anticipates and accommodates all these possibilities. In our system, digital
information and the rules governing its use by a particular user can exist and
move independently of each other, coming together to give effect to the
agreement between supplier, distributor, and consumer, and respecting whatever
rules may be applied by government, or, for example, by financial
institutions.
An efficient system of protection must not only accommodate a wide variety
of business offerings. It must also support the complex value chains through
which many of the offerings are delivered. The architecture InterTrust has
developed supports value chain relationships based on traditional commercial
principles -- we call this digital enabling of value chains "chain of handling
and control." This means that each actor in the value chain is able to create
the rules it wishes to apply to the material in question within the scope of
authority granted to the participant by the previous or governing actors in
the value chain. A publisher could establish the commercial terms for a work
within the authority granted by the author; the distributor could then set
rules within the scope of authority granted by the publisher and so on through
the value chain, all in accordance with law and accepted practice.
Requirements of Digital Rights Management
We believe there are a number of precedent requirements for effective
digital rights management of content. First, it must provide creators of
digital information the ability to manage and protect their rights throughout
content lifecycles and however content may be exploited. This means that a
DRM system must be secure and resilient to tampering, and certain elements of
the protection system must accompany the copy of the work as it is passed from
party to party, format to format, platform to platform.
Second, it must support commercial flexibility so that it can accommodate
the arrangements struck between copyright owners, their customers,
distributors, retailers and other value-adding participants. This means that
a rights management system must provide content creators and/or publishers the
means to allow consumers choices appropriate to the commercial circumstance.
Consumers must be able to enjoy copyrighted works, and the system must permit
consumer arrangements to vary based on the terms agreed to by the content
commerce participants.
Third, it must provide a neutral and trusted environment in which
technology assures these agreed upon arrangements. The rights management
technology must be unimpeachably neutral, that is it may not in any way subtly
or secretly advantage any hidden interests, and further, it is essential that
the rights management technology not advantage any out-of-context interests of
the rights management technology provider. Consequently, for example, neither
a rights holder, nor a consumer, nor the rights technology provider should be
able to alter or tamper with any agreed upon commercial arrangements once
agreed or impede the expression of a parties' rights or interest.
Unless a rights management system meets these requirements -- that is,
unless the trust system is itself unimpeachably trustable -- it will fail to
satisfy the legitimate interests of businesses, consumers, and government.
Further, unless a rights management system is able to maintain its trust
attributes regardless of the underlying digital commerce platform, device, or
application, it will fail one of two tests. Either the system will (A) lack
reliability in protecting participant rights, since a loosely coupled array of
rights systems, without a unifying maintained rights environment, will readily
succumb to hackers; or the system will (B) lack interoperability, and
consumers and commercial participants alike will lose the convenience and
efficiency essential to content commerce, and risk having their interests
suborned to the interests of a party controlling a narrow, proprietary
environment.
In the domain of music, InterTrust DRM technology is now capable of
permitting consumers to listen, record, and distribute music online in ways
that do not compromise the rights of artists, record labels, and other
copyright owners. It is capable of managing the rights in copyrighted works
in a secure manner in the context of peer-to-peer distribution. Its
technology supports the ongoing effort of Digital World Services (DWS), a
Bertelsmann subsidiary, and the Universal Music Group, as well as many other
interests both large and small, enabling them to implement new business models
for the distribution of music on-line. A leading international music group,
Daft Punk, for example, recently accompanied the release of its latest album
with a novel application of InterTrust technology. The band is encouraging
traditional retail relationships and creating digital economy value for its
fans by enabling those fans who have purchased the CD to access the group's
web site and to download additional music -- at no further cost, but protected
with InterTrust DRM.
Effective DRM solutions require more than sophisticated technology. They
also require credibility and trust. That is why InterTrust restricts itself
to building a platform that supports third party businesses. It is not itself
a distributor of copyrighted works; a builder of commercial consumer
applications, such as electronic music players; or a credit card transaction
processor. InterTrust's MetaTrust Utility, the core of InterTrust's business
interests, functions as a utility. It facilitates -- but refrains from
intruding into -- the business models and distribution channels for
copyrighted works. Its function is not to dictate the arrangements for
digital rights management, but to establish and maintain a platform that
ensures the neutrality, security, commercial reliability, and trusted
interoperability of services, software applications, and devices used for the
protection and management of rights in digital information of all kinds. A
trusted, neutral infrastructure is essential to the long-term effectiveness of
DRM solutions, and to their acceptance by copyright owners, distributors, and
consumers alike.
Conclusion
DRM technologies should give consumers new options for legitimately
acquiring and enjoying music and other forms of online entertainment, while
ensuring that copyright owners and other commercial participants have the
means to manage and protect their rights. Enabling peer-to-peer distribution
of music and other copyrighted works without compromising copyright is an
obvious example. In our view, sophisticated DRM solutions must support the
fundamental principle of any effective copyright system: that of striking the
correct balance between protecting the rights and interests of copyright
owners while promoting the interests of the wider community and facilitating
the efficient and flexible dissemination of, and greater access to, music and
other copyrighted works.
Ultimately, the reality of sophisticated DRM technology is about far more
than Napster, online entertainment and copyright law. Policy makers,
consumers, and business globally will come to realize that the "Napster issue"
isn't just about music and the Internet. It is about constructing a civil
digital society in the Internet Age, where rules created for and by its
citizens can be implemented and respected wherever and whenever legitimate
interests are in play. It is this simple proposition that InterTrust is
helping to make a reality.
In closing, InterTrust once again thanks the Committee for the opportunity
to present testimony on this important issue, and looks forward to working
with members of the Committee as they consider the important issues related to
online entertainment and copyright.
About InterTrust Technologies Corporation
InterTrust Technologies Corporation is the leading developer of
peer-to-peer, distributed digital rights management (DRM) technology. Its
general-purpose DRM trust platform serves as a foundation for trusted
peer-to-peer and client server e-commerce. InterTrust holds numerous patents
in the area of trusted systems technology and peer-to-peer rights management,
and licenses its technology and patents in the form of software or hardware
and tools to partners. These partners provide digital commerce services and
applications that together form, a global digital commerce network branded as
the MetaTrust Utility(tm). InterTrust is the neutral administrator of the
MetaTrust Utility network, defining and enforcing the rules which maintain the
security, commercial reliability, and trusted interoperability of devices,
services, and applications deployed on the platform. For more information,
please visit the InterTrust website at http://www.intertrust.com.
The statements contained in this release that are not purely historical
are forward-looking statements within the meaning of Section 21E of the
Securities and Exchange Act of 1934, including statements regarding
InterTrust's expectations, beliefs, hopes, intentions or strategies regarding
the future. All forward-looking statements included in this document are
based upon information available to InterTrust as of the date hereof, and
InterTrust assumes no obligation to update any such forward-looking statement.
Actual results could differ materially from current expectations. Factors that
could cause or contribute to such differences include, but are not limited to,
the factors and risks discussed in InterTrust's reports filed from time to
time with the Securities and Exchange Commission.
NOTE: DigiBox, the InterTrust logo, MetaTrust, and The MetaTrust Utility
are registered trademarks of InterTrust Technologies Corporation, and
TrustChip, RightsChip, InterRights Point, MetaTrust-Certified, Rights/PD and
Rights/System are trademarks of InterTrust Technologies Corporation, all of
which may or may not be used in certain jurisdictions. All other brand or
product names are trademarks or registered trademarks of their respective
companies or organizations.
SOURCE InterTrust Technologies Corporation
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