DRM systems take two approaches to securing content. The first is "containment," an approach where the content is encrypted in a shell so that it can only be accessed by authorized users. The second is "marking," the practice of placing a watermark, flag, or an electronic tag on content as a signal to a device that the media is copy protected.
Some content industries argue that digital media will lead to large-scale piracy, a la NAPSTER's sound recording peer-to-peer file sharing, on an alarming basis. The technology community is concerned that DRM technology and legislation requiring the inclusion of copy control systems pose serious threats to privacy, open source software development, and the fair use of copyrighted content. Technical standards have provided little defense against copyright piracy in the past (the software industry has attempted to use them) and alienated consumers. Legislative mandate of any type of technology standard is intrusive and could fundamentally change the path of free-market technological development.
Impact to Business
The US motion picture industry lobbied the US Congress to impose copy protection standards on technology industries and successfully obtained draft legislation to this effect in 2002. The introduction of draft legislation was followed by a series of intensive negotiations and meetings with Members of Congress by industry and consumer group representatives on all sides of the issue. The result was a senior level group, representing a range of technology and content industries, engaged in dialogue regarding the technical possibilities of establishing a DRMs standard. This group, the Copyright Technical Working Group (CPTWG) and other private sector consortia, have worked to address the issue. The US Congress remains engaged on the issue.
The Federal Communications Commission (FCC) issued rules on the specific issue of digital broadcast and the ability to make analog copies. The FCC has required a "broadcast flag" recognition technology for use in systems to receive over-the-air digital television broadcasting. The FCC may consider similar requirements in the case of digital radio broadcasts in the future.
In Europe, the European Commission's Copyright Directive supports the use of DRMs. While the Directive does not impose the adoption of DRMs, it does call for voluntary measures by copyright holders to protect copyrighted materials. It also establishes that fair compensation to copyright holders for legal, private copying should take into account the application or non-application of technical protection measures.
There is, however, a lack of clarity as to if or how DRMs will be taken into account when defining new levy schemes as required by the Directive.
The European Commission acts as a facilitator who promotes a DRM environment that is acceptable to all market players. Ultimately, it is up to the different stake holders, such as industry, right holders, collecting societies and users, to build consensus on the applicability of DRM. To this end, a Commission Staff Working Paper on DRMs has been published to assess the policy options available for promoting the use of DRM. Workshops on DRM were held on 28 February 2002 and on 25 March 2003. As a result, four working groups were established. The Commission considers legislation tackling DRM issues a last resort and believes that standards should be developed by industry and be voluntary.
In March 2004, the Commission established a High Level Group on DRM. The group presented a final report on Intellectual Property and Digital Rights Management Systems in July 2004.