The Digital Millennium Copyright Act: A Potent New Weapon in the Aftermarket Wars

For more than a century, original equipment manufacturers (“OEMs”) have sought, with only limited success, the aid of the courts to enforce restrictions against competitors' sales of products designed to complement or replace components of their proprietary technologies. At stake in each of these cases was a lucrative aftermarket for products directed to the OEM's patented technology and a “razor-and-blades” business model by which the OEM strove to attain a large installed user base for its equipment in hopes of “locking-in” customers to that aftermarket.

The products involved in these commercial skirmishes have been many and varied, and the restrictions at issue have been similarly diverse. See, e.g., Aro Mfg. Co. v. Convertible Top Co., 365 U.S. 336 (1961) (prohibitions of the repair or replacement of perishable components); Hewlett-Packard Co. v. Repeat-O-Type Stencil Mfg. Corp., 123 F.3d 1445 (Fed. Cir. 1997), cert. denied, 523 U.S. 1022 (1998) (single-use requirements); Surfco Hawaii v. Fin Control Sys. Pty, Ltd., 264 F.3d 1062 (Fed. Cir. 2001) (bars against modification or replacement of unused parts). Almost invariably, however, the OEM's claim of right arose under the patent laws, the notable exception being, in more recent years, the assertion of software copyrights to block the sale of competitors' compatible playback equipment, platforms or other interoperable products. See, e.g., Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772 (5th Cir. 1999).

Although the 1988 Patent Misuse Reform Act permits a broad range of patent-leveraging practices, including the right to “condition [ ] the license of any rights to the patent or the sale of the patented product on the … purchase of a separate product,” 35 U.S.C. '271(d)(5), the ability of OEMs to compel adherence to lawful product tie-in conditions has remained spotty, at best. This circumstance is attributable to three principal factors: 1) unrestricted sales and the associated doctrines of patent exhaustion, implied license and right of repair; 2) the defenses of copyright fair use and misuse; and 3) the tendency of consumers to “cheat” on license restrictions by purchasing lower-cost or value-enhancing third-party components.

It is no small irony that a statute enacted for an altogether different purpose, the Digital Millennium Copyright Act (“DMCA”), may now serve as the most effective means of surmounting these barriers to the enforcement of ancillary and aftermarket restrictions. Passed in 1998 to achieve compliance with the WIPO Copyright Treaty's requirement that contracting states “provide adequate legal protection … against the circumvention of effective technological measures … that restrict acts, in respect of [copyrighted] works,” the DMCA, 17 U.S.C. '1201 et seq., was reputedly designed to make digital networks, such as the Internet, “safe places to disseminate and exploit copyrighted works.” Universal City Studios, Inc. v. Corley, 273 F.3d 429, 440 (2d Cir. 2001); Universal City Studios, Inc. v. Reimerdes, 82 F. Supp.2d 211, 221 (S.D.N.Y. 2000). (Citations omitted.)

To this end, Section 1201 of the DMCA prohibits: 1) the circumvention of technological measures ' such as scrambling and encryption ' that control access to works protected by copyright, 17 U.S.C. '1201(a)(1)(A); and 2) the manufacture of or trafficking in technologies and devices (a) “primarily designed or produced for,” or (b) that have “only limited commercially significant purpose or use other than,” or (c) are knowingly marketed for, the circumvention of such access-control technologies or technological measures that protect “a right of a copyright owner.” 17 U.S.C. ”1201(a)(2)(A), (B) and (C). The DMCA thus prohibits the unauthorized circumvention of “lock-out” software and technologies that control access to or the reproduction of copyrighted works. 17 U.S.C. ”1201(a)(3)(A), 1201(b)(2)(A).

In so doing, the DMCA has created a right of exclusive access to works of authorship that is separate and distinct from the copyrights in these works. Compare 17 U.S.C. '106 (copyrights consist of the exclusive rights to reproduce, distribute, display, perform and prepare derivative works), with 17 U.S.C. ”1201(a)(1)(A) and 1203 (right of action against circumvention of access controls). Significantly, while copyright protection is denied to “any … procedure, process, system, method of operation, … or discovery,” 17 U.S.C. '102(b), the DMCA exclusive access right extends to such functional subject matter so long as its use or engagement requires access to technologically-protected copyrightable works. 17 U.S.C. '1201(a)(1)(A). As a result, by embedding “gate-keeping” encryption software to control access to programs that operate electronic or mechanical devices, an OEM may invoke the DMCA to bar competitors from manufacturing and selling products that must bypass or disable these access controls.

Thus, with proper planning and engineering, the access right can be a potent weapon, equaling or exceeding copyright ' and even patent ' protection in a number of significant respects.

First, encryption technology erects a practical bar to unauthorized modification, repair or replacement of access-protected components that makes it difficult for end users to breach the manufacturer's contractual sale or license conditions.

Second, in the absence of such binding conditions, access control presents an effective technological and legal response to the doctrines of patent exhaustion and implied license by which purchasers have secured the right to modify, replace and repair components of patented articles sold pursuant to unrestricted sales. See, e.g., Hewlett-Packard, 123 F.3d 1451-53.

Third, the right of access can serve as a patent surrogate that confers, independent of any patent, the exclusive rights to make, use and sell useful devices without need to satisfy any of the stringent validity, publication or other requirements of the patent laws. See, e.g., Lexmark Int'l, Inc. v. Static Control Components, Inc., 253 F. Supp.2d 943, 974 (E.D. Ky. 2003) (preliminarily enjoining DMCA defendant from “making, selling, distributing, offering for sale or otherwise trafficking in” microchips for Lexmark's toner cartridges); Sony Computer Entm't Am., Inc. v. GameMasters, 87 F. Supp.2d 976, 990 (N.D. Cal. 1999) (preliminarily enjoining the “distributing, selling, transporting or purchasing” of any device that “directly or contributorily violates” Sony's exclusive access rights).

Fourth, like patents and copyrights, the right of access may be exploited by way of license. By this means, the rights holder may command considerable royalties, particularly in view of the fact that, unlike patents and copyrights, the right of access has no defined duration. Indeed, if the right has any temporal limit, it would likely be the life of the copyrights in the access-protected program, providing a period of protection roughly five to six times the 20-year term of patents.

Fifth, the distribution and use of a multipurpose technology may be enjoined under the DMCA so long as one of the purposes for which it is designed or intended is unauthorized circumvention. 17 U.S.C. ”1201(a)(2)(A), (C).

Sixth, the courts have not recognized fair use or misuse as a defense to a DMCA circumvention claim. See, e.g., Universal City Studios, Inc. v. Reimerdes, 111 F. Supp.2d 294, 322 (S.D.N.Y. 2000); Lexmark, 253 F. Supp.2d at 965; GameMasters, 87 F.Supp.2d at 965. As a result, neither defendants' privileged use of a work nor copyright holders' leveraging of access-controls to exclude competition has served to deny DMCA claimants enforcement of their exclusive access rights.

The DMCA right of access thus provides a formidable means by which OEMs may establish dominion over markets for products ' and services ' that require access to their software-protected products. See Storage Tech. Corp v. Custom Hardware Eng. & Cons'g., Inc., No. 02-012102-RWZ, 2004 U.S. Dist. LEXIS 12391 at *14-*15 (D. Mass. July 2, 2004) (preliminarily enjoining performance of services that circumvented access controls). The right, however, is not without its limits.

One such limitation lies in the statutory definition of “circumvent,” which proscribes only actions that are committed “without the authority of the copyright owner.” 17 U.S.C. '1201(a)(3)(A). Thus, where the manufacturer has expressly or impliedly consented to the end user's acts, no violation for use of or trafficking in circumvention technology may be found. See Chamberlain Group, Inc. v. Skylink Techs., Inc., 292 F.Supp.2d 1040, 1043-46 (N.D. Ill. 2003). This limitation is not imposed as a matter of implied license, but as an indispensable element of a Section 1201 claim. Id. at 1044. However denominated, the implication that purchasers have been authorized to circumvent access controls can only be safely avoided by adopting explicit sale or license restrictions.

Finally, although, on its face, it would appear to undermine OEMs' ability to foreclose the development, use and sale of related, interoperable technologies, the DMCA's “reverse engineering” exemption has thus far fallen short of this mark. Because the exemption sanctions only actions directed to achieving “interoperability of an independently created computer program with other programs” 17 U.S.C. ”1201(f)(1), (2) and (3), it has thus far proved unavailing in two important respects. First, the independent creation requirement compels the accused circumventer to establish that, in seeking the desired interoperability, it has not borrowed elements of the OEM's program. See, e.g., Lexmark, 253 F.Supp.2d at 971. And, correspondingly, the fact that the exemption speaks solely to interoperability between computer programs suggests that it does not apply to the bypassing of access controls to enable, for example, purely chemical, electrical or mechanical interoperability.

Conclusion

The enactment of the Digital Millennium Copyright Act has expanded the age-old battle for product aftermarkets into an entirely new arena. As reflected in the ongoing Lexmark and Chamberlain cases ' both of which are the subject of a pending appeal ' in addition to the federal courts, the battlefront now extends to Section 1201(a)(1)(C) exemption rulemaking proceedings before the Copyright Office (Lexmark), Tariff Act Section 337 proceedings before the U.S. International Trade Commission (Chamberlain), and legislative initiatives designed to curb the DMCA's effect upon product aftermarkets. See, e.g., 2003 N.C. Sess. Laws 386 (voiding contractual prohibitions of the “reusing, remanufacturing or refilling of a toner or inkjet cartridge”); H.R. 107, '5, 108th Cong. (2003); and H.R. 1066, '5, 108th Cong. (2003). While the last word on the DMCA's reach has yet to be heard, savvy manufacturers are taking increasing advantage of their exclusive access rights to control the use of product components and peripherals designed to operate with their software-protected devices.

EDITOR'S NOTE: At press time the district court's decision in Skylink was affirmed. See Chamberlain Group, Inc. v. Skylink Techs., Inc., No. 04-1118, slip op. (Fed. Cir. Aug. 31, 2004) (available at http://www.ll.georgetown.edu/federal/judicial/fed/opinions/04opinions/04-1118.pdf.)

For more than a century, original equipment manufacturers (“OEMs”) have sought, with only limited success, the aid of the courts to enforce restrictions against competitors' sales of products designed to complement or replace components of their proprietary technologies. At stake in each of these cases was a lucrative aftermarket for products directed to the OEM's patented technology and a “razor-and-blades” business model by which the OEM strove to attain a large installed user base for its equipment in hopes of “locking-in” customers to that aftermarket.

The products involved in these commercial skirmishes have been many and varied, and the restrictions at issue have been similarly diverse. See, e.g., Aro Mfg. Co. v. Convertible Top Co., 365 U.S. 336 (1961) (prohibitions of the repair or replacement of perishable components); Hewlett-Packard Co. v. Repeat-O-Type Stencil Mfg. Corp., 123 F.3d 1445 (Fed. Cir. 1997), cert. denied, 523 U.S. 1022 (1998) (single-use requirements); Surfco Hawaii v. Fin Control Sys. Pty, Ltd., 264 F.3d 1062 (Fed. Cir. 2001) (bars against modification or replacement of unused parts). Almost invariably, however, the OEM's claim of right arose under the patent laws, the notable exception being, in more recent years, the assertion of software copyrights to block the sale of competitors' compatible playback equipment, platforms or other interoperable products. See, e.g., Alcatel USA, Inc. v. DGI Techs., Inc., 166 F.3d 772 (5th Cir. 1999).

Although the 1988 Patent Misuse Reform Act permits a broad range of patent-leveraging practices, including the right to “condition [ ] the license of any rights to the patent or the sale of the patented product on the … purchase of a separate product,” 35 U.S.C. '271(d)(5), the ability of OEMs to compel adherence to lawful product tie-in conditions has remained spotty, at best. This circumstance is attributable to three principal factors: 1) unrestricted sales and the associated doctrines of patent exhaustion, implied license and right of repair; 2) the defenses of copyright fair use and misuse; and 3) the tendency of consumers to “cheat” on license restrictions by purchasing lower-cost or value-enhancing third-party components.

It is no small irony that a statute enacted for an altogether different purpose, the Digital Millennium Copyright Act (“DMCA”), may now serve as the most effective means of surmounting these barriers to the enforcement of ancillary and aftermarket restrictions. Passed in 1998 to achieve compliance with the WIPO Copyright Treaty's requirement that contracting states “provide adequate legal protection … against the circumvention of effective technological measures … that restrict acts, in respect of [copyrighted] works,” the DMCA, 17 U.S.C. '1201 et seq., was reputedly designed to make digital networks, such as the Internet, “safe places to disseminate and exploit copyrighted works.” Universal City Studios, Inc. v. Corley, 273 F.3d 429, 440 (2d Cir. 2001); Universal City Studios, Inc. v. Reimerdes, 82 F. Supp.2d 211, 221 (S.D.N.Y. 2000). (Citations omitted.)

To this end, Section 1201 of the DMCA prohibits: 1) the circumvention of technological measures ' such as scrambling and encryption ' that control access to works protected by copyright, 17 U.S.C. '1201(a)(1)(A); and 2) the manufacture of or trafficking in technologies and devices (a) “primarily designed or produced for,” or (b) that have “only limited commercially significant purpose or use other than,” or (c) are knowingly marketed for, the circumvention of such access-control technologies or technological measures that protect “a right of a copyright owner.” 17 U.S.C. ”1201(a)(2)(A), (B) and (C). The DMCA thus prohibits the unauthorized circumvention of “lock-out” software and technologies that control access to or the reproduction of copyrighted works. 17 U.S.C. ”1201(a)(3)(A), 1201(b)(2)(A).

In so doing, the DMCA has created a right of exclusive access to works of authorship that is separate and distinct from the copyrights in these works. Compare 17 U.S.C. '106 (copyrights consist of the exclusive rights to reproduce, distribute, display, perform and prepare derivative works), with 17 U.S.C. ”1201(a)(1)(A) and 1203 (right of action against circumvention of access controls). Significantly, while copyright protection is denied to “any … procedure, process, system, method of operation, … or discovery,” 17 U.S.C. '102(b), the DMCA exclusive access right extends to such functional subject matter so long as its use or engagement requires access to technologically-protected copyrightable works. 17 U.S.C. '1201(a)(1)(A). As a result, by embedding “gate-keeping” encryption software to control access to programs that operate electronic or mechanical devices, an OEM may invoke the DMCA to bar competitors from manufacturing and selling products that must bypass or disable these access controls.

Thus, with proper planning and engineering, the access right can be a potent weapon, equaling or exceeding copyright ' and even patent ' protection in a number of significant respects.

First, encryption technology erects a practical bar to unauthorized modification, repair or replacement of access-protected components that makes it difficult for end users to breach the manufacturer's contractual sale or license conditions.

Second, in the absence of such binding conditions, access control presents an effective technological and legal response to the doctrines of patent exhaustion and implied license by which purchasers have secured the right to modify, replace and repair components of patented articles sold pursuant to unrestricted sales. See, e.g., Hewlett-Packard, 123 F.3d 1451-53.

Third, the right of access can serve as a patent surrogate that confers, independent of any patent, the exclusive rights to make, use and sell useful devices without need to satisfy any of the stringent validity, publication or other requirements of the patent laws. See, e.g., Lexmark Int'l, Inc. v. Static Control Components, Inc., 253 F. Supp.2d 943, 974 (E.D. Ky. 2003) (preliminarily enjoining DMCA defendant from “making, selling, distributing, offering for sale or otherwise trafficking in” microchips for Lexmark's toner cartridges); Sony Computer Entm't Am., Inc. v. GameMasters, 87 F. Supp.2d 976, 990 (N.D. Cal. 1999) (preliminarily enjoining the “distributing, selling, transporting or purchasing” of any device that “directly or contributorily violates” Sony's exclusive access rights).

Fourth, like patents and copyrights, the right of access may be exploited by way of license. By this means, the rights holder may command considerable royalties, particularly in view of the fact that, unlike patents and copyrights, the right of access has no defined duration. Indeed, if the right has any temporal limit, it would likely be the life of the copyrights in the access-protected program, providing a period of protection roughly five to six times the 20-year term of patents.

Fifth, the distribution and use of a multipurpose technology may be enjoined under the DMCA so long as one of the purposes for which it is designed or intended is unauthorized circumvention. 17 U.S.C. ”1201(a)(2)(A), (C).

Sixth, the courts have not recognized fair use or misuse as a defense to a DMCA circumvention claim. See, e.g., Universal City Studios, Inc. v. Reimerdes, 111 F. Supp.2d 294, 322 (S.D.N.Y. 2000); Lexmark, 253 F. Supp.2d at 965; GameMasters, 87 F.Supp.2d at 965. As a result, neither defendants' privileged use of a work nor copyright holders' leveraging of access-controls to exclude competition has served to deny DMCA claimants enforcement of their exclusive access rights.

The DMCA right of access thus provides a formidable means by which OEMs may establish dominion over markets for products ' and services ' that require access to their software-protected products. See Storage Tech. Corp v. Custom Hardware Eng. & Cons'g., Inc., No. 02-012102-RWZ, 2004 U.S. Dist. LEXIS 12391 at *14-*15 (D. Mass. July 2, 2004) (preliminarily enjoining performance of services that circumvented access controls). The right, however, is not without its limits.

One such limitation lies in the statutory definition of “circumvent,” which proscribes only actions that are committed “without the authority of the copyright owner.” 17 U.S.C. '1201(a)(3)(A). Thus, where the manufacturer has expressly or impliedly consented to the end user's acts, no violation for use of or trafficking in circumvention technology may be found. See Chamberlain Group, Inc. v. Skylink Techs., Inc., 292 F.Supp.2d 1040, 1043-46 (N.D. Ill. 2003). This limitation is not imposed as a matter of implied license, but as an indispensable element of a Section 1201 claim. Id. at 1044. However denominated, the implication that purchasers have been authorized to circumvent access controls can only be safely avoided by adopting explicit sale or license restrictions.

Finally, although, on its face, it would appear to undermine OEMs' ability to foreclose the development, use and sale of related, interoperable technologies, the DMCA's “reverse engineering” exemption has thus far fallen short of this mark. Because the exemption sanctions only actions directed to achieving “interoperability of an independently created computer program with other programs” 17 U.S.C. ”1201(f)(1), (2) and (3), it has thus far proved unavailing in two important respects. First, the independent creation requirement compels the accused circumventer to establish that, in seeking the desired interoperability, it has not borrowed elements of the OEM's program. See, e.g., Lexmark, 253 F.Supp.2d at 971. And, correspondingly, the fact that the exemption speaks solely to interoperability between computer programs suggests that it does not apply to the bypassing of access controls to enable, for example, purely chemical, electrical or mechanical interoperability.

Conclusion

The enactment of the Digital Millennium Copyright Act has expanded the age-old battle for product aftermarkets into an entirely new arena. As reflected in the ongoing Lexmark and Chamberlain cases ' both of which are the subject of a pending appeal ' in addition to the federal courts, the battlefront now extends to Section 1201(a)(1)(C) exemption rulemaking proceedings before the Copyright Office (Lexmark), Tariff Act Section 337 proceedings before the U.S. International Trade Commission (Chamberlain), and legislative initiatives designed to curb the DMCA's effect upon product aftermarkets. See, e.g., 2003 N.C. Sess. Laws 386 (voiding contractual prohibitions of the “reusing, remanufacturing or refilling of a toner or inkjet cartridge”); H.R. 107, '5, 108th Cong. (2003); and H.R. 1066, '5, 108th Cong. (2003). While the last word on the DMCA's reach has yet to be heard, savvy manufacturers are taking increasing advantage of their exclusive access rights to control the use of product components and peripherals designed to operate with their software-protected devices.

EDITOR'S NOTE: At press time the district court's decision in Skylink was affirmed. See Chamberlain Group, Inc. v. Skylink Techs., Inc., No. 04-1118, slip op. (Fed. Cir. Aug. 31, 2004) (available at http://www.ll.georgetown.edu/federal/judicial/fed/opinions/04opinions/04-1118.pdf.)