On Friday, April 6, the French government inaugurated the regulatory body in charge of ensuring that DRMs (Digital Rights Management) are made compatible and do not prevent users of copyrighted work to benefit from copyright exceptions . If successful, this DRM watchdog, the first of its kind in the world, might become a model in dealing with problems raised by DRMs. Already its mere introduction in French law eight months ago may have played a pivotal role in Apple’s recent decision to change its DRM policy and promote DRM-free music.

1. The composition and independence of the ARMT
Article L. 331-18 (all Article numbers refer to articles of the French IPC) provides that the ARMT consists of six members who are appointed by decree for six years. The six members come from prestigious bodies of the French Republic (In [ ] are the names of the members appointed Friday as reported by Crouzillacq ):

• a member of the Conseil d’État, the Supreme Court in administrative matters [Jean Musitelli],

• a member of the Cour de Cassation, the Supreme Court in civil and criminal matters [Marie-Françoise Marais],

• a member of the Cour des Comptes, the Auditor-general’s Court [Patrick Bouquet],

• a member assigned by the president of the Académie des Technologies, the Academy of Technological Science [Christian Saguez],

• a member of the Conseil Supérieur de la Propriété Littéraire et Artistique, the Higher Council on Copyright [Pierre Sirinelli],

• the Chairman of the Commission pour la Copie Privée, the Committee on private copying (who only has a non-binding vote) [Tristan d'Albis],

The French lawmakers deliberately chose to compose the ARMT with members from prestigious and independent institutions, rather than try to establish a balance between representatives of interest groups. The lawmakers thought that choosing people with no ties to specific interest groups, rather than trying to balance those interests, would better guarantee the body’s independence.

To guarantee the independence of the body, the IPC provides that people who are or were involved, or have any interest in collecting societies or any company involved in the production and distribution of music or films cannot become a member (Article L. 331-19). Before becoming member of the ARMT the persons must disclose, in a statement, their ties, direct and indirect with a collecting society, a company producing music or films, distributing them online or any rightholder on a DRM. This statement must be updated by the members when existing ties are modified or when new ones are created (Article R. 331-9).

Another feature of the independence of the ARMT is that it has its own services including a Secretaire General and rapporteurs, and can call upon experts (Article L. 331-20) who are designated according to the rules set in the decree (Artciles R. 331-7 and R. 331-8).

In spite of all these precautions it is likely that the legitmacy of the authority will be challenged anyway. While its members are less likely to be accused of bias, they might be accused of being aloof or out of touch with technology or business realities.

Decisions of the ARMT
The ARMT takes its decisions on a majority. If the vote is split, the President has a casting vote (Article L. 331-21). (The President of the ARMT must be the member of either the Conseil d’État, the Cour de Cassation or the Cour des Comptes, the three most prestigious institutions).

2. The implementation of the interoperability requirement by the ARMT
One of the main features of the dadvsi law is that the provision which gives legal protection to DRMs also imposes an interoperability requirement according to which DRMs “must not have the effect of preventing effective interoperability” (Article L. 331-5).

The IPC does not define interoperability but leaves it to the ARMT to ensure that DRMs, “because of their mutual incompatibility or lack of interoperability, do not create, in the use of a work, additional and independent limitations to those expressly chosen by the rightholder” (Article L. 331-6). (There is currently a scholarly debate to determine whether the wording of Article L. 331-6 offers a loophole to rightholders and proponents of DRMs by allowing them to contractually defeat the interoperability requirement. The author does not believe it to be the case, as will be argued in another article. In any event, the ARMT and the courts will clarify the matter when a case will be brought before them).

Achieving interoperability will be done through the disclosure by DRMs suppliers of the “information essential for interoperability”. Such information will then be used to make DRMs interoperable. As it is unlikely that suppliers would spontaneously grant access to such sensitive and confidential technical data, Article L.331-7 states under which conditions and procedure the ARMT can grant access to the information.

2.1 Only technology companies can refer a case for interoperability
The point at which a case can be referred to the ARMT is when access to interoperability information has been refused by a DRM supplier.

However, the law limits the number of entities who can claim such access to three categories of technology companies, namely “software publishers, manufacturers of technical systems and service providers.” Such companies as Microsoft, Real, Apple, Sony, Creative, Fnacmusic.com or VirginMega.fr would thus be able to refer a case to the authority.

The fact that only technology companies can enforce the interoperability requirement is highly controversial. Consumers and consumer groups cannot refer a case to the authority, which seems in contradiction with the purpose of a law aimed at protecting consumers against market segmentation in digital content distribution.

However, the lawmakers argued that this restriction was necessary to prevent the general public from accessing sensitive information that would be largely useless to them and the potential dissemination of which could be lethal to the efficiency of DRMs. Such concerns for the confidentiality of the information and the efficiency of DRMs are also an important feature of the way the ARMT operates.

2.2 A procedure aiming for speed, conciliation and confidentiality

Two months to decide
The ARMT must give its decision within two months after it has received the complete file for the referal (Articles L. 331-7 and R. 311-12).

Conciliation, then injunction
The ARMT will first encourage the parties involved to commit to end the practices contrary to interoperability.

In the absence of such a commitment, the ARMT may then decide either to reject the demand or issue an injunction, where necessary, under a periodic penalty payment, detailling how the rightholder of the DRM should allow the claimant to access the information necessary for interopearbility (Articles L. 331-7 and R. 331-22).

Confidentiality of the information
The law sets procedures and guidelines to guarantee the confidentiality of the information during the proceedings and when access has been granted to the claimant.

During the proceedings, one party can ask the President of the authority for all or part of the information to be made confidential. The party can then challenge the request to access such confidential information. Ultimately the President of the ARMT will have to decide whether to grant access to this information (Article R. 331-18).

When the ARMT orders the disclosure of the information, it must define the scope and duration of this access. The ARMT also sets the financial compensation that the person accessing the information will have to pay to the DRM supplier. The injunction will only take effect after the compensation has been paid. The ARMT must also specify the commitments that the claimant has to undertake in order to guarantee the efficiency and integrity of the DRM (Article R. 331-22).

When the ARMT makes its decision available to the public it must also guarantee the confidentiality of the information (Article L. 331-7).

2.3 The power to impose huge fines
The ARMT may impose a financial penalty in the event of non-compliance with the injunction or with the parties’ commitment. The maximum amount of the penalty for a company is 5% of the worldwide turnover after tax. The financial penalty is proportionate to the scale of the damage caused to the parties, to the financial situation of the body or company penalised and to the likelihood of any repetition of practices contrary to interoperability (Article L. 331-7).

2.4 The cooperation between the ARMT and the Council on Competition
Finally, the president of the ARMT can refer to the Council on Competition about abuse of dominant position or anti-competitive behaviours that he may come across in the field of DRMs. The President of the ARMT can also refer to the Council on Competition, for advice, on any other question relating to its jurisdiction. Conversely, the Council on Competition informs the ARMT of any antitrust cases that falls within the field of DRMs (Article L. 331-7).

2.5 The publication of decisions and appeal
The decisions of the ARMT are made available to the public, but with regards to the respect of the secrets protected by law and they can be appealed in front of the Paris Court of Appeal.

3. The ARMT and the interaction between DRMs and copyright exceptions
Another issue raised by DRMs that the dadvsi law wanted to address is the fact that they can prevent users from benefiting from copyright exceptions, as they impose technological restrictions on how people can access protected content.

The most contentious example of that is when a consumer who has legitimately purchased a CD or DVD cannot benefit from the private copying exception recognised in French law. The ARMT will have to find a balance between DRM protection and copyright exceptions.

Under Article L. 331-8, the ARMT must ensure that the use of DRMs “do not prevent users from the benefit of the [following copyright exceptions]:
- the private copying exception
- the exception for teaching and scientific research
- the exception for the benefit of people with a disability
- the exception for libraries, museums and archives.”

3.1 Anybody can refer a case on copyright exceptions
The procedure is the same as in cases for interoperability cases except in one crucial aspect. Whereas the procedure to implement interoperability is only open to technology companies, the procedure regarding copyright exceptions is open to users and associations representing them (Article L. 331-13). So, for instance, a consumer or a consumer group can refer a case relating to the benefit of the private copying exception (Article R. 331-13).

3.2 A difficult balancing act
If beneficiaries of copyright exceptions or associations representing them cannot solve issues directly with a DRM supplier they can refer a case to the ARMT (Article L. 331-13). The authority will try to make both parties reach an agreement (Article L. 331-14).
In the absence of such agreement the ARMT will have to define how users can benefit from the relevant copyright exception (Articles L. 331-8 and R. 331-27).

3.3 What guarantee in practice for the private copying exception?
This task will be particularly delicate in the case of the controversial private copying exception. A more detailed analysis of the law shows that in many cases there is no guarantee that the private exception will be upheld.

First, the law provides that rightholders are not held to guarantee the private copying exception for content distributed online (Article L. 311-10). This authorises rightholders, when selling their content on demand, to use DRMs to prevent any sort of copying. This would let content rightholders at liberty to eradicate the private copying exception from the future of content distribution.

The situation also looks bleak for the private copying exception in the physical world of DVDs. Indeed, the ARMT will have to balance the requirement that the use of DRMs “do not prevent users from the benefit of the private copying exception” and its “[mission] to define the minimal number of [allowed copies]” (Article L. 331-8) with the broader requirement that its decisions cannot “conflict with a normal exploitation of the work or other subject-matter protected by an intellectual property right (IPR) and do not unreasonably prejudice the legitimate interests of the IPR holder.” (Article R. 331-2 but also in Article L. 122-5 9° which formally introduces the legal concept known as the “three-step test” in the IPC)

In other words, the ARMT will only allow users to benefit from a copyright exception if it does not harm the commercial exploitation of the work protected by a DRM. In the case of the private copying exception, the ARMT will have to decide whether letting people make copies harms the commercial exploitation of a DVD. Given recent court decisions (especially the decision by the Cour de Cassation in the “Mulholland Drive” case on 28 February 2006) the ARMT is likely to decide that the private copying exception indeed, harms the commercial exploitation of a DVD and that therefore DRMs should be allowed to prevent users to benefit from such exception.

In spite of this reservation, it is safe to say that the ARMT will provide an interesting forum to debate of the interaction between DRMs and copyright exceptions, even if supporters of the private copying exception might be disappointed by its decisions.

4. The impact of the ARMT in France and internationally
Leaving aside more general questions such as whether consumer law would be more appropriate than copyright law to deal with DRM issues, or whether the market rather than regulators should decide the fate of DRMs, what can we make of the French system? What will be its impact on the DRM issue? Will it be emulated in the rest of the world?

4.1 Assessing the French model
The dadvsi law wanted to create a balanced system that would both protect DRM suppliers and consumers. In doing so, it took the risk of disappointing both. Indeed, proponents and opponents of DRMs can raise some valid reservations about the system put in place.

On the interoperability front, DRM suppliers will be wary of finding themselves being forced to disclose their confidential information or face huge fines.
DRM opponents would argue that preventing consumers from referring a case to the ARMT defeats the purpose of a law aimed at protecting consumers against DRM market segmentation. Consumer groups could also argue that they would have been keener than technology companies to use the power to refer a case to put pressure on suppliers to solve DRM issues.

Regarding copyright exceptions, users will welcome the fact that anybody can refer a case to the ARMT. However, in practice the most important exception, the private copying exception, is likely to be undermined. Indeed, the ARMT will almost certainly apply the three-step test in a way that could virtually void the private copying exception of its substance. Adopting the view of the French courts (and the French Parliament) that there is no right to private copying, the ARMT will, for instance, probably rule that DRMs on DVDs are allowed to prevent any copy.

It is however too early to tell whether these reservations will hinder the usefulness and efficiency of the ARMT. And irrespective of whether it lives up to its expectations, one could argue that the French system has already had, even before its inauguration, a great impact in the DRM debate.

4.2 A model already victim of its success?
We will argue that the introduction of the interoperability requirement and the creation of the ARMT already played an important role in the field of DRMs and particularly in Steve Jobs’ recent decision to push for DRM-free music .

The point here is not to suggest that France single-handedly forced Apple to change its DRM policy. Many factors such as the fiasco of Sony’s XCP DRM, the lawsuits against Apple in the US and Norway , and more generally the fact that DRMs have not stopped piracy and frustrated many customers have all played their part in this decision. However, the choice made by France to address these DRM issues through the legislative process and to adopt a regulatory solution is likely have played an important role in this.

Proof of this impact was Apple’s reaction to the introduction of the interoperability requirement in the law last year. Apple, whose iTunes-iPod business model had been built around DRMs, dubbed the law “state-sponsored piracy” and threatened to leave the French market altogether. The fact that it did not and rather chose to push for DRM-free music speaks volumes.

It seems clear that the prospect of having a French regulator meddling with its technology secrets is not very inviting. Apple would rather try to convince music labels, including French-owned Universal Music, to drop DRMs, leaving them the task of redefining a business model for music whilst continuing to sell its profit-generating iPods in peace.

Proving skeptics wrong, Apple has already convinced EMI to go DRM-free. Will the French model then become obsolete if other music labels follow Apple and EMI’s lead? This would not seem the case for two reasons. Firstly, the other three main music labels are far from convinced that it is in their interest to drop DRMs. Apple and EMI will have to show whether this strategy is beneficial for content producers. Secondly, and more importantly, even if all music were DRM-free, problems relating to DRMs will still abound in the field of movies. After all, so far, neither Apple nor movie majors have committed to dropping DRMs for movies. So it is likely that issues relating to DRMs in movies will keep the ARMT busy in years to come.

4.3 A regulatory model for the rest of Europe and the world?
DRMs seem to be here to stay, at least in the near future. They also enjoy legal protection at national, regional and international level and it seems unlikely that this policy will be reversed anytime soon. In that context, the French system might offer a good compromise guaranteeing the interests of content producers and distributors and of consumers.

In Europe, the French model will stand out when the EU conducts a review of the implementation of 2001 Copyright Directive and will therefore be intently scrutinised. Whether it will be able to change the course of European Copyright law will largely depend on its efficiency.

It is unlikely that the French model, consisting in the creation of a specific administrative body, will be adopted in the more market-oriented US. However, it could be used by consumers groups or lawmakers as a kind of “regulatory bogeyman” that would spur technology companies and content producers to better accommodate the needs of consumers for fear of state intervention.

In the rest of the world however, net importers of copyright-protected goods, especially developing countries, might find this model attractive.

This, again, will depend on whether the French model manages to deliver its promises. The efficiency of the dadvsi law and of the ARMT will surely be tested sooner rather than later and the bets are on to know what will be the first case put to the ARMT (probably a referral by the consumer group UFC-Que Choisir about the private copying exception or VirginMega or Fnacmusic.com about interoperability).

SOURCES

Legal Texts

- Loi n° 2006-961 du 1er août 2006 relative au droit d'auteur et aux droits voisins dans la société de l'information; parue au JO n° 178 du 3 août 2006, page 11529.
- Décret n° 2007-510 du 4 avril 2007 relatif à l'Autorité de régulation des mesures techniques instituée par l'article L. 331-17 du code de la propriété intellectuelle.

Comment
- Mikko Valimaki & Ville Oksanen, DRM interoperability and intellectual property policy in Europe. E.I.P.R. 2006, 28(11), 562-568. (submitted version downloadable from http://www.valimaki.org/ )
- Nicolas Jondet, "La France v. Apple: who’s the dadvsi in DRMs?", (2006) 3:4 SCRIPT-ed 473

Media
- L'Autorité de Régulation des Mesures Techniques s'ouvre vendredi. Ratiatum.com, 4 avril 2007.
- Philippe Crouzillacq, Un arbitre pour régler les litiges liés à la copie privée. 01net., 6 avril 2007.
- Alexandre Laurent, DADVSI : l'Autorité de régulation est instituée. Neteco.com, 6 Avril 2007.
- Estelle Dumout, Le gendarme de la copie privée prend ses fonctions. ZDNet France,
6 avril 2007.
- Nicole Vulser, Internet : une nouvelle autorité est née. Le Monde, 7 avril 2007.

MODIFICATIONS (last modified on June 26, 2006):
Introduction..."On Friday" replaced by "On Friday 6th April",
2... The IPC does not define interoperability but leaves it to the ARMT to ensure that DRMs, “because of a lack of interoperability, do not create, in the use of a work, additional and independent limitations to those expressly chosen by the rightholder” (Article L. 331-6).

Replaced by:
The IPC does not define interoperability but leaves it to the ARMT to ensure that DRMs, “because of their mutual incompatibility or lack of interoperability, do not create, in the use of a work, additional and independent limitations to those expressly chosen by the rightholder” (Article L. 331-6). (There is currently a scholarly debate to determine whether the wording of Article L. 331-6 offers a loophole to rightholders and proponents of DRMs by allowing them to contractually defeat the interoperability requirement. The author does not believe it to be the case, as will be argued in another article. In any event, the ARMT and the courts will clarify the matter when a case will be brought before them).

2.2 ... “be classified” replaced by “made confidential” AND “classified” replaced by “confidential”
3.3... Given recent court decisions (including one from the Cour de Cassation) completed as follows; "(especially the decision by the Cour de Cassation in the “Mulholland Drive” case on 28 February 2006)"
4.2...“a regulatory solution must have played an important role in this” by “is likely” to have played.
4.3...“It is unlikely that the French model will be adopted in the more market-oriented US” completed by “… “the French model, consisting in the creation of a specific administrative body,”


Illustration
- From the website of the Assemblée nationale

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