FTC: Digital Rights Management Software Use Requires Disclosure

computer with lockCompanies that bundle music, movies and games with digital rights management software must prominently disclose information about such software to consumers, a Federal Trade Commission official warned last week.

"Hard to notice, mouse-print-type disclosures using cryptic terminology is not sufficient," said Mary Engle, acting deputy director at the FTC. "As a market for digital media evolves, it becomes even more important for consumers to know and understand the nature of what they are paying for."

The FTC convened the town hall meeting, held in Seattle last week, to explore how digital rights management technology affects consumers. Engle said the FTC wasn't trying to weigh in on the merits of the software, which limits consumers' ability to make copies and, in some cases, play media on their choice of devices.

But many of the speakers were anything but neutral about such technology. Corynne McSherry, an attorney with the Electronic Frontier Foundation, told the FTC that digital rights management software threatens consumers' ability to use media. "Fair use means that you can do things like buy a CD and take it home and play it on various different devices and play it in the background in your kitchen and your toddler can dance to it and then you can put a video of the toddler dancing up on YouTube," McSherry said. "Unfortunately, DRM (digital rights management) can interfere with those expectations."

Christopher Soghoian, a student fellow at the Berkman Center for Internet & Society at Harvard University, added that purchasers of DRM-bundled media could be left stranded when a seller stops supporting it, or simply goes out of business. In the last year, Yahoo, MSN and Wal-Mart said they intended to stop supporting DRM files, but all backtracked after people protested.

Representatives from media companies viewed DRM differently. Fritz Attaway, executive vice president of the Motion Picture Association of America, said rights management software enabled studios to experiment with online film distribution. "Without DRM and DRM technology, how could we provide consumers with choices to rent it for some period of time or to download a copy of the movie and permanently, all at different price points?" he asked.

More than 800 comments were submitted in advance of the meeting -- many of which were critical of DRM.

In the past, the FTC took action regarding DRM when Sony BMG sold CDs without informing consumers that they were bundled with software limiting the number of copies that could be played, and also tracked information about what consumers listened to. Sony agreed to exchange the CDs and reimburse consumers up to $150 for any damage to their computers.

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