By Drew Clark and Bara Vaida, National Journal's Technology Daily
© National Journal Group Inc.
Friday, Sept. 6, 2002

With a cue from Walt Disney Chief Executive Michael Eisner, Senate Commerce panel staffers dimmed the lights for a packed February 28 hearing in the Russell Senate Office Building. A full house of lawmakers and lobbyists settled back to watch an ABC Nightline segment on a 15-year-old named Benjamin who used his personal computer to go online and download the movie Men of Honor and an episode of Seinfeld, minus the ads. "You name any movie, I can find it," Benjamin declared.

Hollywood versus Silicon Valley: The two titan industries are locked in a struggle over copyright issues and the Internet. The battle has pulled in Washington lawmakers and regulators.

At the witness table moments later, Eisner repeated that boast, hoping to hammer home Hollywood's message: Congress must act fast to protect the motion picture industry from Internet pirates like Benjamin. And the Disney chief also pointed a finger at big names in the technology industry -- Intel, Microsoft, Apple Computer, Dell Computer, and Hewlett-Packard -- accusing the tech giants of condoning a growing wave of digital thievery.

Seated next to Eisner was Peter Chernin, chief operating officer of News Corp., which owns the Fox network; Chernin chimed in against the tech companies. Intel and other industry giants, many of which are in Silicon Valley, are to blame, Chernin said, for stalling the effort to help protect television programs against illegal copying. But he also described an even bigger high-tech roadblock. Consumers will never switch to high-definition digital television unless high-quality content is available on the airwaves, he said, and no one will offer high-quality programs without technology to enforce copyright protections.

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Then Silicon Valley had its turn. Representing this side was Les Vadasz, executive vice president at Intel, who urged the senators to keep a level head about the entertainment industry's complaints. The technology industry, Vadasz said, is 20 times the size of Hollywood, fast moving, and highly innovative. "Please don't tamper with the dynamics of the technology industry," he warned. "It would do irreparable damage." Vadasz differed with a draft legislative proposal by Sen. Ernest F. Hollings, D-S.C., chairman of the Commerce, Science, and Transportation Committee; the Hollings draft, which was circulating around Capitol Hill, would give tech firms just one year to develop anti-copying "policeware." If they didn't act, the tech companies could ultimately be subject to criminal penalties.

No sooner had Vadasz finished than Hollings launched a verbal counterattack. The chairman reminded Vadasz that semiconductor manufacturers had benefited from government assistance in the 1980s. "We 'tampered,' and we saved you," Hollings declared. "Where do you get all this 'irreparable damage' nonsense?" Vadasz meekly replied, "That is a totally different issue."

Afterward, Vadasz and other tech executives who felt they had been unfairly roughed up at the hearing were determined to hit back. They turned to one of their friends on Capitol Hill, Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., a longtime champion of new technologies, who had been dubbed the "cyber senator" in the 1990s. Leahy, whose panel has jurisdiction over intellectual-property matters, was not at all pleased that Hollings had injected himself and his committee into the copyright-protection debate.

So Leahy convened a rival hearing and scheduled Craig Barrett, chief executive officer of Intel, as his star witness. Now the battle lines were drawn: Leahy and the tech barons versus Hollings and the Hollywood moguls.

Barrett's message at the March 14 Judiciary hearing was this: Intel respects intellectual property and has long worked with Hollywood on solutions to combat piracy, but the government shouldn't force the tech industry to solve the problem through regulatory mandates.

Leahy, too, threw cold water on the "congressional intervention" approach pushed by Hollings and the studios. He warned that the draft legislation would give tech companies too little time to come up with a solution before allowing the government to step in and take over the job of developing a so-called "digital-rights management system."

Sen. Maria Cantwell, D-Wash., agreed. She had been an executive at Seattle-based RealNetworks -- whose software allows video and music to be distributed on the Internet -- and at the hearing, she questioned why the government was getting involved in "picking technology winners and losers."

Rival Visions
Hollywood versus Silicon Valley. Over the past year, the two mega-industries have been locked in a highly public fight in Washington, unable to agree on how to keep the Internet from becoming a pirates' haven. The stakes are high, because the outcome of the battle will help define the computers, televisions, digital videodisc players, and yet-unimagined electronic devices of the 21st century.

These two giants have clashed before. In the late 1970s, the movie studios feared that the newly developed videocassette recorder would slash theater revenues. Hollywood filed copyright-infringement lawsuits against VCR manufacturers. In a 1982 congressional hearing, Jack Valenti, the head of the Motion Picture Association of America, compared the VCR to the Boston Strangler. Hollywood lost that fight in 1984 when the U.S. Supreme Court decided in Sony Corp. v. Universal City Studios that consumers have a right to tape television broadcasts for watching at another time or on another machine.

The legal principle is that a consumer can make "fair use" of copyrighted material. But copyright expert Peter Jaszi, a law professor at American University, also points out that "a very important part of the Sony analysis is that new information technology that benefits consumers is a presumptively good thing."

Hollywood has never been comfortable with that definition of "fair use," and in this era of digitized content, the movie industry's discomfort has turned into alarm. The studios could live with piracy in an analog world, in which videotapes degrade with each reproduction. But today's Internet-based digital technologies permit broad and instantaneous distribution of digital copies, each one just as high-quality as the previous version. That cuts to the heart of Hollywood's distribution system and eats into studio profits, even as it simultaneously creates new revenue opportunities. Hollywood now makes more money on videocassettes than on box-office sales.

Napster's meteoric rise in 1999-2000 made the implications of piracy apparent to the recording industry. Millions of music lovers began sharing songs in the form of digital files over the Internet. The recording industry's lawsuits finally shut Napster down, but today's next-generation software, such as KaZaA and Morpheus, allows transmission of digital movies and books. Recording-industry sales are slumping because of such software, the music labels say. Now the movie industry is getting worried.

"What is past is prologue," says Matt Gerson, senior vice president of U.S. public policy for Vivendi Universal, a French conglomerate that owns a record label and a studio. "Music had the disadvantage of being first. But the movie industry is paying close attention because they face the same dilemma -- it is just a matter of when."

Technology-industry players disagree, saying that the recording industry has only itself to blame. Napster happened, tech companies argue, because the recording industry failed to respond to the realities of the Internet and to consumer demand. The recording industry wasn't willing -- until recently -- to sacrifice its big profit margins from CD sales for untested models of digital distribution. The recording industry began by suing companies that created digital music players. But consumers wanted music on the Web, and that demand turned to outright rebellion when Napster opened the door to easy file-sharing.

As Intel's Vadasz sees it, movie companies have to make the leap to the Internet, just as the recording industry had to move from vinyl records to CDs and is now slowly moving to online distribution. "At least 90 percent of the issue is having the right business model," he says. "Right now, the movie industry has virtually none that uses the Internet."

Meanwhile, more and more politicians are being drawn into the conflict. The firestorm that was ignited earlier this year by Hollings's proposal, which he later introduced as a bill, has spawned other legislative and regulatory proposals.

Lawmakers are pushing legislation to protect digital content, often against high-technology resistance. Sen. Joseph R. Biden Jr., D-Del., has an anti-counterfeiting bill that could be used to deter digital redistribution. A proposal by Rep. Howard L. Berman, D-Calif., and Rep. Howard Coble, R-N.C., has raised fears about computer security, because it would exempt copyright holders from anti-hacking laws when they strike electronically at so-called peer-to-peer networks -- which connect people without using a Web site.

Not surprisingly, the Federal Communications Commission has been drawn into the fray. At the request of Hollings and the top two members of the House Energy and Commerce Committee, Chairman W.J. "Billy" Tauzin, R-La., and Rep. John D. Dingell, D-Mich., the FCC in August agreed to consider new rules to help thwart potential online piracy. Should this FCC rule-making gather steam, it could force a redesign of all new computers and consumer electronics devices that receive digital television signals.

"The evidence is that this is an increasing battle, not one that is going to be resolved in the short term," says Lawrence Lessig, a Stanford University law professor and an expert on the Internet and legal issues. Lessig, who has debated Valenti on copyright issues, sees the fight between California's two dominant industries -- Silicon Valley in the north, Hollywood in the south -- as a war over rival visions of the digital future. "This is a struggle to the death."

Struggling For A Solution
Now almost forgotten, the first major battle of the digital age was born of a 1996 agreement between the movie industry, through its trade group, the MPAA, and consumer electronics manufacturers. Sony and Matsushita Electric Industrial were among the companies that had developed a digital videotape recorder they thought would replace conventional analog recorders. But the manufacturers could not afford to alienate Hollywood, so they negotiated specifications that would keep the recorders from making more than one copy of a movie or TV program. The agreement was shopped around Washington in the form of proposed federal legislation.

Because the proposal would have applied to computers too, the manufacturers and their studio allies eventually sought the blessing of the Information Technology Industry Council, a Washington-based association for the computer industry. Foreshadowing the present battle, the ITI expressed outrage over what it said the agreement would do to its member companies.

The proposal "was madness, because it wouldn't have done what the movie and consumer electronics guys wanted," says Rhett Dawson, ITI's president. The proposal would have required every computer to scan every digital file that it processed -- whether a movie, a spreadsheet, or a personal e-mail -- and look for a code on whether copying was permitted. Dawson says it would have slowed computer performance by as much as 50 percent, with no apparent benefit to the user.

The tech industry's angry reaction halted movement on the proposed legislation, but Hollywood and Silicon Valley agreed that they needed to find a solution. The first meeting of the two industries was held in 1996 at the Washington headquarters of Patton Boggs, the heavyweight law and lobbying firm that represents consumer electronic interests. The heads of all affected trade associations gathered in the "war room" at Patton Boggs and created the Copy Protection Technical Working Group to tackle the problem. The group eventually grew to 120 engineers, who pored over minute design details during monthly meetings at a Burbank, Calif., hotel.

Within six months, the group had worked out an answer: an encryption scheme that scrambles content and hides it from anyone who is not supposed to see it. Encryption is now used in DVDs, one of the most quickly adopted entertainment formats ever. The solution has been a bonanza for all parties. U.S. consumers spent $4.6 billion on DVDs in 2001, and more than 25 million households now have DVD players, according to the International Recording Media Association. The tech industry views that boom as a testament to the value of business dialogue and technical collaboration -- outside of Washington.

Some other challenges were harder to overcome. The working group spent four years talking about how to protect digital content that is distributed over satellite and cable systems. Engineers at Intel, Matsushita, Sony, Toshiba, and Hitachi -- dubbed the "5C" group because most of the five were consumer electronics manufacturers -- created an encryption technology that would block anyone from moving films from a cable box atop a TV set to a computer hard drive. That solution appealed to some in the movie business, such as AOL Time Warner, which owns cable systems. But the new encryption scheme didn't please studios that own television networks, such as Disney and News Corp. For Disney, which owns ABC, and for News Corp., which owns Fox, it offered no protection for movies broadcast over the public airwaves.

Technologists at Disney urged the company to sign on anyway, but Preston Padden, Disney's top lobbyist in Washington, overruled them, insisting that all five electronics manufacturers had to agree to broaden their technology to cover broadcasts as well as cable systems. "We asked a million times, and we were told it was not possible," Padden says.

At Fox Group, meanwhile, Andy Setos, the president of engineering, devised his own fix, a technology called the "broadcast flag," designed to automatically stop a consumer from sending a pirated file over the Internet. The Setos solution gave Disney and Fox what they wanted, and it was presented to the 5C group. In September 2001, Setos pressed the manufacturers on whether they thought the idea was technically sound. Industry leaders conceded that it would work, but they were worried about anti-trust issues involving licensing.

Even the broadcast-flag technology failed to address an infinitely harder problem: how to stop people from using the Internet to spread movies from sources other than digital television. Disney used that limitation as an opportunity to reframe the debate.

Eisner had been taking his case on digital piracy to members of Congress since at least 2000. A traditionally Democratic donor in a predominantly Democratic industry, he had no takers for his ideas until Democrats gained control of the Senate in June 2001. Within a month, Hollings had made Disney's approach of government intervention against piracy a top priority. Rumors of the Hollings-Disney agreement stirred angry memories of the 1996 fight over digital video recorders. Tempers flared in August 2001 at an annual retreat in Aspen, Colo., for leaders of both camps, hosted by the Progress & Freedom Foundation, a tech-policy think tank. Dawson of the ITI took MPAA Executive Vice President Fritz Attaway to task for running to Congress. "We are committed to protecting your intellectual property," Dawson told the movie-industry lobbyist, "but we are not committed to protecting your business model."

Hollywood's Smooth Touch
Eisner felt confident that Congress would help his company. Disney was an American icon and had won legislative battles before. The company had benefited from a 1998 law that added 20 years to all copyright terms, thus enabling Disney to hold on to its 1928 copyright on Mickey Mouse beyond 2003. (The law is being challenged before the Supreme Court.) Eisner also had the ear of key legislators such as Hollings and a key ally in Valenti, the 81-year-old master of the Washington lobbying game.

"Valenti is rhetorically light-years ahead of everyone else," says Jim Kohlenberger, a former senior policy adviser to Vice President Gore. "He has a way of telling a story and making a compelling case on any issue."

Eisner believed that the private-sector negotiations were moving too slowly and that the technology CEOs were giving too little attention to digital piracy. Only after Labor Day 2001, when Hollings circulated his draft bill -- backed by Disney and Fox -- did executives from Intel, Microsoft, Hewlett-Packard, and Cisco Systems agree to hear Hollywood's pitch. The Hollings draft would give tech firms one year to agree upon a single, mandatory anti-piracy technology. Valenti was invited to a meeting arranged by TechNet, the tech industry's biggest political fundraising organ.

Days after the September 11 terrorist attacks, MPAA's Valenti, Disney's Padden, and Fox's Setos flew on Disney's corporate jet from Burbank to San Jose, Calif. At a Silicon Valley hotel, they hooked up with representatives from Vivendi and AOL Time Warner and went as a group to the TechNet meeting. Valenti urged the tech folks to do more to stop online piracy. The MPAA chief added that he wasn't backing the Hollings plan -- just yet. But according to TechNet President Rick White, who had co-founded the Congressional Internet Caucus when he was a House member from Seattle, Valenti warned that the Hollings approach "might be what had to happen."

No, the tech executives said, a process to resolve differences between the two industries was already in place: the technical working group formed in 1996. But Valenti wanted a CEO-level dialogue, not another meeting of the engineers. White promised to get back to Valenti and then rebuffed the request. Later, the tech executives changed their tune. On the eve of the Commerce Committee hearing in February, Barrett and others promised the studios a CEO-level dialogue, but a date is still being negotiated.

Meanwhile, Valenti upped the ante by beginning to speak out in public about the technology industry's stubborn refusal to cooperate with Hollywood. "There is this new technology mind-set that there should be no regulation, no rules of the road, and that this is Dodge City without a sheriff," Valenti said in an interview. The Internet is no different from cable, satellite, or United Parcel Service, he said. "Every other delivery system operates under ground rules, so why is the Internet to be exempt?"

Ironically, high-tech companies were looking for help from the government in another area. They'd been pressing for regulatory order in the messy world of telecommunications, including high-speed data services. "Broadband" Internet connections are available to up to 85 percent of homes, but fewer than 10 percent subscribe, according to the FCC.

Now Hollywood had a bargaining chip. Seeing that the tech industry wanted to use broadband as a shot in the arm for its own economic woes, the studios came up with a new argument: Consumers won't buy broadband until high-quality digital content is available, and that won't happen without protection for the content.

At a December 2001 Commerce Department forum, Hollywood's Valenti and Silicon Valley's Dawson publicly dueled over the issue. "We live or die by broadband," Dawson said, adding that his industry would work privately with the studios on content-protection as a way to spur broadband. Valenti countered that a deadline was necessary. "If a man is about to be hanged, it concentrates the mind," he said. "The only alternative to being hanged is to go to Congress." Such important work couldn't be accomplished with "some noose being waved around," Dawson responded.

Disney and Fox now favored strong-arming the technology industry with legislation. Ever since Hollings had made his legislative gambit, motion picture executives had been tearing apart their trade association, fighting over strategy. Some, such as those from AOL and Sony, favored sticking with private-industry negotiations. But Valenti stepped in and put together a tough agenda that would unite all the studios on the same page through 2002. First, they would ask Congress to legislate the broadcast-flag technology. Second, they would ask Congress to require all digital devices to recognize and stop illegal copying of Hollywood films that carried a digital "watermark." Third, they would push technology companies to find ways to keep peer-to-peer users from spreading copyrighted materials around the Internet.

"Even though our strategies might be different, at the end of the day, all of us agreed on those three basic principles," says Elizabeth Frazee, the top copyright lobbyist for AOL Time Warner, a company that had never advocated the hard line adopted by Disney and Fox. "It was nice to find something we could agree on." The result: Hollywood spoke with a single voice, with Hollings as their foremost advocate.

Technology Industry Finds Its Voice
The Hungarian-born Vadasz was among the group of six engineers who had fled a larger firm to create Intel in 1968, and he was the third employee on the new silicon chipmaker's roster. He and the others who formed Intel wrote the rule book for countless Silicon Valley start-ups to follow.

One attribute of Intel's hard-hitting engineering culture is its ability to reinvent itself when necessary. In 1985, CEO Andrew Grove, under competitive pressure from Japanese manufacturers, scrapped the company's core business of making memory chips, and turned to microprocessors. The company also received federal funds for research and development in the late 1980s, as highlighted by Hollings at the February 2002 hearing. Intel's well-oiled machine now pumps out microprocessors that double in power every 18 months. This engine was in large measure responsible for the personal computer explosion of the early 1990s, which eventually produced machines powerful enough to play digital songs and movies.

Intel has been central to the technology industry's successes and to the lavish attention it began to receive from Washington in the late 1990s. With the rise of the technology-driven economy and the then-booming stock market, legislators flocked to join the Congressional Internet Caucus and to bask in the aura of the "New Economy" that was going to change everything. The allure was so strong that dot-com multimillionaires barely out of college could command audiences with prominent House and Senate leaders, and lawmakers jockeyed to be the first to visit Silicon Valley and see the future in operation.

"They have been wildly successful in convincing Congress that what is good for technology is good for the nation," says Bruce Mehlman, assistant secretary of Commerce for technology policy, and a former Cisco Systems lobbyist. That's why tech executives and lobbyists were incredulous when they first heard about Hollings's draft proposal. "We didn't assume that anyone would introduce such an anti-innovation bill," Vadasz says.

To the tech industry, the plan essentially required the government to set standards for products that didn't even exist. Princeton computer scientist Ed Felten compared it to setting a standard for teleportation. Even where protection technology existed, such mandates would retard innovation by injecting bureaucrats into the industry's typical 18-month production cycle, and would create a single, identifiable target for hackers, according to Vadasz. Worse, said Intel and other tech companies, no one could design one technological standard for the wide variety of electronic devices the Hollings plan was meant to cover.

"You can use lots of appliances to view movies," says Emery Simon, counsel to the Business Software Alliance. "All have different processing and memory capacities -- and they want a single end-to-end solution? It's like trying to design one dress that fits all women. It won't happen."

The idea was such a bad dream to the high-tech industry that most senior executives at first refused to even debate it. But Hollings and Hollywood were undeterred; in March, the Commerce Committee chairman introduced the Consumer Broadband and Digital Television Promotion Act, to immediate applause from the motion picture industry. "We should have taken the issue seriously earlier," Vadasz admits. "Shame on us."

High-tech lobbyists thought they could use the clout of their trade associations to kill the bill quickly. They were so dead set against the measure that they refused even to make suggestions for improvement, says Al Mottur, senior Democratic counsel at the Senate Commerce committee. Software companies reminded lawmakers of their support for efforts to combat software piracy, which they claimed cost them $11 billion annually. But when legislators pressed back, the high-tech lobbyists weren't able to articulate why they -- the very architects of the Internet -- couldn't stop movie piracy.

"The sense from the Hill is that the tech guys are geniuses. They can figure this out," says Doug Comer, Intel's director of legal affairs and its top Washington lobbyist.

The tech sector had chalked up past legislative victories, but it had never faced such a determined and politically connected adversary as Hollywood. Entertainment executives barraged lawmakers with statistics about how technology had benefited from the growth of Internet traffic, CD-burners, and easy access to copyrighted material -- implicitly indicting the tech companies. In a move particularly upsetting to Silicon Valley companies, Sen. Dianne Feinstein, a Northern California Democrat, signed on to the Hollings bill.

But Silicon Valley still had a host of powerful allies among both Democrats and Republicans. The industry shifted to the offensive after Hollings's hearing. Top executives such as Barrett and Vadasz asked legislators why high-tech should bear the brunt of government regulation to help someone else's industry. They also argued that a mandate would spark a backlash by consumers accustomed to their online freedoms.

"If Ford couldn't make any Explorer go over 65 miles an hour, would that meet consumer expectations? Probably not," Barrett said in an interview. Soon other CEOs, such as Apple Computer's Steve Jobs and Gateway's Ted Waitt, joined the fight. Gateway went so far as to launch a marketing campaign promoting CD-burning and aired its first advocacy commercial, urging consumers to fight the Hollings bill. Every D.C.-based technology association declared its opposition.

The tech industry's growing involvement began to counter Hollywood's early advantage. "The content community has dominated the public policy debate on intellectual property," says Rep. Rick Boucher, D-Va., co-chairman of the Internet Caucus. "High-tech companies are now engaged, and we will have a much more balanced result."

House Commerce Committee Chairman Tauzin agreed. "I get the sense that [both industries] are impressed with the other's effectiveness." Tauzin said in an interview. "The sense of jeopardy is important. If either side feels that they don't have to worry about the other side, you don't get an agreement."

Consumer Manufacturers Balk
Tauzin has a particular need for the two combatants to eventually work together. His committee is responsible for ensuring that broadcasters adopt digital television -- part of a congressional plan hatched in the early 1990s to offer higher-quality TV and simultaneously free up the airwaves for new wireless technologies. By 2006, all broadcast stations are supposed to be transmitting in digital formats.

But studios still face the problem of users' unlawfully retransmitting digital products over the Internet, the same problem the music industry experienced with Napster. The studios' fears about broadcasting their movies over the airwaves in digital format was behind Disney's and Fox's objection to the 5C technology that protected cable and satellite distribution, but not broadcasting.

Technology companies argue that encryption can provide the anti-piracy solution for television signals, just as it has for DVDs, cable, and satellite systems. But few in Washington view that scenario as politically viable: The United States has a strong tradition of transmitting television unscrambled and available to everyone.

Fox says the broadcast-flag technology is the best approach. Digital televisions would scan the programs for the flag and block the user from resending it over the Internet. But a law or regulation is needed to enforce this approach, which is item No. 1 on the motion picture agenda.

Facing pressure from Hollings, technology companies said they would consider the broadcast flag. After months of mind-numbing technical haggling, tech-industry and studio representatives unveiled what seemed to be an agreement at an April hearing called by Tauzin to spotlight the stalled transition to digital TV. AOL Time Warner's then-CEO-designate Richard Parsons, Fox's Chernin, and Paul Liao, the chief technology officer for Matsushita's Panasonic, all extolled the broadcast flag, saying it would protect against Internet piracy without blocking consumers' ability to copy programs.

While Intel and other computer companies did sign on to the flag technology, some consumer electronics manufacturers were balking. Philips Consumer Electronics -- the Dutch-held company that co-invented the CD technology and now leads the market in DVD recorders -- saw the proposal as a direct threat. Larry Blanford, head of Philips's North American operations, objected, arguing that the broadcast flag would deprive consumers of DVD recorders and other digital technologies. "What we are talking about is putting innovation under a small group of people," says Mike Epstein, senior researcher at Philips.

Tauzin urged the parties to keep working on an industry-to-industry compromise. But instead, more consumer electronics companies -- Thomson Consumer Electronics, Zenith Electronics, and Sharp Electronics -- dissented. Microsoft, whose own digital-rights management technology had been rejected by the studios, also objected. The software giant has in turn played a key behind-the-scenes role in crippling Hollywood's digital "watermark" proposal.

Adding to the chorus, groups representing computer users and consumers argued that the Hollings proposal would jeopardize fair use by limiting, for example, a proud parent's ability to e-mail a digitally recorded home video clip to a relative across the country. Gary Shapiro, president of the Consumer Electronics Association, makes a similar point about Hollywood's overbearing approach. Congress, he says, is not likely to sanction "restrictions on consumers that are absurd."

Tauzin and Dingell said in mid-July that consumers' interests were uppermost in their minds. But less than a week later, they sent a letter to FCC Chairman Michael Powell urging him to begin work on regulations to mandate the broadcast-flag technology. On the same day, Powell got a letter from Hollings that also urged immediate action on the flag. Three weeks later, in August, the FCC unanimously issued a proposed rule-making on adopting the broadcast flag. "By Washington standards, that is blinding speed," said Disney's Padden, who is happy to call the FCC action the first success of Hollings's legislative push.

Cybertarians And Consumers Respond
The tech barons and the Hollywood moguls traded harsh words a few weeks ago at the annual Aspen summit hosted by the Progress & Freedom Foundation. Chernin called tech companies "amoral," and Vadasz called entertainment "unimportant." Valenti, in his unique silver-tongued style, told Vadasz: "It is easy to tell a man to go to hell, but much harder to get him to do that."

With Congress now back in town, the battle will pick up. Tauzin is expected to hold a hearing in late September on the broadcast flag and digital television. Beginning to make their voices heard in earnest are organizations such as the Electronic Frontier Foundation, a 12-year-old digital-liberties group, which is fighting Hollywood and Hollings.

EFF began raising the cry against the Hollings bill a year ago through an e-mail campaign, and the group later released a one-minute video parody on Disney. "Who believes the average Jane's a criminal on the make? Disney and its showbiz friends, who have a lot at stake," it sang, to the tune of the Mickey Mouse Club theme song.

Fred von Lohmann, a ponytail-sporting lawyer at EFF, sees the fight against the Hollings proposal as a broader battle over "whether or not Hollywood will be entitled to install a lawyer into every engineering meeting at every technology company." EFF and other digital-rights advocates have tapped into a wellspring of anger against the entertainment industry. In April, they spurred more than 3,300 people to write letters to the Senate Judiciary Committee opposing the Hollings bill. The committee posted many of the comments on its Web site.

Dovetailing with EFF's grassroots strategy are two well-connected Silicon Valley executives, Joe Kraus and Graham Spencer, who are promoting a "consumer technology bill of rights." Their insider efforts against Hollings's bill -- coupled with the opposition of such groups as Consumers Union and the American Library Association -- have helped EFF's arguments gain traction on Capitol Hill. Motion picture studios say they welcome consumer groups to the table. Meanwhile, the technology industry has strengthened its hand by adopting much of the rhetoric of the consumer advocates.

"It resonates with lawmakers," said a staff member who works for one key Senate Democrat.

After a year of draft legislation, proposals, counterproposals, speeches, hearings, behind-the-scenes negotiations, lobbying, and letter-writing, the fight is as fierce as ever. The clash between Hollywood and Silicon Valley over online piracy has now engaged additional players on each side. More important, it has engaged the broader public -- millions of Americans whose lives are becoming more and more intertwined in the digital revolution.

Drew Clark and Bara Vaida are senior writers for National Journal's TechnologyDaily For subscription information please click here.

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