Does DRM Affect the Mobile Application Market

Tihomir Katulić, Faculty of LawKruno Golubić, University Computing Center

University of Zagreb

Digital content

• Protected by copyright/droit d’auteur• Distribution of digital content is a key aspect

of electronic commerce.• Rampant digital piracy • DRM technologies are used to prevent

unauthorized reproduction, distribution and use of protected works

Intellectual property vs. Competition

• Intellectual property – a statutory monopole to promote creative activities in culture, technology, business

• Competition rules foster market competition and benefit consumers and society

• An evergreen of European private law

What is Digital Rights Management - DRM?

• "Digital rights management (DRM) is a type of server software developed to enable secure distribution - and perhaps more importantly, to disable illegal distribution - of paid content over the Web”

• DRM covers the description, identification, trading, protecting, monitoring and tracking of all forms of usages over both tangible and intangible assets“

• Digital Rights Management stands for technical measures, material (hardware) or immaterial (software) products whose purpose is to allow the legitimate user limited access to protected content in digital form.

• Encompassing term for several different technologies used to enforce pre-defined limitations on how to access and use protected digital content

DRM in multilateral agreements and international legislation

• Historically DRM has been regulated as a technical measures and rights management information – Article 6, EU InfoSoc Directive (Directive 2001/29/EC

of the European Parliament and of the Council on the harmonisation of certain aspects of copyright and related rights in the information society)

– Articles 11 and 12 of the WIPO Copyright Treaty – Articles 18 and 19 of the WIPO Performances and

Phonographs Treaties.

DRM vs. Technical protection measures

• Often, DRM and TPM are considered the same• Some choose to differentiate between DRM

and TPM by defining technical protection measures as the technology used to control and restrict access

• Accordingly, DRM would then be technology that relies on TPM implement these controls and restrictions

Intellectual property v. Competition, round 2

• Virgin Mega v. Apple• Intellectual property rights are being curtailed

by the application of competition principles in common law legal systems

• This idea is contested in the European continental legal systems, along with other issues concerning applicability of IP rights (principle of territoriality)

Specific challanges of mobile application licencing

• A fundamentally different model of application distribution– Download and installation of applications through

the official market – Higher level of quality control and application

security through approval process, however...– Applications can be revoked from markets and

devices

DRM markets

• DRM technology itself presents an important market– Technology is a product– Preventing a competitor to obtain effective DRM is a

market violation in itself• DRM protected works markets– Content with functionality simultaneously in digital and

analogue form– Content that exists in two forms but has full funcionality

in the digital form– Content that only functions in digital form

Case study: Apple Fairplay/iTunes

• iTunes allows users licensing and access to music (albums and individual songs), films, television series episodes, radio broadcasts, podcasts

• the most popular digital distribution system in history, but does it represent a market violation?– terms and conditions in the iTunes user's licence agreement – limit or deny access to licenced content in the event of closing the

iTunes service– the user is limited in copying licensed content and authorizing

additional devices to access licensed content– how does Apple's behaviour, and indeed the whole

iTunes/AppStore/iOS eco-system affect competition?

Market creating effect of DRM• By preventing users from accessing and using licensed content in a manner of

their own choosing – Apple created a new market - the market of content for Apple devices

• Never before has licensing of content, music, movies or computer software implied a limitation on the actual model of device being used to access content

• Apple managed to control the devices and download services monopolizing the market of Apple devices in terms of content distribution

• In hindsight, Microsoft's quasi-monopoly in the desktop and server operating system market has shown to be much less dangerous and competition, coming both from Apple and Google as well as from the Free Software/Open Source community has successfully developed competing products and business models.

• Apple's behaviour and usage of DRM technology resembles the effects of a tie-in agreement - a well understood practice of selling a product or a service as a mandatory addition to a purchase of another product or service

Of Cathedrals and Bazaars

• the rise of two distinct models of application distribution

• one governed by a single entity (the cathedral) • one open to parallel input from different,

competing or cooperating sources (the bazaar)

Conclusion• Considering the success of mobile application eco-systems developed around the

App Store/Marketplace model and the central role of DRM technology in all but one of the competing systems it is safe to conclude that DRM technology can exhibit a strong anti-competition effect

• This is not the case against adopting and further refining DRM technology. The technology itself is neutral and can be put to constructive use as well.

• Effective DRM technology can enable individual authors - artists, journalists, programmers - to develop and monetize their work online without the need for intermediaries like publishing houses or collective rights management societies

• Closed off application markets of today with their anti-market DRM implementation are often a more affordable and effective choice for today's authors.

• DRM and developing content management systems hold the promise to finally turn the tide of rights management from collective to individual - for the first time since the invention of the printing press.

Thank you for your attention!

tihomir@pravo.hrkgolubic@srce.hr