Our class was delighted to be joined by Fritz Attaway and Craig Hoffman from the Motion Picture Association of America last week. Fritz is an Executive Vice President and Special Policy Advisor for the MPAA and has been a leading figure in developing the motion picture industry’s approach to  intellectual property. Craig is in charge of corporate communications for the MPAA. They joined us by telephone for a discussion which centered primarily on the challenges posed by technological development for copyright. Below is a transcript of the proceedings in their entirety. Many thanks to both Fritz and Craig for this informative discussion.

Interview with Fritz Attaway and Craig Hoffman

Interviewer:      Brett Caraway

Interviewees:    Fritz Attaway & Craig Hoffman

Date:                 September 30, 2010

Brett: I’ve got the whole class assembled here and we are on speakerphone. I guess first off I would like to start by Craig having you tell us a little bit more about what your position is at the MPAA.

Craig: Sure. I’m in charge of corporate communications for the MPAA which is public relations and education. And we’re happy to be here and we’re glad everybody is okay after the events of the other day. We were thinking about you a lot.

Brett: Yeah it was a bad day but of course it could have been much worse.

Craig: Yes. Thank god everybody is safe.

Brett: And Fritz you’ve been with the MPAA since 1976. Is that correct?

Fritz: (laughter) If you must point that out yes—how old I am.

Brett: How wise you are.

Craig: He started as a baby.

Brett: I am going to ask a couple of questions and then I’ll just open it up to the students. One of the things that I have picked up on here in our class is that there seems to be the perception that the MPAA is somewhat less aggressive in its enforcement of copyright protections when compared to the RIAA. And I think that this probably has a lot to do with how high profile some of the RIAA cases are today and the fact that perhaps the RIAA litigation disproportionately affects college students. So one of the things I’d like to start out with is to have you comment or tell us what the MPAA ‘s position is on the RIAA litigation against individual file sharers and tell us whether or not the MPAA views the RIAA litigation as a potential model for future actions against copyright piracy.

Fritz: Well let me just start by saying that I want to dispel any perception that MPAA is not aggressive in fighting piracy. I mean we are extremely aggressive, certainly equally aggressive as RIAA or any other copyright owner group. We have used slightly different tactics than RIAA in part because of the nature of our respective works. There are certainly other reasons as well but MPAA has filed end user lawsuits like RIAA has. However, they are very expensive and we have determined that there are other routes that provide a better return; among them education, working with intermediaries like ISPs to discourage infringing activity, and one, that is probably the most important, is encouraging the development of new business models that provide legitimate alternatives. All of these avenues we are pursuing very aggressively. Because for a number of reasons RIAA has focused on end-user suits and that makes sense for them. It is absolutely necessary we would agree that there be consequences to infringing behavior. If bad behavior does not result in consequences pretty soon no one thinks it’s wrong. And that is not a good thing. So we agree that it is helpful to establish that there are consequences for infringing behavior but there are also a number of other things that can be done to discourage bad behavior and we are pursuing those as well.

Brett: Okay great. Oh I already got a question. I going to have a student jump in real quick here and then I’ll ask my other question a little bit later. Go ahead.

Student: You mentioned the development of alternative business models. I wonder what kind of examples you had.

Fritz: I don’t know what the present count is, at the last count as I recall and Craig maybe you have this more firmly in your mind, as I recall there were well over a hundred online sites that provided audio-visual entertainment material.

Craig: Legally.

Fritz: Legally yes. Some high profile examples would be Hulu, Netflix…Craig others probably come to your mind.

Craig: NBC.com, ABC.com, almost every media outlet has its own.

Fritz: There are literally hundreds of sites that one can go to on the Internet to obtain legal material.

Craig: And the other thing that you can do is go to MPAA.org and you can get a list of a lot of the sites that are available that give you legal content.

Brett: Right at MPAA.org?

Craig: MPAA.org. Go to “content protection” and then go to “get movies and TV shows”.

Brett: Okay. Go ahead and ask your question.

Student: Last year I had a friend who was using Grande—a local cable and Internet provider—and he downloaded an HBO series using Torrents I think. And the ISP cut him off from downloading, the Internet and cable. Is that something the MPAA regulates or is that the ISP itself?

Fritz: I would think that that would have been a decision by the ISP itself. We encourage ISPs to at least notify subscribers who are engaging in infringing material and advice them that it is illegal and could have consequences. And for repeat infringers we encourage ISPs to terminate service but that is strictly a decision of the ISP and not ours.

Brett: Is there an effort underway right now by the MPAA to lobby Congress for some sort of legal mechanism to compel ISPs or is it still based on voluntary compliance?

Fritz: It’s based on voluntary compliance. I don’t believe there is any legislation pending but we have considered the idea of providing some kind of safe harbor for ISPs who voluntarily choose to take measures to discourage infringing activity. We definitely encourage that kind of action but we are not pressing for a legislative mandate.

Brett: Does anyone else have any questions that they want to ask right now? Okay I am going to move forward and ask another question and then maybe we’ll get some more student questions after this. We’ve focused a lot on civil enforcement of copyright protections mainly I guess because we are focusing on the music industry so far. But one of the things that the motion picture industry has done that to my knowledge the recording industry has not done is to engage in criminal prosecution of people for copyright infringement using distribution over the Internet. Here I am thinking of the Hoaglin case and I guess it was the Gonzalez case for The Hulk and Episode 3 of Star Wars. I know that the No Electronic Theft Act makes it possible to fine these people up to a quarter of a million dollars and I think they can face imprisonment for up to five years. And so my question to you is how involved has the MPAA been in those efforts and is there any coordinated effort between the motion picture association, the major Hollywood studios, and government enforcement agencies like the FBI or the Department of Justice?

Fritz: Well of course the decision to bring a criminal action is strictly that of state or federal law enforcement agencies. We do coordinate with and try to assist the Justice Department, FBI, as well as states’ attorney general to take action against high profile infringers—certainly not individual file sharers but the people who provide camcorded copies of very recent movies and distribute them on the Internet. We try to work with law enforcement agencies to bring criminal actions absolutely.

Brett: Does anyone else have any questions? I know some of you want to ask about 3D. No? I’ll ask it for them because they’re being shy.

Craig: (laughter) Don’t be shy we can’t see you.

Brett: This is off the intellectual property track here but these are primarily film students in this class and there seems to be some concern I think that Hollywood is moving to 3D all the time now. So I think there’s an aesthetic concern about 3D. But one of the issues that was raised which I thought was interesting was whether or not 3D could almost be considered a form of Digital Rights Management or could it be something in the vein of William Castle—a gimmick to keep people going to the movie theaters. In the same way that television was once considered a threat to the movie industry perhaps the Internet is viewed as a threat and we are seeing the industry rely on 3D as something of a gimmick. Can you speak to that at all?

Fritz: Well this is definitely not my area of expertise. This question can much better be answered by Jeffrey Katzenberg at DreamWorks who I think is one of the primary proponents of 3D. In terms of how the industry views the Internet I don’t think the industry does view it as a threat. Quite to the contrary I think the industry views the Internet as a tremendous opportunity and the industry is investing tens of millions of dollars to establish these new business models like Hulu to market content over the Internet. It also brings challenges in the area of piracy and infringement that we have to deal with. But overall the Internet is an opportunity. It’s not a threat. As far as 3D goes I think people are looking for new ways to engage people and get them to view movies and also to view movies in theaters. That has been a constant effort of the industry over time and will continue. Is 3D going to last? I don’t know. But it is simply an example of efforts to use new technology to engage people and get them to watch movies.

Brett: One of the questions that we also have is has the motion picture association seen any discernable effect of copyright infringement over the Internet on box office revenues or DVD sales? I know that you were involved with the controversy over the hack of Content-Scrambling System and the DMCA I guess about ten years ago. Where are we now in terms of sales?

Fritz: Well I just read I think last week in Variety that DVD sales are down as much as 30 percent. I think this is the result of, at least in large part, the fact that people are downloading movies rather than renting them or purchasing them at Blockbuster which you probably have noticed has now declared bankruptcy. Consumers are going to a different place to access movies. And many of them are accessed legally on the Internet. A lot of them are taken from pirate sites and we are trying to address that. I think that DVDs, particularly High Definition, will be with us for the foreseeable future. But other business models will continue to develop and that will affect DVD sales.

Brett: We have another student question.

Student: I’m curious as to how much of a large portion of older movies made up DVD sales and whether or not services like Netflix which offers streaming services hurt those DVD sales?

Fritz: I’m afraid I just have to be honest and say I don’t know. I’m not a marketing person. I just don’t know. Craig do you have any thoughts?

Craig: No those business decisions are really made by the studios.

Brett: So that’s something the MPAA probably could not address?

Craig: No that’s a studio question.

Brett: Okay. Let me turn back to copyright real quick and this is a question I have put to all of our industry contributors thus far. A lot of the defense of peer-to-peer file sharing is that this somehow falls within the protection of fair use. And there seems to be, at least within this classroom, a lot of ambiguity about what constitutes fair use. So I am wondering if you all can tell us where to look to figure out what fair use means and a little bit about how the MPAA views defenses which have invoked fair use.

Fritz: Well fair use originated as a judge-made concept and was embodied in the copyright law in 1976. It can be found in Section 107 of the Copyright Act Title 17. And it simply sets forth a number of factors to be considered in determining whether any particular use is fair. No judge has ever said that the downloading of an entire movie is fair use. That is just totally outside of the concept of fair use. Fair use generally involves small portions of works that are used for education, criticism, comment—that type of thing. It does not involve entire works. There’s one major exception to that and that is the 1983 Sony Betamax decision where the Supreme Court held that time-shifting of entire audio-visual works broadcast by television stations using a VCR was a fair use. I think if the Supreme Court had that case to decide today it probably would have decided it another way. But that is the only instance I am aware of where a court has said that the copying of an entire work is a fair use.

Brett: For the record can you tell us what the MPAA’s stance on the VCR was at the time?

Fritz: The MPAA supported legislation that would have placed a continuing royalty on VCRs to be paid to copyright owners to compensate them from the copying of their works. That legal concept was adopted in most of Western Europe and still exists. But it was rejected by the U.S. Congress and when the Supreme Court issued its final decision in the Betamax lawsuit that was the end of that effort. And since 1983 the industry has simply lived with the fact that time-shifting is a legal activity.

Student: I just wanted to follow up on the idea of fair use and I have a question about anti-circumvention technology. If your stance with MPAA is that time-shifting would have been considered illegal and you still want to encourage fair use of material how might somebody get that material off of a DVD that has anti-circumvention technology involved with it?

Fritz: You can’t. Just as you can’t break into a video store and take a CD in order to use a small portion of it for comment or criticism which would be a fair use. It doesn’t allow you to break into a store. The DMCA doesn’t allow you to circumvent a technical measure as a general matter in order to use fair use. Now there is a safety mechanism in the DMCA that allows the Copyright Office every three years to determine whether technical measures have seriously impeded the exercise of fair use and in those situations make exemptions to the prohibition on circumvention, which the Copyright Office has done. In fact, most recently just last month, or maybe it was two months ago. I can’t remember. But very recently the Copyright Office issued a decision making a number of exemptions to the prohibition against circumventing technical measures for purposes like classroom use of film clips for instructional purposes.

Student: What was the MPAA’s stance on that ruling?

Fritz: We were very much opposed to those exemptions because our position was that this material could be accessed in non-infringing ways or non-circumventing ways excuse me, including taking screenshots off display devices for small portions. And we thought that was a non-circumventing way of accessing materials for fair use purposes that did not require an exemption from the DMCA prohibition. The Copyright Office felt otherwise in certain instances and made exemptions. You might take a look on the Copyright Office website, take a look at its decision.

Brett: And another student question.

Student: Can you really compare circumventing the software to breaking into a store when you own the disk? When it’s your property?

Fritz: It’s your property and you bought it with technical measures that only allow authorized access. And if you put it in your DVD player your DVD player is an authorized access device and it will play the DVD. There was nothing in the sales contract that said that in purchasing a DVD you are also purchasing the right to make a copy of the DVD. To the contrary the Copyright Act says you don’t have that right. That is an exclusive right of the copyright owner to authorize copying.

Brett: And so would this tie in, because I know the MPAA has argued for a more narrow conceptualization of the doctrine of first sale, and is that the concern, that somehow the doctrine of first sale serves as a smokescreen for what in fact is a violation of the right to distribution?

Fritz: I don’t think that we’ve advocated a more narrow definition of first sale. I think we’re generally in sync with the courts in their interpretation of first sale—most recently the Vernor case in the Ninth Circuit. The courts have pretty much accepted the view that the first sale doctrine does not apply when there is a transaction that is more in the nature of a lease transaction where there are limitations on what you can do with the work that you’ve acquired. That is particularly the case or important to software companies. Typically when you acquire a copy of Windows—that is not a sales transaction. That is a license transaction where you license the right to use Windows but you do not acquire the right to make copies or to transfer that copy off your own computer. It’s extremely important for the software industry because if the first sale doctrine were to apply it would enormously reduce their revenue base.

Brett: Okay, do we have any other student questions right now? Okay go ahead.

Student: To what extent is the prosecution of illegal file shares or illegal downloaders a violation of privacy rights implied by the Bill of Rights and the Constitution?

Fritz: Well I don’t think the prosecution is an issue. The identification is an issue perhaps. But I think that the courts have uniformly held that when you engage in file sharing you are voluntarily inviting the entire world into your computer by putting a movie in your share folder. And the fact that copyright owners can determine that you are offering these works on your computer for copying by others and obtain your IP address is not a violation of privacy rights in any way. You are voluntarily making that information available to everyone by the act of providing access to your shared folders.

Brett: Does anyone else have a question? Can you take a moment—I’ve had Mr. Oppenheim speak to this already—but since I have all the students assembled here, I guess one of the issues that often comes up when we’re looking at some of the RIAA cases that have gone to trial is the astronomically high damages that have been awarded for each individual act of copyright infringement. Can you tell us how we are to interpret really high statutory damages versus actual damages?

Fritz:  Well I don’t think the damage awards have been unreasonably high. Really there are only two cases that I’m aware of. One was the woman in I think Minnesota and the other was the fellow in New York. In both cases even though technically, legally, there were only a relatively small number of works at issue, the fact was, and the juries knew that these people were engaged in massive downloading of music. And they lied to the jury. And the jury was just ticked off. And that’s why in the Minnesota case even after a retrial the jury awarded an even higher damage award because they were really unhappy that they were lied to. I don’t think that’s a miscarriage of justice at all.

Craig: The other thing to realize is it only takes one copy to go around the world and with a movie if you post one copy not only can people download it but it becomes the source for illegal hard goods all over the world. So there is a substantial amount of damage that is being done.

Fritz: That is a very good point.

Brett: I think that is the point that gets lost in this sometimes is that we are talking about what I would characterize as a loss of a revenue stream as opposed…

Craig: I would just like to throw out one anecdote. How many of you saw The Hurt Locker? Anyone raise their hands?

Brett: About six people…seven people.

Craig: Okay. Academy Award for best picture right? Ten million illegal downloads of the Academy Award winning movie The Hurt Locker occurred on BitTorrent while it was viewed in theaters around the world by fewer than eight million people in total. The Hurt Locker did not make money.

Brett: We have another question or response here.

Student: The Hurt Locker also didn’t have great distribution.

Fritz: If you haven’t you should also read the LA Times article yesterday or the day before, very recently…

Craig: We sent it around.

Fritz: Oh good. It didn’t have great distribution because it was an independent film and typically they go straight to DVD and they depend exclusively on—the independent producers—depend exclusively on DVD sales to recoup their investment. And those are the sales that are most seriously hurt by file sharing activity. And in this case he was completely devastated by the infringing activity and couldn’t recoup his investment.

Brett: Have you had a lot of contact or have independent filmmakers come to you and expressed concern? And I guess the reason I’m asking is because when I think MPAA I think major Hollywood motion pictures. And I know that a lot of them pick up distribution for smaller independent filmmakers but what are you hearing from the filmmakers themselves?

Fritz: Exactly the same thing. We are a member of the Copyright Alliance which membership includes most of the copyright industries: publishing, computer software, music, as well as movies. The independent producers are very active in that organization. They have a trade association called Independent Film and Television Alliance. You can look them up on the Internet. Their positions against piracy are identical with ours.

Brett: Do you have any efforts still underway to reach out to universities and are there policy changes that you would like to see at public universities and private universities with regard to either educating students on intellectual property or with regard to peer-to-peer file sharing?

Fritz: Craig I think that’s yours.

Craig: Well talking to students like this would be one of them. We encourage universities to have their own Internet policies. Does your university have one I’d be curious?

Brett: Yes we’ve got a couple of resources made available to students.

Craig: Okay. So that’s an important part of it.

Brett: And are there policy changes, because I know that a lot…well I shouldn’t say a lot, but there was some resistance on the part of universities to identify file sharers and I’m not sure where we stand right now on the copyright holder’s ability to compel a university to identify students. Does the MPAA have a stance on that?

Fritz: Well I was involved in the very early stages of our outreach to the educational community and there were differences of opinion by college and university administrators as to how to handle this issue. Some were very open to the idea of identifying infringers because it was an illegal activity and they felt that their students ought not to be engaged in illegal activity and for the university to support that in any way was contrary to their educational mission. Other administrators had different views. But I think by and large everyone agrees that illegal file sharing on college and university campuses should be discouraged but there are differences of view as to exactly how they should go about doing that.

Brett: Okay. Any other questions before I take over again? One of the things that I am fascinated with is that there’s this strange trend in that the average cost of a blockbuster film just keeps going up and up and up every year while at the same time there’s a decrease not only in the costs of production but distribution made possible by advances in technology. So I’m curious why is it that blockbuster films cost so much when there’s a potential to lower the costs just in terms of production and distribution?

Fritz: Well I don’t know where you got that information but it certainly is totally at odds with my understanding of the financial picture of making blockbuster films. Avatar was probably the most technologically advanced movie ever made and also without question was the most expensive movie ever made. All of this new technology is very expensive to implement. And as audiences expect more and more from films in terms of special effects that’s very expensive.

Brett: Let me clarify my statement. What I’m actually talking about, for example, in this studio that we are assembled in right now we have a series of computers where students can sit down and use various audio and video editing suites and produce films that twenty years ago would have been unheard of for someone without access to a huge outlay of capital. So there’s one side of technological development which has allowed amateur, I guess for lack of a better word, production to become more professionalized whereas on the high end we still have the James Cameron’s and Steven Spielberg’s producing huge budget films. But I think you spoke to this a little bit already just by saying that the audience expectation is really really high.

Fritz: I’m sorry if there was a question there I didn’t get it.

Brett: There’s not (laughter). Is there an effort underway by the MPAA to still engage in a public relation campaign to educate the public about piracy in the same way that there was a number of years ago when it was common to see public service announcements in the movie theater before a movie? What is the MPAA’s approach right now to public outreach on these issues?

Fritz: Craig again I’ll…

Craig: That would be me. We are no longer running the public service announcements. We feel that they did their job. You’ll see anti-camcording posters in the theaters you go to because it’s now a federal crime to illegally camcord a movie. Right now we are also going after, the Department of Justice is going after what they call “rogue” sites. And there are some very high profile cases.

Brett: And what is a rogue site?

Craig: A rogue site is an illegal site that is sort of like a cyber-locker. Do you know that term?

Brett: No.

Craig: Okay a cyber-locker is where someone puts their illegal content and you can download it or stream it. And the problem with these rogue sites is that they’re meant—they’re all for-profit—but they’re meant to actually fool consumers into thinking that what they’re doing is legal. They carry advertising that’s placed there by ad-brokers that sometimes have legitimate companies advertising unknowingly. They accept PayPal and Visa and MasterCard. And they do a pretty good job of mimicking a legal site. And the DOJ under their Immigration and Custom Enforcement Agency is going after them in an operation called “Operation In Our Sites”.

Fritz: Actually streaming from these sites is becoming an even bigger problem than file sharing. The file sharing has actually been diminishing…

Craig: It’s still a problem.

Fritz: Oh yes. But these rogue sites that stream movies are becoming more and more common. Most of them are sited off shore so they’re hard to get at. That is really an emerging piracy problem that is eclipsing file sharing.

Brett: Is there any effort by the MPAA to engage in global enforcement of intellectual property regimes. There’s always been some rumor that I’ve heard about the MPAA’s involvement in the raiding of the Pirate Bay. But I’ve never heard anyone say anything conclusive. So I’m curious if there is any sort of coordinated effort by the MPAA with foreign law enforcement agencies.

Fritz: Absolutely. We participate in anti-piracy coalitions around the world and in most major markets which would include most of Western Europe, Japan, China, Philippines, the major markets in Asia. In all of these places we participate, as I said, in local coalitions of film producers and distributors to engage in anti-piracy activity.

Craig: I’d also like to point out that it’s not just Hollywood blockbusters or Hollywood films that are suffering from piracy. These local countries and industries, India for example has Bollywood which is a vibrant industry, they have a tremendous piracy problem. And in many countries local product suffers more than Hollywood product. In France, for example, the number of pirated French films outstrip the number of American pirated films. So it’s in their interest also to preserve their industry.

Brett: I’ve got time for one last question. Does anyone have a question in mind? Okay sure.

Student: It’s off topic. What are your thoughts on the documentary This Film Is Not Yet Rated?

Fritz: (laughter) Well that was an example of the continuing debate among primarily independent film producers who feel that the ratings system in some ways restricts their ability to exercise their creativity and the supporters of the ratings system which include the MPAA studios that feel that they have some obligation to inform parents as to what is in the movies that their children want to see. That debate has been going on for many years. It will probably continue to do so. My personal view is that the ratings system is a good and necessary thing. It does help inform parents and it is something that discourages greater government involvement. And the only worse thing for these independent producers than the ratings system would be government censorship. But that is a debate that like I said will no doubt continue.

Craig: And by the way you don’t have to accept the rating if you are an independent filmmaker. You can send your film out unrated.

Fritz: It’s totally voluntary.

Brett: Any other questions? The last thing I want to put to you then is I would like for you to engage in a little prognostication about the future of the motion picture industry. I think a lot of people probably think that the total termination of peer-to-peer file sharing as a phenomenon is not realistic. So I’m curious what the MPAA would like the production and distribution industry to look like ten years out and what are your objectives for containing both illegal streaming and file sharing?

Fritz: We will do whatever we can to discourage illegal accessing of our motion pictures. We have no illusions that we will be 100 percent successful. Piracy has always been and will always be with us. Our goal is to keep it under a reasonable level of control where we can make enough revenue in a legitimate market to recoup expenses and continue to make new movies. And I am very optimistic that we will be able to do that. I said in the very beginning that a very large part of that is developing new business models that consumers will access legally and find that experience superior to illegal access. And I think the industry is doing an excellent job of that and will continue to do so. We’ll always have to address illegal uses and discourage it and make it as inconvenient as we possibly can through technical measures, legal measures, and various other things. But I think the future of the industry is very bright because people love audio-visual content. And as long as we have talented people who can write good stories and make good performances and do interesting cinematography we’re going to do just fine.

Brett: Okay great. I appreciate both you Craig and Fritz taking the time to talk to us today.

Craig: You’re welcome. It’s been a pleasure.