Nicholas Rogers

J413 Capstone

6-6-11

SCEA v. Hotz: Fair Use is of No Use

An analysis of the current situation regarding the legalities of jail-breaking and how corporations dictate ownership rights in our society through End User License Agreements and the Digital Millennium Copyright Act that discourage legal Fair Use modification with technological devices

I. Introduction

The recent settlement of the SCEA v. Hotz case regarding the modification of computer hardware in a way unintended by its creator reveals three glaring legal issues present in the current United States legal definition of property ownership and copyright in the 21^st century[1].

First, there lies a considerable amount of confusion and lack of awareness among general consumers regarding the methodology and legality of software license agreements and terms of service that govern technological hardware and software. Initially, these contracts and licenses served the essential purpose of removing legal liability; otherwise known as protecting the creator from extraneous lawsuits due to potential consumer use and abuse and enforcing copyright; the process of preventing other businesses or users to profit off the sale or distribution of copyrighted material and patented creations.[2]

In recent years, the rapid shift and the exponential increase in the consumption of technological hardware and software has led to a widespread change in the corporation's perception of what terms can be included in an agreement and what legal measures can be taken to ensure enforcement of these regulations. Users are now faced with often extremely lengthy and wordy agreements that enforce terms significantly more favorable to the corporation's economic and competitive interests than the purchaser. These terms also can change at any time, making it extremely difficult for consumers to keep track of differences in the contract and even allowing for the removal of previously included features of a product.[3] Specifically, this paper will serve to inform the reader of the general purposes and types of technological contracts that exist in the digital realm and how corporations currently have the legal right in most cases to enforce anti-reverse engineering or anti-circumvention clauses in contracts involving security measures present in physical products that deal with digital content.

Second, the court system still remains unclear on whether corporations and intellectual property creators have the right to bring criminal charges against individuals who violate certain clauses of software license agreements and end user license agreements regarding the circumvention of technological security measures (TPM or DRM) that expose security flaws present on an individual's own personal technological device. In the case of SCEA v. Hotz, a group of hackers or self-proclaimed security experts exposed extensive security flaws present in Sony's PlayStation 3 computer entertainment system that effectively compromised the secure integrity of the console.[4] The hacker group provided a set of instructions for bypassing security measures implemented to prevent the installation of non-sanctioned or non-approved (third-party) computer software and processes on the system and further provided steps on how to take complete control over the system in a way not intended by the original creator. This culminated with the defendant publishing the methods on how to properly circumvent the PlayStation 3 security and how to install a 3^rd party operating system on his own personal website.[5]

Though legal cases that involve circumventing security devices have been quite extensive throughout the years[6], Sony's legal argument differed significantly from a majority of these cases. The Electronic Frontier Foundation offered a sufficient summary: “Researchers accessed their own PlayStation 3 consoles in a way that violated the agreement that Sony imposes on users of its network” and that Sony claims extensive violations of the Computer Fraud and Abuse Act that possess “criminal as well as civil penalties.”[7] Traditionally, the courts have ruled against enforcing criminal terms in cases involving the violating of license agreements because the agreements are private, one-sided and easy to change. However, a decision regarding criminal penalties for violating license agreements becomes complicated when involving anti-circumvention exemptions in the DMCA that do allow for criminal prosecution.[8] Overall, Sony attempted to link George Hotz's personal modification of a PlayStation 3 entertainment system to directly violating the terms of the online network license agreement because his dissemination of the methods threatened the overall stability of the PlayStation network.[9] In basic terms, Sony asserted that his publishing of the hack would allow for other users to copy his method and then those users would subsequently use the hack to install pirated copyrighted software[10] and commit other illegal actions that the defendant did not necessarily commit, but rather he provided the necessary groundwork for it to occur. The precedent that this case could have set would have fundamentally altered the legal reach a network license agreement has on the actual physical device used to access the network.

Third, the U.S legal system still does not possess a clear legal precedent or standard definition necessary to determine whether consumers now have the legal right to modify their technological hardware for personal purposes after sale in circumstances usually prohibited in the anti-circumvention clauses of the Digital Millennium Copyright Act (DMCA). After intense pressure from electronic consumer rights activists, The Library of Congress announced in August of 2010 that “jail-breaking” or the replacing of the iPhone operating system with a hacked or modified operating system would be allowed under the DMCA circumvention exemption list under terms dictated in the Fair Use Act.[11] For years, Apple argued that the implementation of a third party or independent operating system jeopardized their business model and digital marketplace, in addition to violating United States Copyright Law and the DMCA. Apple cited that “jail-breaking will breach the integrity of the iPhone's ecosystem”[12] but the Library of Congress countered that "fewer than 50 bytes of code out of more than 8 million bytes, or approximately 1/160,000 of the copyrighted work as a whole” were used in the process of jail-breaking the iPhone making it covered under Fair Use[13]

Though seen as a victory for consumer rights, the limited scope of the exemption process and the pervasive clauses of the DMCA that fervently oppose circumvention exemptions in most legal cases prevents this ruling from extending to other technological devices that provide multimedia and Internet-based services.

As the United States moves closer towards a system of complete digital distribution of media content in this century, the U.S legal system must address the struggle between corporate control and consumer freedom regarding ownership of physical property that operates on digital content. The recent DMCA exemption of iPhone jail-breaking in the U.S represents just one of the many steps necessary to improve consumer awareness of the many inequalities present in the license agreements and contracts they sign on a daily basis. In the case of SCEA v. Hotz, Sony's invasive legal strategies and their call for a seizure of all computer hardware forced the defendant, George Hotz, to settle out of court and agree to the terms that he never “illegally modify a Sony product” again.[14]

This settlement represents a rather apparent standstill in a legal issue that neither side (corporation or consumer) seems to particularly want to address in a U.S court of law. Reverse engineering and the modification of computer hardware for private use are consumer actions that corporations such as Sony want to prevent through wide-ranging network license agreements that only loosely govern the actual physical usage of a product.[15] Apple attempted to use the same argument of their network license agreement to prevent the installation of 3^rd party operating systems on their iPhones and lost bitterly. Is there any monumental legal difference between jail-breaking of a PlayStation 3 and jail-breaking of an iPhone?

Corporations such as Sony insist that you merely license or “borrow” their devices when you purchase them and that license agreements and software contracts allow them to enforce terms of usage even after you purchase the product.[16] Consumer electronic rights organizations such as the Electronic Frontier Foundation and others rather believe that network agreements do not govern the actual physical device used to access a digital service and that consumers should have the right to physically modify their devices for legal purposes.[17] This paper does not intend to argue that the very nature of software contracts and license agreements do not belong in the business of protecting intellectual property. Certain rules and regulations are absolutely pertinent to ensuring the financial and societal success of a digital product in today's world[18]; however, consumer rights organization often argue that this should not allow corporations to possess the complete power in determining every action a consumer performs on or with his product.

This paper will first aim to provide a clear background of license agreements and the DMCA to illustrate the current legal guidelines in the U.S that dictate how contracts govern the products and software consumers use today. In this section, a synopsis of Sony's PlayStation Network agreement will be provided. From there, a brief summary of the SCEA v. Hotz case will explain both legal arguments and strength of argument each side presented before the case settlement. Significant comparisons of the methods used for iPhone jail-breaking will determine whether Hotz's modification of the PlayStation 3 operating system shares legal ground with the iPhone and qualifies for exemption. Further on, there will also be explanation of the significance of the PlayStation Network Security Breach and how it directly connects with this case. With this information in tow, this paper will then serve to determine that consumer electronic rights organizations should lobby for the inclusion of the “jail-breaking” of computer and video game hardware in the next round of DMCA exemptions in 2012.

II. Background on Software Contracts and EULA's

A Contractual Agreement

Though people may spend extensive periods of time looking over a intimidating legal contract when renting their first official place of residence, fewer ever spend that same amount of time glancing at the various other software and license agreements they must agree to on a daily basis on the Internet and in daily life. These contracts can include but are not limited to Codes of Conduct, Legal Waivers, Permission Forms, Terms of Service, End User License Agreements and other formal or informal contracts or agreements.[19] Every time a person logs onto a website with their personal information, they enter a contract or a license agreement set by the corporation or creator of the service. Though contracts often bring about significant negative attention for their propensity to “pull one over” on the common man, they serve an essential purpose in asserting legal liability and most importantly, protecting intellectual property in the interest of the creator.[20]

What's a License?

In the simplest of terms, a license is a type of contract that gives the licensee (consumer) the permission to do something, use a product or join a service that the granter of the license (the licensor) has the right to forbid or prevent.[21] Under terms dictated by the Constitution, creators to possess the exclusive right of their intellectual property for a definite period of time. In this world of private enterprise, creators do not possess any obligation to provide access to a creation or service for the greater community. An individual does not have any right or entitlement to any intellectual property they do not own themselves. If Sony wanted to, they could limit membership to only close friends and family of the staff.. However, in the interest of great financial potential, Sony licenses or allows the usage of their intellectual property through a software license contract commonly known as a Terms of Service.

As with Sony's Terms of Service, every legal contract contains a few crucial elements:

1. Offer and Acceptance

Simply put, most common legal contracts contain two parties who both want something from the other. In terms of a license, the licensee or general individual want access and the licensor or creator wants to dictate the terms in which the licensee can have access.[22] One party will propose the “bargain” or offer and the other party must agree to accept all the terms of that bargain in exchange for access.[23] In the example of Sony, they “offer” an individual usage of their website in exchange for “acceptance” of the set forth terms. Just like in the case of every other contract, if the individual violates the TOS of Sony, Sony reserves the right to refuse further access to the website for that individual.

2. Competence

This second term refers to the competence or mental culpability of an individual. Mental culpability is the term used to describe a reasonable person's ability to understand the terms of a contract. In the United States, all individuals under the age of 18 (minors), the insane, senile and mentally retarded do not have the ability to legally agree to a legal contract.[24] Mental states that nullify contracts also include degrees of intoxication from ingestion of controlled substances.[25] Sony requires individuals to be at least 13 years of age with the permission of a parent or guardian to legally allow the usage of the service.[26] Since Sony can not visually confirm that an individual is “of legal consent” through the Internet, they simply offer the terms through a “good faith” policy. If Sony later discovers an individual falsified their age, they can immediately end the agreement. Online agreements have created a whole new set of rules and policies for interpreting mental culpability in legal contracts that will be addressed later.

3. Consideration and Sufficiency

Consideration refers to the idea that both parties, (the licensor and the licensee) will both receive something from the other party. This may be a legal detriment or as mentioned earlier, a bargain. From the perspective of the licensor, this something can refer to monetary consumption or agreeing to the terms of service and from the perspective of the licensee, this refers to access to the service.[27] Sony does not charge for their service but they do require that you follow their rules for usage of their service. If the consideration includes an exchange, then the contract is considered sufficient. Sufficiency does not mean equivalency, a legal court can not gauge whether the exchange is fair or that the things exchanged have similar monetary or other value. As long as each party receives something, then this condition is met.[28]

4. Legality

The terms of a contract must be allowed by the United States through legal statutes and constitutional clauses. Simply put, an individual can't agree to a contract that is unlawful and in the example of Sony, they can't make the individual agree to something unlawful in their terms of service.

What’s the Purpose of a Contract?

Traditionally contracts have served the need of forming legally binding promises between two distinct parties. License Agreements were never needed in times where technology served rudimentary needs of the people. For example, people don’t need to sign a license agreement when buying a new microwave. The advent of the Internet has changed this notion. Consumers have great access and knowledge when it comes to computer technology and innovation of these technologies has come from within this infrastructure rather than traditionally in the hands of the Intellectual Property Holders. If the United States learned anything from the Napster peer-to-peer file sharing network in the 1990s, it’s that intellectual property on the Internet is very easy to replicate and distribute.[29] And as intellectual property creators have realized very well today, it is difficult to assert ownership on the Internet.

This open access to communication has mitigated the necessity of creating contracts that corporations and creators could legally enforce on the consumers who use their products. These contracts serve to protect the interests of a business when they provide a digital service for the massive number of people who potentially use it. These contracts range from End User License Agreements to Terms of Service. The creators can use these agreements for any number of purposes. For the purpose of relevance, this list will include some of the various clauses provided in the PlayStation Network End User License Agreement (other companies utilize similar agreements and clause depending on the service provided) and how Sony enforces them.[30]

Dissecting a License Agreement: The Abridged Edition

1. Dictating the terms of how you access the product

This simply refers to how you access or log on to use a service. Often times, companies will want you to only use their web pages and access points for entering their network. For example, Sony asserts that a user must create an account and log-in user name through their services for acceptable network access

2. Dictating the terms of how you must act when using the product (proper behavior)

Proper Behavior refers to a number of different behaviors deemed unacceptable by Sony when using their network. These include: A user cannot profit off the network, cannot infringe on copyrighted material, cannot post threatening or vulgar messages, the list goes on and on. The one interesting and relevant clause states that “ You may not attempt to hack or reverse engineer any code or equipment in connection with Sony Online Services,” but this refers to the actual code associated with the network, not the code written for the actual operating system. Confusing, but necessary to point out.

3. Dictating the terms of how you access content through the product (media content)

These terms often dictate who acts as the liaison or provider of content from third parties. Often times, software developers will want to sell consumers media content (music, films, games) through the PlayStation Network and this clause simply states that Sony has the right to connect you to them. In other words, users must use the network to play 3^rd party software that runs on the system

4. Dictating the terms of how purchases made through the network are the responsibility of the consumer

This clause asserts that Sony has the right to deduct money from your account when you wish to purchase content through the network and that a consumer is ultimately responsible for the purchasing actions of his or her account. It also affirms that the consumer is responsible for ensuring that the product successfully downloads to their system. Apparently obvious, but remember that their online service essentially eliminates any sort of return service often provided for physical purchases in retail.

5. Dictating the terms of how you are merely licensed the services provided for a product

With an online network, the perception of property does not exist like physical property. Just as Sony legally owns all rights to photos uploaded to their site, this clause simply reaffirms that Sony owns the network and all content created within that network. A license is a non-exclusive agreement that allows a user merely to access the network. Most importantly, it states that “You may not bypass, disable, or circumvent any encryption, security, digital rights management or authentication mechanism in connection with Sony Online Services or any of the content or services offered through Sony Online Services.”[31] This will serve an important purpose later in determining whether Hotz's actions were legal.

6. Dictating the terms of how your personal information will be protected or used at the discretion of the company

This clause refers to the idea that users must provide personal information in order to use the service and that Sony will do its best to protect that information. This seems particularly ironic when Sony just suffered one of the worst data breaches in history recently with over 77 million accounts compromised, but the original purpose still stands.[32]

7. Dictating the terms of how you can lose access to the service by violating the terms

Simply put, you break the terms, Sony can terminate your access to the service.

8. Dictating the terms that remove any liability of the company for any loss of data or issues related to usage of services within a product

As discussed earlier, liability clauses simply protect Sony from any lawsuits that blame Sony for loss of data or damage you inflict on their products.

9. Dictating the right to change the terms at any point during the time the service is offered

This clause allows Sony to modify the agreement whenever they deem it necessary.

The Fairness of It All

These terms may appear particularly forceful, but it is worth noting that all online services have similar terms of agreement that must be accepted before joining. Facebook alone has had to adjust their terms of service several times due to user outrage over certain policies.[33] Running an account with millions and millions of users creates a lot of data and license agreements help protect the user and help protect the creator's copyright. However, that doesn't mean that all terms of a license agreement are legally justified- sometimes these terms overstep their bounds and cannot hold up in a court of law.[34]

Different Types of License Agreements

In the area of License Agreements for digital products, the most common type of agreement is the Click-Wrap agreement. The Click-Wrap agreement refers to the method that consumers agree to online agreements in which they click “I Agree” as an official substitution for an electronic signature. The consumer must read or “say he read it” before agreeing to the license agreement.[35] In the example of Sony's PlayStation Network, users must scroll through the official End User License Agreement and then indicate or click with a button press that they agree to the terms presented. These contracts are sometimes referred to as contracts of adhesion or standard form contracts because there is no room for negotiation present within the contract.[36] Simply stated, the consumer must agree to all the terms and not just most of them. Also, consumers buy the product before agreeing to the contract, often meaning that they must agree to the terms or return the product.

III. The DMCA and What it Does

In the history of the United States, legislators have received significant criticism for waiting too long to update Copyright laws. Legislators waited nearly 70 years to update the copyright law in 1978.[37] Traditionally, as the average lifespan of an individual significantly increased over the last 200 years, the copyright laws were lengthened accordingly. The last major copyright law for traditional works passed in 1998, lengthening the terms to 95 or 120 years for a creator or death plus 70 years.[38] The terms here refer to the amount of time a creator has the exclusive right to exploit his or her intellectual property. The most important thing to understand about a copyright is that it does not last forever.[39] A creator does not possess his copyright for an indefinite period of time. Eventually his exclusive right to exploit his work becomes the property of the people. This is the reason old books published in the 1700s and 1800s can be accessed by anyone with a computer. All copyrighted materials eventually enter this public domain.[40] Copyright lasting for a definite period of time is very important. The perfect balance of time to exploit a current creation and motivation for creating new works forms the basis of innovation in the modern world.

Infringing on Copyright refers to the idea of someone stealing or taking someone’s right to exploit his or her own intellectual property creation. Traditionally, this consisted of taking one’s idea and making it one’s own and this made it very easy for infringement to be spotted and prevented on a wide scale. The Internet changed this. So much of intellectual property these days focuses on the act of replicating or duplicating copyrighted material. The Internet now allows for easy manipulation of copyrighted works for personal consumption. This made creators fear for the worse as the introduction of the Internet meant possibly the end of protective copyright. The Lehman Working Group issued an initial report known as the Green Paper called for stringent new levels of copyright protection that would define each digital copies made on the Internet as a protected copy subject to royalty for every transmission or download made.[41] Initial negative reactions from academia forced the Lehman Working Group to draft The White Paper which advocated for criminalizing digital copyright infringment and called for anti-circumvention clauses to be added to relevant copyright law.[42]

The DMCA or the Digital Millennium Copyright Act, introduced in 1998, criminalized the act of infringing copyright or circumventing security measures regardless of intent.[43] Simply put, it formed the basis of protection or security for copyrighted material that circulated in the technological realm.

The Clinton Administration released a white paper in 1995 that indicated the inherent dangers copyright enforcement faced in an increasingly digital society.[44] After much deliberation, Congress settled on a number of provisions that radically changed the perception of copyright in the U.S. These changes included:

1. Aligning Copyright Laws with the WIPO (Title I: Part 1)

This first clause focused on aligning Digital Copyright Law with the World Intellectual Property Organization (WIPO) for international unity among copyright laws all over the world. Rampant copyright law abuse occurs often outside of the origin of the created product and this clause amended copyright law to allow U.S copyright law to cover the works of other countries who subsequently sign various other international copyright treaties.[45]

2. Prohibiting the Circumvention of TPM and DRM present in copyrighted material (known as the Anti-Circumvention Provisions) (Title 1: Part 2)

The most controversial clause in the DMCA prevents consumers from circumventing or bypassing security measures that protect a creator's exclusive copyright. Though the DMCA did not originate these clauses[46], they definitively brought attention to anti-circumvention measures circulating internationally and domestically.

As defined in Section 1201 (a) (3) The DMCA forbids the means:[47]

(A) to circumvent a technological measure means to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner; and
(B) a technological measure effectively controls access to a work if the measure, in the ordinary course of its operation, requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work.

To summarize succinctly, the DMCA prohibits the modifying or bypassing of technological protection measures (TPM) that would “open” access to the device if the copyright owner prohibits it. In the clauses following it, it also prohibits the manufacturing of these anti-circumvention tools and also the distribution of the tools to others by means of physical or digital distribution. Subsequently, this also allows for copyright owners to create Rights Control or TPM or DRM (Digital Rights Management) technology to limit consumer access to products.[48]

Yet with all these rigorous alterations to consumer electronic rights, the DMCA asserts in the following clauses that:[49]

(1) Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use, under this title.

(2) Nothing in this section shall enlarge or diminish any rights of free speech or the press for activities using consumer electronics, telecommunications, or computing products

Fair Use?

Fair Use as a concept has existed since the early 1700s in U.S common law, but it was not formally introduced into U.S copyright law until 1976.[50] This doctrine allows non-owners the limited use of a copyrighted creation or material without the permission of the creator. Fair uses of copyrighted material can include parodies of works, criticism of works, commentary of works, academic usage of works, and so many other usages that have propagated extensively through online sites such as YouTube and Facebook. The general rule states that the more original and more significant a fair use creation is, the more likely it will not be cited for infringement.[51]

It may appear pretty straight-forward in a legal sense, but the Fair Use Doctrine is arguably the most complicated and circumstantial policy present in all of U.S copyright law. In the iPhone jail-breaking decision, the Library of Congress ruled that the Fair Use Doctrine legitimized the 3^rd party operating system installed onto the device because the manipulation of the code and the actual physical amount of code used to create the operating system was in itself “fair use”.[52] Yet, George Hotz and his fellow hackers installed a 3^rd party operating system on their PlayStation 3 system and Sony sued them for a number of reasons. As with the DMCA anti-circumvention exemptions, every “fair use” of copyright must be reviewed individually on a case-by-case basis.[53]

There are 4 main provisions present in the Fair Use doctrine that must be met in order to justify the “infringement of the copyright” as it appears in 17 U.S.C. § 106A, [54]

1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

This refers to the actual reason a person decides to use the copyrighted work. Does the usage of the copyrighted work transform the original meaning into a new creative idea, or does it simply derive value from the original creation? If a person cannot show a specific purpose or reason for Fair Use, the privilege is not granted.[55] In the case of SCEA v. Hotz, this section would examine whether the group team0verflow had a purpose of modification of the operating system to create new value or expression from Sony's copyrighted material. Was their purpose to infringe on Sony's creation? Or was their motivation to create a new way for consumers to use their purchased product?

2. The nature of the copyrighted work;

This section simply refers to the actual existence of the copyrighted work. It's important to note that copyright does not protect facts and ideas but rather the expression of those facts. In context, if a copyrighted material holds significant value in a social or historical context, people generally possess more leeway in terms of Fair Use. In the case of SCEA v. Hotz, this section here would not really apply in terms of legitimizing the fair use.

3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole;

This section refers to how much of the copyrighted material is being used in the new creation and how significant that usage is in relation to the original work. Contrary to popular belief, there is no set limit as to how much of a work you can use in a fair usage situation.[56] Rather, it is important to determine whether the expression justifies or legitimizes the amount of copyrighted material used. In the context of the SCEA v. Hotz trial, this section would determine just how much of Sony's operating system (the amount) is needed for the allowance of a 3^rd party operating system and whether this amount is substantial to the general integrity of the work. In better words; is the general essence or existence of the work taken to create this new product?

4. The effect of the use upon the potential market for or value of the copyrighted work.

This last section often creates the most confusion regarding the connection between Fair Use and non-commercial use. It's important to note that Fair Use does not have to always be non-commercial (not for profit) and Non- commercial use is not always considered Fair Use.[57] This section rather examines whether the infringing use has the potential to directly replace the original creation in an economic marketplace and whether its general existence significantly harms the financial stability of the original product. In the instance of SCEA v. Hotz, this section would examine whether Hotz's security exploit for a 3^rd party operating system jeopardizes the economic stability of the original creator of the PlayStation 3 computer system.

In every instance of Fair Use, these 4 sections properly identify whether the usage of copyrighted material is justified and necessary. Every situation is different and no one section of the four holds anymore power than the other. If a non-owner can show that their usage of copyrighted material falls in line with these 4 steps, then the Fair Use is considered justified and the non-owner will not be found liable for infringement.

The Fair Use Defense

In many cases of copyright infringement, the defendant will call upon Fair Use as justification for his or her actions. Though it exists as a proper legal defense, meeting the terms of Fair Use does not prevent the originator of the copyrighted material from filing a legal suit.[58] Even if content is covered under Fair Use, corporations such as Warner Bros and others have used rampant legal suits to scare non-owners from appropriating their copyrighted material for any purpose.[59] Due to the potential financial risk involved with going to court, many people are scared into settling out of court or removing their Fair Use material even if the usage is proper.

No Fair?

Many consumer rights organizations criticize the DMCA because it does not explicitly allow for consumers to exercise fair use under the Anti-Circumvention clauses. As interpreted through the DMCA, Fair Use in technological protected products in the digital world is not a guaranteed right. Not only do consumers have to meet the 4 criteria listed earlier, now they must seek exemptions for Fair Use dictated by the terms set in the DMCA. Even if a usage of copyrighted material is considered “fair” the DMCA anti-circumvention provisions supersede those rights and can and have in the past prevented proper displays of Fair Use in the digital world.[60]

This is the reason why the Electronic Frontier Foundation and other consumer groups had to bring attention to the iPhone jail-breaking issue to get it added to the DMCA circumvention exemption list.[61] In order for iPhone jail-breaking to be classified as fair use, The Library of Congress had to congregate and assess whether the benefits of allowing consumers to install 3^rd party operating systems on their iPhone devices superseded the right of Apple to protect their intellectual property.[62]

The last part of the circumvention clause in the DMCA outlines the process to which exemptions can be added and at times removed from the list.

The Exemption Process

In the third clause of the circumvention provisions, the DMCA grants The Library of Congress the right to examine whether the DMCA anti-circumvention provisions have had a detrimental effect on persons wishing to access copyrighted material for non-infringing processes, i.e. Fair Use.[63] Every 3 calender years, the Library of Congress meets to review specific instances and issues regarding different devices and products on the market. In each individual case, the Library of Congress determines the availability of the material, the availability for non-profit or educational use, the impact of the prohibition in circumventing the security measures and most importantly, the effect the circumvention has had on the value of the works protected. Very similar to the process used to determine fair use in our legal system, the Library of Congress reviews each of the sections to determine whether an exemption to the DMCA should be added. In every instance, an act of circumvention must be specifically covered under the exemption list to be legal in the U.S and there are no exceptions to that rule.[64] Currently, there are 6 major exemptions to the DMCA provisions and this paper wishes to propose a 7^th in the next round of exemptions.

The Current Exemptions:

1. Films on DVD may have their security measures circumvented for the purpose of creating commentary, criticism, parody or new value from short clips of the film.

2. Computer Software present on telephone devices may be circumvented for the purpose of bringing about interoperability (read: more than one operating system) within the personal device.

3. Computer software present on telephone devices may be circumvented for the purpose of using another wireless carrier or provider if the security measure solely prevents interoperability

4. Video game software may have their security measures circumvented for the purpose of fixing security flaws and bugs present in the build and coding of the program

5. Computer programs protected by dongles that prevent access due to malfunction or damage may be circumvented if necessary to provide access to the program

6. Digital E-Books may have their security measures circumvented in for the purpose of resizing the text or making the volume louder

As of current, these 6 exemptions are the only current ways a person may circumvent security measures on copyrighted material for the purposes listed above. Even so, these exemptions only last for around 3 years and the Library of Congress must deem a exemption worthy of renewal in order to keep it on the list.[65]

3. Removing Internet Service Providers of any liability for copyright infringement committed by its users (known as the Safe Harbor Provisions)

The Safe Harbor Provisions are not entirely relevant to this discussion of the paper but are of worth mentioning for general knowledge. These provisions remove all liability of the Internet Service Provider (ISP) for copyright infringement committed by users of the ISP.[66] This means that when George Hotz hosted the instructions on how to circumvent the Playstation 3 security measures, the ISP that hosted his website is free from any liability for the potentially incriminating material. However, the ISP must comply with copyright owners to help prevent infringement and for the SCEA v. Hotz case, the courts ordered for a list of all the IP addresses (read: all the people who accessed Hotz's instructions) to be gathered for the purpose of determining who visited the site. The ISP who hosted the site had to comply with the DMCA and provide that information to the court.[67]

4. Allowing for the criminalization of pirating or the distributing of copyrighted material through the Internet.

The DMCA effectively criminalizes any act of distributing copyrighted material without authorization and it also criminalizes persons who violate the anti-circumvention clauses. This includes creating, manufacturing and the distributing of these tools. The first person to officially be convicted of criminal charges associated with the DMCA was Dmitry Sklyarov, a Russian programmer, who disseminated materials related to E-Books called The Advanced E-Book Processor.[68] The processor allowed for users to remove security measures on E-books for interoperability purposes. This process is completely legal but because the DMCA places restrictions on circumvention, legal displays of showing exploits of security measures are not allowed even for research purposes. Sklyarov spent over a month in jail before the charges were dropped for his involvement in the development of the technology. Though the technology had a variety of legal uses, he was arrested because of the potential of other users abusing the technology to pirate E-books. [69]

In the case of SCEA v. Hotz, Sony wished to bring criminal charges related not only to the DMCA but also to Computer Fraud abuses coming about from manufacturing and disseminating material related to the security exploit.[70] This case is also related because Sony wished to connect Hotz's security circumvention methods to have liability for other users who may use the methods of circumventing security to pirate illegally obtained software and films.

The Effect of the DMCA Today?

Though the DMCA has received numerous complaints in terms of stifling competition and innovation in the market place, the criticism most relevant to this discussion revolves around the chilling of scientific research and development related to security. Many researchers fear publishing their results of security exploits and compromises present in digital software and systems due to what happened to Dmirty Sklyarov when he contributed to security exploits present in E-Books. Another prominent example occurred when professor Edward Felten and his students at Princeton responded to a challenge in 2001 to remove digital watermarks (a form of TPM) from the Secure Digital Music Initiative or SDMI's audio recordings.[71] Felten decided to publish the results of his findings after succeeding in removing the watermark but received a DMCA litigation letter from SDMI saying to cease and desist immediately. Even though SDMI specifically requested for groups to circumvent their security measures, when Felten and his team decided to publish their results publicly, the terms of the DMCA silenced them.

In more related cases, a publisher contracted a MIT doctoral graduate to write about security exploits present in Microsoft's Xbox videogame system. Security researcher Andrew Huang was contracted to release a book about the security exploits but at the last minute, the publishing group halted production of the book.[72] They feared that the mere publication of his findings in a book could be labeled as a DMCA circumvention device and that would make anyone associated with the creation criminally liable. When Huang attempted to release the book online, even his online shopping cart host refused to host the book and this forced Huang to self-publish the book in 2003. Cases such as these clearly show that the DMCA acts as a deterrent for legal circumvention activities and it has intimidated many security researchers from publishing their results. Does George Hotz deserve to be seen in the same light as these security researchers? Or did Sony have a case?

IV. The Sony Trial Aftermath: What was Argued and Who could Have Won?

On January 11 2011, Sony Computer Entertainment of America filed suit against George Hotz and other members of the team fail0verflow hacking group that had published results of reverse engineering and jail-breaking committed with the Playstation 3 entertainment system. The lawsuit included 8 claims:

ñ Violating the Digital Millennium Copyright Act (17 U.S.C. § 1201)

As discussed earlier, Sony asserted that George Hotz and his hacking team fail0verflow violated the anti-circumvention clauses present in the DMCA by disseminating and distributing information related to security exploits present in the Playstation 3 computer system.

ñ Violating the Computer Fraud and Abuse Act (18 U.S.C. § 1030(a)(2)(c))

The Computer Fraud and Abuse Act was a law passed in 1986 to criminalize Internet theft and hacking related fraud.[73] In a sense, hacking has two important connotations. The first definition commonly refers to invading another person's computer or cyberspace for criminal purposes and the second definition when referring to “hacking” often means the modification of a technological device for purposes not intended by the original creator. In this case, Sony asserted that George Hotz violated this act by violating the terms set forth in the network agreement.[74] Essentially, by breaking the terms present in the EULA we examined earlier, Sony believes that by hacking one's own personal computer device, a person technically can be held liable for violating the Computer Fraud and Abuse Act.[75]

ñ Contributory copyright infringement (17 U.S.C. § 501)

Contributory copyright infringement refers to a type of indirect copyright infringement that refers to “one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another.”[76] This means that while Hotz's publication of the security exploits do not directly contribute to copyright infringement, other people could potentially use the exploit for improper uses.

ñ Violating California Comprehensive Computer Data Access and Fraud Act (§ 502)

This charge is directly related to the Computer Fraud and Abuse Act mentioned earlier, except this law is a state statute present in California.[77] Before the trial settled, a big part of the trial focused on establishing venue. Sony wanted the trial to be held in California because that's where SCEA's (Sony Computer Entertainment of America) headquarters are located and SCEA at the time was the creator of the End User License Agreement that binds all users of the PlayStation Network.[78]

ñ Breach of Contract (related to the PlayStation Network User Agreement)

Sony asserted that by breaking the terms of the Playstation Network User Agreement, Hotz was liable for breach of contract.

ñ Tortious interference

Tortious interference is when a person maliciously interferes with the plaintiff's contractual or business relationships.[79] In respect to this case, Sony asserted that Hotz's publishing of the material was a specific attempt to undermine the integrity of the network and that he broke the network agreement purposely.

ñ Misappropriation

Misappropriation is a legal term defined as the intentional and illegal use of another person's property for usually unauthorized purposes.[80] Sony asserted that when George Hotz published the results of the security exploit, he used the technology associated with the PlayStation 3 (a copyrighted and patented device by Sony) for illicit purposes.[81] Essentially his published findings, misappropriated the intellectual property owned by Sony and misrepresented the corporate interests.

ñ Trespassing

This last violation listed does not refer to trespassing in the traditional sense but rather in a digital sense. Sony sees their security measures as property that they own and that by circumventing the process, George Hotz trespassed onto their intellectual property rights. This presents a crucial question in terms of the future of consumer ownership. When consumers purchase an electronic device, do we own all of the device? Or do we only own the parts of the device that the original creator wishes us to own. Can we trespass on our own property?

Hotz's Background

Before he began his plans to “hack” the PlayStation 3, George Hotz was well-known for his work related to hacking Apple electronic devices. He was one of the first American hackers to discover the exploits present within the Apple iPhone that would allow the phone to be unlocked for open source access.[82] When the iPhone released in 2007, Apple had an exclusive contract with AT&T to provide users only one carrier option for mobile telephone access.[83] Security measures were set in place to prevent a person from using another carrier or service provider such as Verizon, Sprint or T-Mobile in conjunction with the iPhone. Hotz discovered a way to get around these security measures and released an exploit that unlocked the iPhone so iPhone owners could use carriers other than AT&T for their mobile coverage.[84] This is referred to as SIM unlocking because it allows for the owner to use a different SIM card for their iPhone.

Jail-breaking of the iPhone is a bit different and Hotz also worked on circumventing security exploits in the iPhone that would free the device from Apple's iOS operating system. Jail-breaking in this sense refers to modifying the firmware or “brain” of the device to allow open source programs to be installed onto the iPhone.[85] Apple is known to be particularly strict with the content and applications they allow to be used on the iPhone and the security measures imprint a signature on all authorized programs and applications used on it.[86] Jail-breaking removes the necessary component that checks for the digital signature, allowing for any such compatible programs to function on the iPhone. As mentioned earlier, the Library of Congress officially approved this method of jail-breaking for iPhones and Apple had no justifiable grounds to halt the exemption process.

Apple claimed that jail-breaking of an iPhone device constituted copyright infringement because the method circumvented security measures imprinted on the device (DMCA) and that the hacker groups had to use Apple's iOS firmware in a way that violated the terms of use[87] (License Agreements). Columbia Law professor Tim Wu disagreed with this statement saying that security measures "are used by wireless carriers to limit the ability of subscribers to switch to other carriers, a business decision that has nothing whatsoever to do with the interests protected by copyright”[88] which would mean that jail-breaking can not be seen as a violation of the DMCA anti-circumvention clauses.[89] The DMCA protects copyright related to intellectual property, not to protect business interests. This reason, among with the appropriation of fair use, convinced the Library of Congress to allow iPhone jail-breaking under the DMCA exemptions in the 2009 conference.

Bigger and Better Things

Hotz soon moved on to new projects after jail-breaking the iPhone and he shifted his entire focus on jail-breaking the PlayStation 3 system in late 2009. His reasoning was based on the fact that the PlayStation 3 represented some of the most advanced technological architecture in the 21^st century and as of then, neither the hardware operating system or the Blu-Ray disc had been successfully hacked.[90] At first, his modifications were soft-mods that allowed only access to the system's processor and virtual memory. In early January 2010, Hotz released to the public through his blog on how to accomplish such a feat.[91] He provided a method for users to install unauthorized homebrew software on the device that would allow the Playstation 3 device to play media content not initially authorized on the system.[92] The hack required the usage of the Other OS application in the system, which legally allowed users to install another operating system on their PlayStation 3 systems. From the console's release, Sony had supported the Other OS application and used it as one of their main marketing tools in selling the PlayStation 3 in U.S markets.[93]

The Removal of OS

When Sony began discovering that Other OS was being used in a manner to circumvent their security measures, they released a firmware update on March 28 2010 that would effectively remove the previously advertised and included feature from all valid PlayStation Network users.[94] Any purchaser of the system that wished to continue using the PlayStation Network had to download the firmware update. In the world of digital intellectual property, license agreements allow corporations such as Sony to alter their agreement at any time and to any degree.[95] This allowed them to justify removing the Other OS option.

Removing the Other OS option effectively ended all current jail-breaking and soft-modding methods by the burgeoning hacker community for the time being. Users who refused to update their firmware could still use the Other OS feature but would not be allowed access to the PlayStation Network in any aspect. Hotz then shifted his efforts to developing a way to install a 3^rd party operating system on the PlayStation 3 after Sony had removed the feature.[96]

In his intent to figuring out how to install a 3^rd party operating system, Hotz discovered along with his friends at team0verflow how to access the root keys of the system. To the uninformed reader, root keys seem to be just a bunch of random numbers but to a hacker, the root key is essentially the key to the heart of the system.[97] Not only could Hotz install a 3^rd party operating system with the root key in hand but essentially it could allow any user unprecedented access to their PlayStation 3 system. Access to the root key allows the imprinting of a digital signature used for authenticating official media content. With the root key in hand, a user can simulate the digital signature process and effectively imprint the signature on any type of executable program. He released the root keys to the public on January 2 2011 and further demonstrated the use of homebrew (3^rd party software) running on a custom 3^rd party firmware PlayStation 3[98]. Just like the iPhone, the PlayStation 3 had been officially jail-broken and hacked. When asked in an interview about the legalities of PlayStation 3 jail-breaking compared to iPhone jail-breaking he stated that “Currently the only difference is the DMCA explicitly states mobile phones but I think the same precedent should apply and that the exemption should apply to videogame consoles because “It's a closed system where the manufacturer controls all the software that runs on it.”[99]

The Empire Strikes Back

Sony officially filed a TRO (Temporary Restraining Order) against George Hotz in the U.S District Court of Northern California on January 11 2011. The District Court granted the request on January 27 2011, meaning that Hotz had to end all distribution of the root key on his website and an injunction was placed on the circumvention methods.[100] The case went to court in mid-February and a series of motions for a change of venue and Sony's seizure of information relating to all the users who went to Hotz's website and viewed his YouTube videos delayed the case significantly.

There were two main arguments addressed in the case that are of important note. The first issue was the place of venue determining which circuit court would hear the case. Sony wanted the case to be heard in California because the main headquarters of Sony's American division (SCEA) is located there and SCEA is the main overseeing master of the PlayStation Network. SCEA also created the PlayStation Network User Agreement that Sony ultimately claims Hotz breached when he released the root keys to the system. Sony's main argument here in the case was that because the network agreement creators were from SCEA, it was natural that the case would be heard in California.[101] Hotz's legal term asserted however that they wished to have the trial held in New Jersey because that's where the alleged physical instance of the circumvention occurred. In the scheme of things, this argument appears rather trivial but it holds serious ramifications about License Agreements. Granting Sony the right to choose the venue based on the Network agreement would mean that corporations would have the priority of choosing the venue in a case involving digital architecture.

The second argument consisted of Sony asserting that because George Hotz had signed up for a Playstation Network account, he knowingly understood the user agreement he would have had to sign and knowingly understood that if he was to be breaching the contract, he would be interfering with SCEA. However, Sony could not prove that Hotz ever signed up the account and could not prove that Hotz knew the existence of SCEA.[102] His legal team presented the situation that Hotz circumvented the device without ever having to sign the License Agreement. Thus, because Hotz did not sign the agreement, he could not be held to upholding the agreement.

The case did not progress as far as many (including myself) had hoped it would. On April 11 2011, Hotz and Sony reached a settlement agreement where Hotz would agree to never disseminate and distribute any modifications to the architecture of the PlayStation 3 system or develop any unauthorized 3^rd party operating system.[103] Due to the privacy necessary for the terms of the settlement, it's truly unclear what actual events transpired to make a settlement the best strategy for both parties. Though disappointing to much of the hacking community, it is clearly understandable why Hotz was forced to settle. He simply did not have the resources to fight a billion dollar corporation used to constantly suing and being sued. Hotz was forced to give up every bit of computer equipment he owned to Sony for “inspection” and every viewer of his circumvention method was identified from the IP addresses who visited the site.[104] His settlement represents a sort of stalemate between hacker and corporation. What is important now is to focus on the next steps in terms of legalizing the jail-breaking of a PlayStation 3.

V. The Network Breach and Why It's Important

The Aftermath

While it first appeared that no winner or loser had been decided by the conclusion of the settlement, Sony has clearly come out the loser after recent events. As the EFF stated in an article on the trial, “Given that the research results Sony presumably cares about are available online, granting the order (to confiscate the results of Hotz's research) would mean that everyone except the researchers themselves would have access to their work,”[105] it's difficult to understand why Sony went after Hotz in the first place. All of the results are still online and there is no way for Sony to effectively change the architecture of the system to prevent consumers from using the exploit. Unlike previous security exploits, Sony can not simply update the Network firmware to eliminate the potential of hacking because the root keys gathered are integral to every system manufactured and can not be changed. The main message that Sony sent out to the world then was that if someone publishes security exploits, then they will do everything in their power to shut it down whether the usage is legal or not.[106] However, as of recently Sony has faced a whole new slew of issues based on its decision to go after Hotz's circumvention measure.

The CollaPS3

On April 20 2011, the PlayStation Network servers and databases were thought to be hacked by a well known hacking-collective known as Anonymous.[107] Anonymous grew from a group of technologically knowledgeable users on the popular website 4chan that explore a style of political activism known as “hacktivism”.[108] They use their hacking skills often for comedic and dramatic effect to push a social agenda and have gone after groups such as the Westboro Baptist Church and Fox News that they take particular issue with.[109] They often hack into a group's servers and modify content present on web pages and other related things. Anonymous publicly condemned Sony for its invasive legal actions against Hotz and attempted to organize boycotts of the company with mixed results. They launched DDOS (or Distributed Denials of Service) attacks against the company which refers to when users flood a website or a server with incoming messages from different points of origin.[110] The system can not handle the incredible amount of material and is then forced to shut down. These attacks have happened to many different websites including Yahoo, RIAA and DDOS attacks were even responsible for taking out the entire Myanmar/Burma Internet infrastructure a few years back (unrelated to Anonymous).[111] As of recent press time, it is still unknown as to who particularly is responsible for the security breach but recently a file recovered from the breach currently links the hack to Anonymous.[112]

Initially when the PlayStation Network had been breached, Sony was relatively slow to inform its millions of users of what events had taken place. It soon came to be known that the profile information of almost 77 million PlayStation Network users had been stolen by the hackers.[113] This included names, addresses, phone numbers, zip codes and even credit card numbers. Sony was forced to shut down their network for almost a month and they had to rebuild security measures to prevent the hackers from repeating their efforts. Their PlayStation Network Store only just recently opened, after being down for nearly a month and a half.[114] Other departments such as their Qriocity music service and their Sony Online Services division also had account information stolen and credit card information compromised. Currently, Homeland Security and the FBI are launching a joint investigation to find the hackers responsible for the breach and examine whether Sony responsibly handled the situation responsibly after waiting a week to announce to users the compromising of their personal information.[115]

The Damage Has Been Done

Initial estimates put the cost of rebuilding the PlayStation Network around $170 million dollars and that does not include the potential lost revenue Sony will suffer from the after-effects of the breach.[116] No network access meant no access for developers as well, leading to a number of release date delays and a definite decrease in the number of online video game titles sold through the network and through Blu-Ray. In his blog, George Hotz denied any involvement with the hack, stating that “Running homebrew and exploring security on your devices is cool, hacking into someone elses server and stealing databases of user info is not cool,” and that “...alienating the hacker community is not a good idea.”[117] In his opinion, he stated that Sony brought this onto themselves for going after him, even though the information regarding the security breach was already common knowledge among the hacking community.

Though Sony has released little to no information regarding the methods of the hack, Hotz believes “The fault lies with the executives who declared a war on hackers, laughed at the idea of people penetrating the fortress that once was Sony, whined incessantly about piracy, and kept hiring more lawyers when they really needed to hire good security experts.” [118] This arrogance he states led Sony to not update security but rather rely on its brand name to discourage users from hacking into Sony related intellectual property.[119] Hotz's views are also shared with many security experts as well. Computer Security Professor Gene Stafford testified at the Congressional Hearing regarding the security breach that “Sony used an outdated version of the Apache Web server software, and had no firewall installed,” for protecting users personal information.[120]

Where to Proceed?

This whole PlayStation Network Security Breach essentially highlights the whole shifting balance of consumer control and corporate domination. As we have observed, corporations no longer possess complete control over all the actions of the devices they sell and they no longer are completely safe from malicious hacking and cracking attacks on their databases. Sony's swift and outrageous reaction claims regarding Hotz's jail-breaking actions show the enormous disconnect between corporate interest and consumer ingenuity. The Internet has created a community and marketplace that no longer solely require the innovation of media corporations and alienating the very community that supports technological innovation and creation will only lead to chaos and dissonance.

It also shows clearly that over-reaching network agreements that threaten legal action from corporate entities like Sony will not defer users from tampering and tinkering with their systems. The terms of service for a network govern the rights a creator has for protecting the actual network and should not be allowed to govern the actual hardware used to access the network. This is clearly shown in the example of the iPhone jail-breaking exemption because it is the actual hardware that is modified in the process, not the network. The DMCA as stated earlier does not protect business interests but rather protect an intellectual property creator's copyright. If a business like Apple wishes to only have one service provider for their iPhone service, the DMCA cannot in any case be cited as a reason for why users can not circumvent this decision. The decision to change service providers is a business decision and not in any way copyrightable. Apple also argued that because they operate on a closed market scheme, users should not be able to jail-break their iPhones to maintain “Apple's Controlled Ecosystem.” Once again the DMCA does not apply here because Apple's choice of having a one-choice marketplace is not something the DMCA can protect against. [121]

It's also clear that the DMCA anti-circumvention clauses should not apply to the effect of jail-breaking for interoperability and self-created software in electronic devices. With the DMCA exemption ruling, Jail-breaking for iPhones is legal because of fair use. As detailed earlier, the Library of Congress ruled that “... the modifications that are made purely for the purpose of such interoperability are fair uses."[122] Fair use in the schema of copyright law allows users to breed innovation from currently-existed copyrighted material. While the DMCA does not extensively include Fair Use in its clauses, the exemptions of the DMCA exist for the specific purpose of allowing fair use in our electronic devices.

Sony may try to argue that the ruling in Universal v. Corley, which ruled against the use of the software DeCSS to decrypt and copy movies on to DVD discs applies to this situation because the courts ruled that DeCSS is not protected under the first amendment. The court stated that DeCSS does not have a functional capability of free speech because the government's interest in preventing authorized access to encrypted copyrighted material is substantial.[123] However, for the PlayStation 3, George Hotz's reasons for circumventing the TPM that effectively secure the Playstation 3 operating system was for the purpose of restoring the Other OS option, and this does not violate copyright law.[124]

The iPhone & PlayStation 3: One and the Same

Just as he hacked the iPhone, George Hotz used similar techniques to circumvent security measures of another electronic device on the market, the PlayStation 3. It is clear that the iPhone and PlayStation 3 should be considered similar enough in terms of their purpose on the market and their technological functions. Both the iPhone and PlayStation 3 are closed market systems where the manufacturer controls all the software that runs on it. Both provide media content to users who use their networks but both the console and the phone also have the ability, when modified under Fair Use, to offer alternate services and allow more options for operating systems and content access for users to choose. The only difference between why the iPhone is exempted from the DMCA and the PlayStation 3 is not is simply through the wording of the exemption that currently; jail-breaking only applies to mobile phones.[125]

It is understandable why Sony and Apple have reacted in such a way to users who modify their devices. Jail-breaking eliminates the dominant marketplace induced by the creator and it threatens the business model used for the selling of media content. However, this does not mean that Jail-breaking is illegal. The DMCA can not be used to protect the interests of copyright who simply find the releasing of their security exploits an inconvenience. Network Agreements cannot serve as legally binding contracts that could lead to possible prison sentences, the very notion of it should be considered ridiculous. The purpose of the DMCA is to protect digital intellectual property from piracy and profiteering specifically.[126] If Hotz had provided code and information with the intent of allowing pirated and illegally obtained software to be played on the PlayStation 3, then this case would be completely different. [127] Just because the actual physical act of jail-breaking can allow for the potential of piracy of copyrighted material by users does not mean that jail-breaking creators should be held liable for their actions as well. It is abundantly clear that Jail-breaking a PlayStation 3 for the purposes of creating interoperability with 3^rd party software is acceptable under fair use and should be considered a DMCA exemption.

Plan of Action:

Just as the Electronic Frontier Foundation helped create the petition for jail-breaking of iPhones, this paper proposes that the same petition should be made to include jail-breaking associated

with computer and video game hardware for the upcoming round of exemptions in 2012. A message needs to be clearly given to corporations who wish to bully users and hackers from exercising legal instances of fair use with their technological devices. Over-reaching and never-ending License Agreements and the DMCA give corporations too much power in silencing technological innovation and applications of fair use that would serve to undermine their dominance present in the technological marketplace. The legal settlement between SCEA v. Hotz demonstrates that there exists a legal disparity between the classification of devices that can legally be jail-broken under the DMCA exemptions and that such disparities will have catastrophic results in the coming years if issues of consumer ownership with their technological devices are not addressed.

Sony underestimated the hacker response in their decision to attempt to silence the release of their security exploit and it resulted in their entire network being taken down and one of the largest data security breaches in the history of the U.S. While tragic, the very nature of the crime indicates that some consumers are not satisfied by the current rules dictating a consumers right to ownership and will no longer take corporate restrictions on fair use lying down.[128] Addressing the issue of jail-breaking in computer and video game hardware for the purpose of interoperability and the development of homebrew software by giving it the same DMCA exemption status as the iPhone mobile device is the proper and fair way of resolving this consumer ownership dilemma.

I am willing to let future Capstone students have access to this article

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[1] Gilbert, Ben “Sony and Playstation 3 Jail-breaker George Hotz settle out of court.” Joystiq Apr 11 2011 available at http://www.joystiq.com/2011/04/11/sony-and-playstation-3-jailbreaker-george-hotz-settle-out-of-cou/

[2] Tollen, David W. The Tech Contracts Handbook ABA Publishing Chicago 2010. P14-15

[3] Sharkey, Mark “UK Gamer Gets Refund After Other OS Removed from PS3” Gamespy Apr 9 2010 available at http://ps3.gamespy.com/articles/108/1082820p1.html

[4] Nilay Patel, Sony follows up, officially sues Geohot and fail0verflow over PS3 jailbreak. Engadget Feb 16 2001

[5] Note: The website geohot.com no longer links to the infringing content due to terms of the settlement between SCEA v. Hotz

[6] DMCA Caselaw: The First Ten Years Pike & Fisher 2008: see relevant case law; Universal City Studios v. Corley 2^nd Cir 2001, Perfect 10, Inc v. Amazon.com 9^th Cir 2007 and RealNetworks, Inc v. Streambox WD Wash, 2000

[7] “Sony v. Hotz: Sony Sends A Dangerous Message to Researchers -- and Its Customers” The EFF Jan 19 2011 available at https://www.eff.org/deeplinks/2011/01/sony-v-hotz-sony-sends-dangerous-message

[8] See relevant case law United States v. ElcomSoft and Sklyarov N.D Cal 2001-2002

[9] “Sony v. Hotz: Sony Sends A Dangerous Message to Researchers -- and Its Customers” id

[10] For example: downloading of illegally obtained video games, downloading of pirated films, music etc

[11] Anderson, Nate “Apple loses big in DRM ruling: jailbreaks are 'fair use' ” Ars Technica Jul 26 2010 available at http://arstechnica.com/tech-policy/news/2010/07/apple-loses-big-in-drm-ruling-jailbreaks-are-fair-use.ars

[12] Id., Quote from Apple

[13] Id., Quote from Register of Library of Congress

[14] Yin-Poole, Wesley “Geohot: "PSN hack nothing to do with me" EuroGamer available at http://www.eurogamer.net/articles/2011-04-28-geohot-psn-hack-nothing-to-do-with-me

[15] See http://us.playstation.com/support/termsofuse/ for details of agreement

[16] Id., Read clauses related in Playstation Network regarding ownership of PlayStation 3 computer device

[17] Newitz, Annalee “Dangerous Terms: A User's Guide to EULAs” The EFF Feb 2005 available at https://www.eff.org/wp/dangerous-terms-users-guide-eulas

[18] Poltorak, Alexander I, Paul J. Lerner Essentials of Licensing Intellectual Property: John Wiley & Sons, Inc New Jersey 2004 Pg 2

[19] Tollen, David W. The Tech Contracts Handbook ABA Publishing Chicago 2010. Pg 3-7

[20] Id.,

[21] Poltorak, Alexander I, Paul J. Lerner Essentials of Licensing Intellectual Property: John Wiley & Sons, Inc New Jersey 2004 Pg 6

[22] Lord Steyn, 'Contract Law: Fulfilling the Reasonable Expectations of Honest Men (1997) 113 LQR 433; c.f. § 133 BGB in Germany, where "the actual will of the contracting party, not the literal sense of words, is to be determined"

[23] Poltorak, Alexander I, Paul J. Lerner Essentials of Licensing Intellectual Property: John Wiley & Sons, Inc New Jersey 2004 Pg 9

[24] Id. at Pg 11

[25] Id.

[26] Terms of Service, supra

[27] Poltorak, Alexander I, Paul J. Lerner Essentials of Licensing Intellectual Property: John Wiley & Sons, Inc New Jersey 2004 Pg 12-13

[28] See Relevant case Chappell & Co Ltd v. Nestle Co Ltd [1959] Consideration sufficient but not equal

[29] Fusco, Patricia “The Napster Nightmare.” ISP Planet March 13 2000 available at http://www.isp-planet.com/politics/napster.html

[30] See Playstation Network End User License Agreement

[31] See PlayStation Network End User License Agreement

[32] Fox News “Hackers Bring Down PlayStation Network, May Have Stolen Credit Cards” April 25 2011 available at http://www.foxnews.com/scitech/2011/04/25/hackers-bring-playstation-network-stolen-credit-cards/

[33] Walters, Chris “Facebook's New Terms Of Service: "We Can Do Anything We Want With Your Content. Forever."” The Consumerist Feb 15 2009 available at http://consumerist.com/2009/02/facebooks-new-terms-of-service-we-can-do-anything-we-want-with-your-content-forever.html

[34] See Relevant Case Law Step-Saver Data Systems, Inc. v. Wyse Technology,[2] Vault Corp. v. Quaid Software Ltd..

[35] W S Petty; R J O'Connell; J C Liu “Electronic Commerce: Using Clickwrap Agreements” The Computer lawyer. 15, no. 12, (1998): 10

[36] Poltorak, Alexander I, Paul J. Lerner Essentials of Licensing Intellectual Property: John Wiley & Sons, Inc New Jersey 2004 Pg 96

[37] Edward Lee Lamoureux, Steven L. Baron Claire Stewart Intellectual Property Law & Interactive Media: Free For a Fee Peter Lang Publishing 2009 Pg 42

[38] Id. Pg 45

[39] See the U.S Constitution Article I, Section 8, Clause 8

[40] Edward Lee Lamoureux, Steven L. Baron Claire Stewart Intellectual Property Law & Interactive Media: Free For a Fee Peter Lang Publishing 2009 Pg 45

[41] Id. Pg 48

[42] Id.

[43] Id. Pg 45-47

[44] See Framework for Global Electronic Commerce Clinton Administration White Paper

[45] See Relevant Statute WIPO Copyright and Performances and Phonograms Treaties Implementation Act.

[46] Lamoureux, Baron, Stewart, supra The Green/ White Papers

[47] PUBLIC LAW 105–304—OCT. 28, 1998 Digital Millennium Copyright Act Section 1201 (a) (3)

[48] Edward Lee Lamoureux, Steven L. Baron Claire Stewart Intellectual Property Law & Interactive Media: Free For a Fee Peter Lang Publishing 2009 Pg 218-219

[49] PUBLIC LAW 105–304—OCT. 28, 1998 Digital Millennium Copyright Act Section 103(c)(1) of the DMCA (17 U.S.C. Sec. 1201 (c)(1)

[50] Lawrence, John Shelton Fair Use and Free Inquiry: Copyright Law and the New Media Ablex Publishing 1980

[51] See Copyright Law Copyright Act of 1976, 17 U.S.C. § 107.

[52] The Library of Congress Exemption List http://www.copyright.gov/1201/

[53] Id.

[54] See Copyright Law related to Fair Use terms

[55] See Relevant Case Law Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539 (1985) , Grand Upright Music, Ltd. v. Warner Bros. Records, Inc., 780 F. Supp. 182 (S.D.N.Y. 1991)

[56] See Relevant Case Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) Fair Use used with time-shifting allows for complete copy of entire work

[57] See Relevant Case Campbell v. Acuff-Rose Music, Inc., 510 U.S. 578 (1994) Parodies are commercial fair use

[58] Id.

[59] Sandoval, Greg “YouTube Users caught in Warner Music spat” CNET Jan 27 2009 available at http://news.cnet.com/8301-1023_3-10150588-93.html

[60] Edward Lee Lamoureux, Steven L. Baron Claire Stewart Intellectual Property Law & Interactive Media: Free For a Fee Peter Lang Publishing 2009 Pg 50-51

[61] Lohmann, Fred von. “New DMCA Exemptions Granted” The EFF https://www.eff.org/deeplinks/2006/11/new-dmca-exemptions-granted

[62] Anderson, Nate “Apple loses big in DRM ruling: jailbreaks are 'fair use' ” Ars Technica Jul 26 2010 http://arstechnica.com/tech-policy/news/2010/07/apple-loses-big-in-drm-ruling-jailbreaks-are-fair-use.ars

[63] See http://www.copyright.gov/1201/2010/Librarian-of-Congress-1201-Statement.html

[64] Id.

[65] Edward Lee Lamoureux, Steven L. Baron Claire Stewart Intellectual Property Law & Interactive Media: Free For a Fee Peter Lang Publishing 2009 Pg 229-230

[66] See DMCA Pub. L. 105-304 Stat. 112 Stat. 2860

[67] Gorman, Michael “Judge in Sony v. Geohot orders YouTube and others to give up users' personal info” Engadget March 7 2001 available http://www.engadget.com/2011/03/07/judge-in-sony-vs-geohot-orders-youtube-and-others-to-give-up-us/

[68] Lemos, Robert “Russian Crypto Expert Arrested at Def Con” CNET July 17 2001 available at http://news.cnet.com/2100-1001-270082.html

[69] See relevant case law United States v. ElcomSoft and Sklyarov N.D Cal 2001-2002

[70] Hotz Ably Fights for His Motion to Dismiss - Tells Court SCEA's Case Doesn't Belong in CA Groglaw March 27 2011 availabe at http://www.groklaw.net/article.php?story=20110327185437805

[71] “Unintended Consequences: 12 Years Under the DMCA” The EFF, supra Pamela Samuelson, "Anticircumvention Rules: Threat to Science," 293 Science 2028, Sept. 14, 2001; Letter from Matthew Oppenheim, SDMI General Counsel, to Prof. Edward Felten, April 9, 2001; Felten v. RIAA: EFF Case Archive.

[72] Id. supra David Becker, "Testing Microsoft and the DMCA," CNET News, April 15, 2003; Seth Schiesel, "Behind a Hacker's Book, a Primer on Copyright Law," N.Y. Times, July 10, 2003.

[73] See Relevant Statute 18 U.S.C. § 1030) g

[74] Hotz Ably Fights for His Motion to Dismiss - Tells Court SCEA's Case Doesn't Belong in CA Groglaw March 27 2011 availabe at http://www.groklaw.net/article.php?story=20110327185437805

[75] Kerr, Orin “Today’s Award for the Silliest Theory of the Computer Fraud and Abuse Act” The Volokh Conspiracy Jan 13 2011 available at http://volokh.com/2011/01/13/todays-award-for-the-lawyer-who-has-advocated-the-silliest-theory-of-the-computer-fraud-and-abuse-act/

[76] http://itlaw.wikia.com/wiki/Contributory_copyright_infringement

[77] https://mandreptla.org/CalifPenalCode502.htm

[78] http://us.playstation.com/corporate/about/

[79] http://legal-dictionary.thefreedictionary.com/tortious+interference

[80] http://legal-dictionary.thefreedictionary.com/misappropriation

[81] Grandy “Geohot Reponds to Sony's Legal Motion” PS Groove Jan 12 2011 http://psgroove.com/content.php?643-Geohot-Responds-to-Sony-s-Legal-Motion

[82] “Geohot Talks About Sony Lawsuit & WP7 Jailbreaking” Feb 2 2011 http://iphonetechtips.wordpress.com/2011/02/02/geohot-talks-about-sony-lawsuit-wp7-jailbreaking/

[83] Patel, Nilay “Confirmed: Apple and AT&T signed five-year iPhone exclusivity deal -- but is it still valid?” Engadget May 10 2010 http://www.engadget.com/2010/05/10/confirmed-apple-and-atandt-signed-five-year-iphone-exclusivity-de/

[84] "Interview with 17 year old iPhone hacker". CNBC. September 30, 2007.

[85] Cassavoy, Liane “What Does it Mean to Jail-break an iPhone” About.com http://cellphones.about.com/od/glossary/f/jailbreak_faq.htm

[86] “What is an ECID SHSH and How do I Save it” April 18 2011 http://www.hackthatphone.com/4x/ecid_shsh.html

[87] Anderson, Nate “Apple loses big in DRM ruling: jailbreaks are 'fair use' ” Ars Technica Jul 26 2010 available at http://arstechnica.com/tech-policy/news/2010/07/apple-loses-big-in-drm-ruling-jailbreaks-are-fair-use.ars

[88] Tim Wu. October 4, 2007. "The iPhone Freedom Fighters." Slate.

[89] "Federal Register: Exemption to Prohibition on Circumvention of Copyright Protection Systems for" (PDF). Retrieved 2010-09-11.

[90] Desz “PS3 Remains Unhackable, Yet Again, Who's Next, Again” N4G Available at http://n4g.com/news/588214/ps3-remains-unhackable-yet-again-whos-next-yet-again

[91] ^ "A Real Challenge". George Hotz. December 26, 2009. Retrieved January 25, 2010.

[92] "Here your silver platter". George Hotz. January 26, 2010. Retrieved January 27, 2010.

[93] Boyes, Emma “Yellow Dog Linux launches for PS3” Gamespot UK Nov 27 2006 available at http://www.gamespot.com/news/6162316.html?tag=result;title;0

[94] Hollister, Sean “Sony taken to court over PS3 'Other OS' removal” Engadget April 29 2010

[95] See the Playstation Network End User License Agreement

[96] Ben Kuchera (30 March 2010). "Hacker vows to fight Sony PS3 update, restore Linux support". ArsTechnica. Retrieved 30 March 2010.

[97] “Will PS3 hacking without a USB dongle finally become a reality?” Myce

http://www.myce.com/news/will-ps3-hacking-without-a-usb-dongle-finally-be-a-reality-38284/

[98] "Geohot: Here is your PS3 Root Key! – Now with "HELLO WORLD" proof!". PSX-SCENE.

[99] Video Interview with George Hotz: G4 http://www.gametrailers.com/user-movie/geohot-interview-g4tv/354285

[100] Patel, Nilay “Court grants Sony's temporary restraining order against Geohot, PS3 jailbreak still available everywhere.” Engadget Jan 27 2011 available at http://www.engadget.com/2011/01/27/court-grants-sonys-temporary-restraining-order-against-geohot/

[101] Hotz Ably Fights for His Motion to Dismiss - Tells Court SCEA's Case Doesn't Belong in CA Groglaw March 27 2011 availabe at http://www.groklaw.net/article.php?story=20110327185437805

[102] Id.

[103] Gilbert, Ben “Sony and PlayStation 3 jailbreaker George Hotz settle out of court” Joystiq Apr 11 2011 available at http://www.joystiq.com/2011/04/11/sony-and-playstation-3-jailbreaker-george-hotz-settle-out-of-cou/

[104] Hotz Ably Fights for His Motion to Dismiss - Tells Court SCEA's Case Doesn't Belong in CA Groglaw March 27 2011 availabe at http://www.groklaw.net/article.php?story=20110327185437805

[105] “Sony v. Hotz: Sony Sends A Dangerous Message to Researchers -- and Its Customers” The EFF Jan 19 2011 available at https://www.eff.org/deeplinks/2011/01/sony-v-hotz-sony-sends-dangerous-message

[106] Id.

[107] Arthur, Charles “Anonymous says Sony accusations over PlayStation Network hack are lies” Guardian available at http://www.guardian.co.uk/technology/blog/2011/may/05/anonymous-accuses-sony-hack-playstation-network

[108] http://www.thehacktivist.com/whatishacktivism.pdf

[109] Smith, Catharine “Anonymous Attacks Westboro Church Website During Live Interview” Huffington Post available at http://www.huffingtonpost.com/2011/02/25/anonymous-westboro-baptist-church_n_828068.html

[110] Neal, Dave “ Sony says Anonymous DDoS attacks distracted it” The Inquirer http://www.theinquirer.net/inquirer/news/2068111/sony-anonymous-ddos-attacks-distracted”

[111] “Massive DDOS attack knocks Burma Online” Info Security Magazine Nov 5 2010 http://www.infosecurity-magazine.com/view/13762/massive-ddos-attack-knocks-burma-offline/

[112] Millian, Mark After Hacks, “Sony Finds Traces Of Anonymous Group” May 4 2011 CNN

[113] Hollister, Sean “Sony responds to Congress: all 77 million PSN accounts compromised, finger pointed at Anonymous” Engadget May 4 2011

[114] Ogg, Erica “Sony: Playstation Store Back This Week” CNET May 31 2011 available at http://news.cnet.com/8301-31021_3-20067531-260.html

[115] “Homeland Security lends a hand in PSN data breach investigation; Sony changes FAQ” VG24/7 available at http://www.vg247.com/2011/04/29/homeland-security-lends-a-hand-in-psn-data-breach-investigation-sony-changes-faq/

[116] Williams, Martyn “Playstation Network Hack will Cost $170 Million” PC World available at http://www.pcworld.com/article/228391/playstation_network_hack_will_cost_sony_170m.html

[117] George Hotz http://geohotgotsued.blogspot.com/

[118] Id.

[119] Id.

[120] Newman, Jared “Experts on PSN Hack: Sony Could Have Done More” PC World available at http://www.pcworld.com/article/227770/experts_on_psn_hack_sony_could_have_done_more.html

[121] Anderson, Nate “Apple loses big in DRM ruling: jailbreaks are 'fair use' ” Ars Technica Jul 26 2010 available at http://arstechnica.com/tech-policy/news/2010/07/apple-loses-big-in-drm-ruling-jailbreaks-are-fair-use.ars

[122] Id.

[123] DMCA Caselaw: The First Ten Years Pike & Fisher 2008: see relevant case law; Universal City Studios v. Corley 2^nd Cir 2001

[124] Ben S. “46 DC EA D3 17 FE 45 D8 09 23 EB 97 E4 95 64 10 D4 CD B2 C2” Yale Law and Technology Blog March 1 2011 available at http://www.yalelawtech.org/trusted-computing-drm/46-dc-ea-d3-17-fe-45-d8-09-23-eb-97-e4-95-64-10-d4-cd-b2-c2/

[125] Video Interview with George Hotz: G4 http://www.gametrailers.com/user-movie/geohot-interview-g4tv/354285

[126] Refer back to the DMCA

[127] See Relevant Case Law Universal v. Corley 2^nd Court 2001

[128] Winterhalter, Ryan “Nintendo hacked but Personal Data Safe” 1UP June 5 2011 available at http://www.1up.com/news/nintendo-hacked-personal-data-safe