November 30, 2000 4:00 AM PST

Consumers may find e-books a tough read

When you buy a paperback book, you can read it as many times as you like, lend it out to your friends, and even sell it later on if you like.

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Will consumers embrace e-books?
Not so for the brave new world of e-books, where publishers place complex electronic padlocks on their wares through so-called digital rights management (DRM) technology. The aim is to curtail the threat of Internet piracy, but that protection can come at a significant cost to consumers who play by the rules and buy legitimate products, analysts say.

"Some of the restrictions on the e-book readers are just brutal for consumers," said Gartner analyst P.J. McNealy. "You may see some definite backlash moving forward."

Consumers aren't the only ones who have noticed a potential problem: Regulators are also looking into anti-copying features, which may conflict with long-standing intellectual property laws granting consumers substantial usage rights.

For example, the U.S. Copyright Office held hearings this week on whether digital transmissions of copyright works should fall in the scope of the "first sale doctrine," which gives buyers of copyright works the right to sell them later on. The hearing will also investigate whether the right to make backup copies of digital works should expand beyond computer programs to literary and other works.

Even if publishers are legally entitled to restrict such content, they run the risk of alienating consumers with draconian anti-piracy features.

"I haven't really invested much in (e-books), and I'm not sure I really want to at this point," said one disgruntled customer, who complained that he'd lost the keys to his small collection of e-books after a simple computer upgrade.

The consumer--who asked not to be identified--used Microsoft's e-book reader, which limits works to two "activations" on two separate devices. While not foolproof, it attempts to link a particular file to a particular reader "persona," which is created when the file is activated.

Such complaints do not bode well for the nascent e-book business, analysts say, at least in the short run. Fewer than 50,000 electronic reading devices have been sold in the United States, according to Internet researcher Jupiter Media Metrix. Sales are expected to limp along through 2005, the company predicts, when they will hit just 1.9 million--far too few to sustain a market.

Publishers are aware that saddling e-book devices with complex anti-piracy technology won't help speed consumer adoption. But they say they have no other choice.

"You can't equate this with the bricks-and-mortar scenario because a physical book doesn't have the ability to propagate itself into millions of copies in an eye blink," said Simon & Schuster spokesman Adam Rothberg. "With a physical book there are all sorts of (piracy) hurdles--geographic, production and distribution...(But these) are not there with an electronic text, unless you impose these safeguards."

Risk vs. reward
Microsoft isn't the only company offering e-book reader technology that restricts content.

Other readers, such as the Adobe Acrobat eBook Reader Plus V2.0--formerly called the Glassbook reader--do not allow someone to read the same e-books from more than one computer or to copy e-book data files from one computer to another.

"The publishers are the ones who have made that a prerequisite to their willingness to offer books in this format," said Mario Juarez, group product manager for Microsoft's e-book team. "The publishers are just extraordinarily security-conscious, and you have to honor that. I think their livelihoods are at stake and they are very concerned and understandably cautious."

Microsoft currently provides publishers three security levels.

Only the highest level, dubbed "owner exclusive," severely blocks copying. At this level, the system actually builds and packages books for a given "persona," which represents an individual consumer. Access is granted through a process dubbed "activation," which links the document to the persona and locks out everyone else.

Lawyers circle
As publishers focus on the business of selling books on the Web, lawyers and government officials are debating whether digital anti-copying features violate copyright laws such as the first sale doctrine, which has traditionally granted consumers wide usage rights.

Intellectual property experts said that DRM technology does place new limits on usage rights established in the offline world. But they said the ready replication of digital content establishes a strong rationale for changing the rules for online commerce.

"The first sale doctrine assumes that the sale is of the original copy," said Neil Smith, an intellectual property lawyer with Limbach & Limbach. "Because of the ability to duplicate identical copies and keep the original copy, I think that you know it does create a tug and a need for some type of limitation."

Legislators have grappled with the problem of digital transfers before.

Two years ago, a legislative proposal was brought forward in the House of Representatives that would have created a first sale doctrine for the transmission of copyrighted digital works. That proposal would have required owners of digital works to simultaneously delete their own copy while transferring the work to another party.

That proposal was rejected.

The issue is once again before the Copyright Office, which is considering whether digital transmissions of copyright works should fall in the scope of the first sale doctrine.

Smith said the problem with extending that doctrine to cyberspace is that digital transfers are not one-way. Owners of physical books lose possession when they pass the book on to another party. In the digital arena, however, that isn't the case.

"The first sale doctrine is fine if it is truly distributed or sold by the buyer and the buyer doesn't retain a copy," Smith said.

Smith said that to protect copyrights, publishers should be allowed to put restrictions on the number of copies. But he said it's a matter of price. A person could pay more for the right to make unlimited copies or something to that effect.

"It's a matter of education. It's like Napster," said Smith, referring to the popular online music-swapping service. "You have the right to make copies of everything at no charge, (but consumers) have to realize that some authors certainly won't write if they don't have the rewards-?the protected rewards of their writing."

Despite complaints, Microsoft's Juarez said that the technology is only going to get better and more sophisticated with time. Even though consumers are beginning to express frustrations over such limits, Microsoft said it is hopeful that in time an honest marketplace will develop allowing less stringent controls.

"We think that DRM should be very flexible, scalable, incredibly robust and secure, and be something that consumers need not be burdened with in any way if they're participating honestly," Juarez said. "Digital rights management is essential for the long-term survival and evolution of all kinds of intellectual property, and e-books (are) a prime example."

 

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