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Digital rights management Digital rights management (DRM) and the development of mobile content in Europe Jens Eckhardt, Martin Lundborg, Claudia Schlipp JUCONOMY Rechtsanwa ¨lte and JUCONOMY Consulting AG, Du ¨ sseldorf, Germany abstract If mobile content is going to be a success, it is important that the content provided to the end users is of high quality and that it creates value for the end users. Therefore, it is im- portant that the content producers can protect their copyrights in order to be able to earn money on the production of high value content. Due to ‘‘Everything-over-IP’’ (i.e. a single Internet Protocol platform for both voice and data traffic) and convergence, including the extension of the media sector to the mobile sector, more distribution channels are made available for content. In this situation, DRM can play an important role as it enables the content producers to better control and bill their content although it is distributed over sev- eral different distribution channels and networks. This paper looks at the possibilities of DRM for the development of mobile content markets. It will in detail look at the current legal problems and possibilities that are associated with DRM and mobile content, i.e. the national borders due to national legal systems, the har- monisation at EU level, the problems with copies for personal use, the enabling of control over copyrights and the legal protection of DRM systems. Based on the analysis of the legal situation, the outcomes on the development of mobile content markets are analysed. ª 2007 JUCONOMY Rechtsanwa ¨ lte and JUCONOMY Consulting AG. Published by Elsevier Ltd. All rights reserved. 1. Introduction This paper looks at the impact of digital rights management on the development of mobile content. This means that the paper will consider both the development in mobile content and the current situation regarding digital rights manage- ment. Regarding the latter, the paper has a focus on the legal conditions created by the European framework and it will also analyse the scope of the national legislators based on the German example. Interesting to notice is that both the areas of mobile con- tent and DRM are currently developing at fast speed. When it comes to mobile content, this is still making up less than 10% of the revenues of the mobile operators and the take up of mobile internet has yet to come. This has in the past led to some doubts that mobile content will fail to develop. Recent announcements in the markets show that the area of mobile content will develop in the future. In Section 2, we will briefly look at the recent developments in mobile content and the dif- ferent market players and business models associated with the provision of the services. For the providers in the mobile content markets, it is not only important that the usage is up, but that the take up actu- ally leads to increasing revenues for essential market players. Due to digital rights management systems, the content pro- viders and producers are given the possibilities to better con- trol and bill their content. In Section 3, an overview of the digital rights management systems will be briefly assessed. available at www.sciencedirect.com www.compseconline.com/publications/prodclaw.htm 0267-3649/$ – see front matter ª 2007 JUCONOMY Rechtsanwa ¨ lte and JUCONOMY Consulting AG. Published by Elsevier Ltd. All rights reserved. doi:10.1016/j.clsr.2007.09.008 computer law & security report 23 (2007) 543–549

Digital rights management (DRM) and the development of mobile content in Europe

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Digital rights management

Digital rights management (DRM) and the developmentof mobile content in Europe

Jens Eckhardt, Martin Lundborg, Claudia Schlipp

JUCONOMY Rechtsanwalte and JUCONOMY Consulting AG, Dusseldorf, Germany

a b s t r a c t

If mobile content is going to be a success, it is important that the content provided to the

end users is of high quality and that it creates value for the end users. Therefore, it is im-

portant that the content producers can protect their copyrights in order to be able to earn

money on the production of high value content. Due to ‘‘Everything-over-IP’’ (i.e. a single

Internet Protocol platform for both voice and data traffic) and convergence, including the

extension of the media sector to the mobile sector, more distribution channels are made

available for content. In this situation, DRM can play an important role as it enables the

content producers to better control and bill their content although it is distributed over sev-

eral different distribution channels and networks.

This paper looks at the possibilities of DRM for the development of mobile content markets.

It will in detail look at the current legal problems and possibilities that are associated with

DRM and mobile content, i.e. the national borders due to national legal systems, the har-

monisation at EU level, the problems with copies for personal use, the enabling of control

over copyrights and the legal protection of DRM systems. Based on the analysis of the legal

situation, the outcomes on the development of mobile content markets are analysed.

ª 2007 JUCONOMY Rechtsanwalte and JUCONOMY Consulting AG. Published by Elsevier

Ltd. All rights reserved.

1. Introduction

This paper looks at the impact of digital rights management

on the development of mobile content. This means that the

paper will consider both the development in mobile content

and the current situation regarding digital rights manage-

ment. Regarding the latter, the paper has a focus on the legal

conditions created by the European framework and it will also

analyse the scope of the national legislators based on the

German example.

Interesting to notice is that both the areas of mobile con-

tent and DRM are currently developing at fast speed. When

it comes to mobile content, this is still making up less than

10% of the revenues of the mobile operators and the take up

0267-3649/$ – see front matter ª 2007 JUCONOMY Rechtsanwalte and Jdoi:10.1016/j.clsr.2007.09.008

of mobile internet has yet to come. This has in the past led

to some doubts that mobile content will fail to develop. Recent

announcements in the markets show that the area of mobile

content will develop in the future. In Section 2, we will briefly

look at the recent developments in mobile content and the dif-

ferent market players and business models associated with

the provision of the services.

For the providers in the mobile content markets, it is not

only important that the usage is up, but that the take up actu-

ally leads to increasing revenues for essential market players.

Due to digital rights management systems, the content pro-

viders and producers are given the possibilities to better con-

trol and bill their content. In Section 3, an overview of the

digital rights management systems will be briefly assessed.

UCONOMY ConsultingAG. Publishedby ElsevierLtd. All rights reserved.

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 5 4 3 – 5 4 9544

DRMs will only have a positive impact on the mobile con-

tent markets if the legal situation supports the introduction

and enforcement of the systems. This is discussed in Section

4. Finally, in Section 5, an analysis based on the previous sec-

tions will be made in order to identify the impact of DRMs on

the development of mobile content.

2. The situation of mobile content

After a rather disappointing start of mobile content, recent an-

nouncements show that there are good chances that mobile

content will play an important role in the future mobile mar-

kets. In Section 2.1, we will look at the current trends in mobile

content. For the analysis of the impact of DRM on the mobile

content markets it is important to consider the business

models and value chains. These are described in Section 2.2.

2.1. Trends in mobile content

By looking at the recent announcements for mobile content,

the development goes towards media applications like mobile

TV, mobile music, mobile radio and streaming. There is also

a positive development projected for mobile gaming and gam-

bling (Lundborg, 2006). On the contrary, the markets for ring-

tones and screensavers are declining. As of today though,

the three most common applications for mobile content are

still ringtones, wallpapers and gaming (BVDW-Trendbarome-

ter, 2006).

One market which is of high interest for digital rights

management is the markets for mobile music. The markets

for online music are still on the starting blocks, and in 2006

the European digital music market was worth 111 million

(USD) – an increase of 80% compared to 2005 (IFPI, 2007).

With the introduction of MP3-Players, mobile handsets with

MP3 functionalities and IPods in combination with the intro-

duction of new online sales channels, the end user has started

to buy their music online instead of in the store around the cor-

ner. In the future it is conceivable that the end users will buy

their music completely online and a large proportion might

be bought over mobile handsets as these will be the main por-

table music player for a large proportion of the end users.

One of the most successful mobile content applications so

far has been mobile gaming and the projections for mobile

gaming are very bright with possibilities for the mobile indus-

try to generate more revenue. Reasons for a positive develop-

ment in mobile gaming include the introduction of 3D-games

and improvements in handsets and software technologies.

Also the possibility for mobile operators to bill the end users

in a safe and user friendly way and the increased bandwidth

due to the introduction of UMTS and HSDPA could bring

more end users to download mobile games or to play online

games over their mobile handsets. These value added devel-

opments have resulted in end users spending money on mo-

bile gaming. IDC projects annual growth rates of 16% in the

coming years for mobile gaming (Cellular-news.com, 2007).

Another application is mobile video over UMTS. These

markets are predicted to experience large growth rates with

an emphasis on sports and information services. The world-

wide markets are projected to generate 4.2 billion USD in

2006 and grow to 9.5 billion USD in 2011. Thereof, about 40%

is projected to be generated in Europe (moconews.net, 2007).

Regarding mobile TV, our previous studies have shown

that there is a future, but that according to the spectrum reg-

ulation situation in the different countries, the introduction

will still take a couple of years in several countries. According

to different pilots and surveys, the markets for mobile TV are

predicted to about 10% penetration amongst mobile telephony

subscribers in the future as the markets are maturing (Lund-

borg, 2006).

The drivers behind this positive development are several

developments favouring the take up of mobile content, i.e.

falling prices for mobile services (voice and SMS), the ongoing

development of mobile handsets, increasing bandwidth and

coverage of the access networks and improvements in the

provision of content (Lundborg, 2006).

In summary, the developments in mobile content are to-

wards services and applications which are, especially in case

of mobile music, gaming and mobile video, very interesting

for DRM. As a conclusion, DRM will become more important

in the future, as these types of content go mobile.

2.2. Business models and value chains

For the analysis of the outcomes of DRMs an analysis of the

different value chains is important. There are several different

market players active in the mobile content industry. As iden-

tified by Lundborg and Ruhle, the following types of business

models and their strengths and weaknesses exist in the

mobile content value chain (Lundborg and Ruhle, 2006):

Marketplayer

Strengths Weaknesses

Mobile

operators

Access to the sub-

scribers, including pro-

visioning systems

(billing, collection, cus-

tomer case, etc.)

Owner of UMTS network

for interactivity

Experience from mobile

content

Experience from sales of

CPEs

Established and well

known brands to set up

new business

No/less experience

from broadcasting

services

No or little access to

content

No experience from

advertising financed

service offerings

Application

service

providers

Experience from mobile

content and

interactivity

Only indirect access to

subscribers

No access to content

No experience from

broadcasting services

Lack of financial

capability

Content

producers

Owner of the digital

rights

No access to end users

and networks

Content

aggregators

Owner of the digital

rights

No access to end users

and networks

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 5 4 3 – 5 4 9 545

Regarding the value chains, there are a high number of

possible and existing constellations. These also vary

according to the content and the positioning of the leading

companies in the value chain. Common for all value chains

is that the mobile operators are placed at the end of the

value chain, controlling the access networks and equipped

with an advantageous end user relationship. This leads to

the situation where the mobile operators have a significant

negotiation power in the content industry. On the other

side, the other companies in the value chain are very

heterogenic from small regional content producers to

multinationals like Google, Ebay, Warner Music Entertain-

ment, etc.

Important to notice for the aspects of DRMs is that each

mobile operator is only providing access to a part of the to-

tal end user markets. As hardly any mobile operator in

Europe has now more than 50–60% market shares (Euro-

pean Commission), the content may be too expensive for

the mobile operators as these can allocate the costs of con-

tent to a relatively low number of customers/users, leading

to the situation where the content stays in the hands of

content aggregators and producers.

This situation is important for the implementation of

DRMs because it is granting substantial opportunities to

the owners of the content, as they can better control the

distribution of their content over multiple access networks.

Because the owner of the content eventually has to negoti-

ate agreements with the mobile operators in order to use

their networks and their possibility to bill the end users,

the DRMs might play an important role regarding the pric-

ing of content in the upstream markets.

It is worth mentioning that in an open market environ-

ment, where the end users are getting unlimited access to

the internet over their mobile handsets, the role of the mo-

bile operators is significantly reduced. In these cases, the

end user billing has to be provided directly by the content

right holders/providers. Also in these cases, DRM can play

an important role in order to better control distribution

and billing of the content. In this situation though, there

are no differences between mobile content and content

over the fixed network internet.

(continued)

Marketplayer

Strengths Weaknesses

Broadcasting

companies

Experience from broad-

casting services and ad-

vertising financed

offerings (knowledge

about customer needs

and behaviour)

Access to marketing

channels

No direct access to the

end users

No sales network for

CPEs

Broadcasting

network

operators

Operation of backbone

and access networks

No direct access to end

users

No access to content

No sales network for

CPEs

3. The situation regarding DRM

DRM is a term used for different features and it works like wa-

ter marks for identification of a protected content in order to

protect the copyright. For mobile content different DRM stan-

dards are available, including (Kwok, 2006):

� SDMI (Secure Digital Music Initiative).

� Microsoft Windows Media Rights Manager.

� OMA (Open Media Association).

� MPEG-4 DRM.

In addition to these DRM systems several other systems are

being developed.

SDMI has been developed in cooperation with more than

180 companies and is primarily made for the distribution of

music via the internet. For the secure distribution of digital

media files, the Microsoft Windows Media Right Manager, as

an end-to-end DRM system is mostly used for content pro-

vider and retailer as a flexible platform. The currently most

favoured DRM standard for mobile content is provided by

OMA (OMA-SRM-v1.0) and this is supported by newer hand-

sets from most mobile companies. In addition Moving Pictures

Expert Group has developed a DRM system for MPEG-4, which

is a standard for audio and video. The advantage of MPEG-4 is

that it can be applied to several different forms of usage and

end user devices and that it is therefore a wide spread com-

mercial standard (Kwok, 2006).

A peculiarity with mobile content is the limitations of

the hardware. In consequence there are some problems in

the performance of DRM systems, including (Piloura et al.,

2003):

� Coordination and interoperability.

� Security.

� Privacy and trust.

� Payment.

� DRM operation.

� License management.

Regarding the different forms of DRM systems available, it

is at the moment difficult to say which one is going to be the

dominating one in the future. Which standard will be success-

ful at the end will be decided by the market.

4. Regulation of DRM

The reason why DRM systems have been developed lies in the

fact that the copyright laws have not been sufficient in order

to control and bill content. Hence, the importance of DRM re-

sults from the weaknesses of copyright law. On the other hand

the question arises, whether DRM can exist without copyright

law.

DRM serves the simplification and the facilitation of billing

as well as the control of use. Again, the control of use serves

the facilitation of billing.

From a legal point of view, DRM means rights management

by digital technology. Rights management means the

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 5 4 3 – 5 4 9546

managements of rights provided by the owner of the content

and not rights provided by law.

Below we will start with looking at the regulation of DRM at

EU level, then a brief overview of the German law as an exam-

ple will be followed by the situation regarding the legal protec-

tion of DRM systems and the limitations of DRM.

4.1. EU-directives

EU-directives have harmonized copyright law only concern-

ing certain specific aspects. In particular, the protection of

computer programs (e.g. computer games) and databases

has been harmonized but not the one for music (e.g. music

and ringtones) (Reinbothe, 2001; Katzenberger, 2006). In fact,

not all aspects, which are addressed by the EU-directives,

are regulated identically throughout Europe. There are

still – at least small – differences (Sections 2 and 44a to

63a UrhG).

These aspects become relevant if restrictions of use shall

be enforced by court action. This means:

� First of all, the copyright law of the specific country applies

in which the violation shall be prohibited. For example, if

a German user distributes ringtones to his friends and col-

leagues, the court action has to be taken in Germany and

German law applies.

� On the second stage, the question occurs whether the use is

illegal under national law:

- Firstly, it has to be evaluated whether the distributed con-

tent is capable of being protected by national copyright law.

The capability is different from country to country. For

example, not every kind of ringtone is protected under Ger-

man copyright law; extremely simple and computer-gener-

ated ringtones might not be protected (Section 2 UrhG).

- Secondly, if the content is capable of being protected it has

to be evaluated whether the copying and the distribution is

illegal.

In principle, under German law private copies and

private distribution is not illegal (Section 53 UrhG) (for

details see below).

As a conclusion, although EU-directives have harmonized

European copyright law, there are still national differences

which make it necessary to adapt distribution systems to na-

tional law. As there is not one or the applicable copyright law

within Europe and moreover there is no global harmonisation,

a number of different strategies of distribution must be

established.

These problems can be solved by DRM systems and global

strategies can be developed:

� DRM systems enable to prohibit technically the use of con-

tent in another way. The use is restricted in practice and

not by law (Schulz, 2006).

� The question whether the content is capable of being

protected by national copyright law can be omitted.

� Also the aspect whether the copying and distribution is

illegal under national law can be omitted.

4.2. National law of German as an example

The background and the advantage of DRM can be exemplified

under German law:

After the distribution has taken place, content might be

copied by the first buyer and distributed to others. All the peo-

ple that receive such a copy will not pay for the use and will

not buy the content themselves.

This problem occurred when the first tape recorder was

sold to the mass markets. At that time, the content industry

realized that they could not practically prohibit copying on

mass. Therefore, the German copyright law was amended.

According to this amendment, – simplifying – on the one

hand, the producers or retailers of tape recorders had to pay

a fee (Section 54 UrhG) which was collected from the customer

by the price of the tape recorder, and on the other hand, the

private copy and private distribution was legalized (Section

53 UrhG; Hilty, 2005).

The use of DRM systems avoids this problem. The solution

would be to amend the German copyright law once more: the

right of private copies does not completely apply as far as

technical copy protection systems are used (Section 95b

UrhG).

As long as content was distributed physically, it was easier

for the content generator to control its distributors (Sections 2

and 44a to 63a UrhG). The distributor had to produce ‘‘fakes’’

on his own to undermine the position of the content genera-

tor. However, in the course of digital distribution, the produc-

tion of fakes became redundant. The distributor might sell as

many originals as possible without any control by the content

generator. Therefore, contractual agreements became neces-

sary including audit- and reporting-clauses. DRM systems

can also solve this problem practically.

On the other hand there are also advantages for the distrib-

utor and the user (Schulz, 2006). The distributor can demon-

strate to his customers as well as to the content generator

that he sells legal copies. The customer is enabled to check

whether he buys a legal copy. He also can prove to the content

generator that he uses a legal copy. In particular this becomes

relevant when he asks for support or claims warranty for

defects.

4.3. Legal protection of DRM systems

It is an historical fact that every technological protection

mechanism has been ‘‘cracked’’ and/or ‘‘hacked’’. However,

the advantages of DRM can only be used when a DRM system

will not be ‘‘cracked’’ and/or ‘‘hacked’’. If the DRM is compro-

mised, the content can be used and distributed without any

control. From a legal point of view, the DRM system itself

must be protected by an anti-circumvention regulation.

In the European Union, anti-circumvention provisions

have been enacted in particular in three directives:

� Software Directive of 1991 (Council Directive of May 14, 1991,

on the Legal Protection of Computer Programs, Official Jour-

nal of the European Communities, L 122 (May 17, 1991), 42):

prohibits the circulation and ‘‘possession for commercial

purposes’’ of tools which are solely intended to circumvent

technical measures protecting a computer program.

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 5 4 3 – 5 4 9 547

� Copyright Directive of 2001 (Directive 2001/29/EC of the Eu-

ropean Parliament and of the Council of May 22, 2001, on

the Harmonisation of Certain Aspects of Copyright and Re-

lated Rights in the Information Society, Official Journal of

the European Communities, L 167 (June 22, 2001), 10):

- Art. 6 (1) prohibits the actual circumvention of any effec-

tive technological measure that is used by the rights

holders of any copyright or neighbouring right to protect

their work.

- Art. 6 (2) prohibits a wide range of preparatory activities,

including production, distribution, promotion or ‘‘posses-

sion for commercial purposes’’ of devices that have only

a limited commercially significant purpose or use other

than circumvent or are at least primarily designed to en-

able the circumvention of technological protection

measures.

� Conditional Access Directive of 1998 (Directive 98/84/EC of

the European Parliament and of the Council of November

20, 1998, on the Legal Protection of Services Based on, or

Consisting of, Conditional Access, Official Journal of the Eu-

ropean Communities, L 320 (November 28, 1998), 54): pro-

hibits the production, distribution and promotion of illicit

devices that circumvent technological protection measures.

The Conditional Access Directive primarily intends to pro-

tect the ‘‘classic’’ pay TV and broadcasting sector, it also ap-

plies to a wide range of internet-based systems.

The provisions of the above mentioned directives differ

from each other. Therefore, it is necessary to check which ap-

plies to the respective content. Altogether, they provide a wide

range of protections (Bechthold).

The obvious advantage of anti-circumvention regulations

is that the content generators and the distributors can take

legal action against those who distribute circumvention-

technology. This is very important, because without circum-

vention-technology there will be no circumvention on mass.

For example, the provisions of the above mentioned EU-direc-

tives are implemented into national German law (Sections 94–96,

69a–69g UrhG; Arlt, 2004). However, not every member state of

European Union has implemented the provisions in the same

way (Bechthold). This means that the content providers as well

as the aggregators and distributors (e.g. mobile operators) will

have to deploy national strategies to protect their DRM systems)

(Section 45 UrhG; Teligen; AV Interactive, 2007).

4.4. Limitations to DRM

DRM provides practical rights to use content in a certain way.

Nevertheless, there must be provided the right to use the con-

tent in the meaning of the law (Schulz, 2006).

The practical possibility to restrict the use of the content

might be in conflict with the law (Sections 2 and 44a to 63a

UrhG). In particular, a too strict restriction might collide

with legal provisions on General Terms and Conditions

(Schulz, 2006) as well as with copyright law (Schulz, 2006;

Arlt, 2004). For example, the German copyright law imposes

legal exceptions to the copyright (use of copies in the course

of court action, in particular as evidence).

The above mentioned right to copy content for private

purposes is also such a legal exception (Section 53 UrhG).

At the moment it is discussed how to resolve the collision

of this exception and the protection of DRM (Schulz, 2006;

Hilty, 2005; Katzenberger, 2006; Sections 94a and 95b

UrhG). Because the above mentioned need for the legality

of private copies no longer exists to the extent that DRM

is established.

Another upcoming conflict is the protection of privacy. As

far as only basic information about the user is collected the

collection and use of such data might be in accordance with

privacy regulations (Section 28 BDSG). However, if too much

personalized information is collected or requested by the

DRM, the conflict with privacy laws arises. However, the level

of protection of the privacy diverges extremely from country

to country. For example German privacy laws are very protec-

tive in favour of the user.

4.5. Key statements regarding regulation of DRM

Regarding the regulation of DRM, the following conclusions

can be made:

� Weaknesses of Copyright Law that make DRM necessary:

- Differences of national law obstruct cross-border

strategies.

- Copyright law requires the practical control of the rights

(control of copying and use).

- Not every sold content unit is capable of being protected by

copyright law under national law.

� DRM and copyright law are – at least from a German point of

view – not congruent:

- DRM is no legal term and there is no legal framework aim-

ing specifically at DRM.

- DRM enables imposing more restriction than copyright law

does.

- DRM enables controlling whether content is used in accor-

dance with the granted ‘‘rights’’.

- DRM systems need to be protected by law; otherwise DRM

systems will be ‘‘cracked’’/‘‘hacked’’ and ignored.

4.5.1. Key statement 1DRM enables controlling the copying of content. Therefore, it

enables preventing the unpaid distribution of content.

In contrast, even if copyright law interdicts copying and

distribution of content it must be enforced separately and ad-

ditionally. In fact, the enforcement is complicated and

expensive.

In principle, private copies and private distribution of such

copies comply with German copyright law. This right to pri-

vate copies applies only if the copy protection system does

not have to be ‘‘hacked’’ in order to make a copy.

4.5.2. Key statement 2DRM enables controlling and limiting the number of uses.

Therefore, billing per use can be introduced. On the other

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 5 4 3 – 5 4 9548

hand, too strict a restriction might collide with legal provi-

sions on General Terms and Conditions.

4.5.3. Key statement 3DRM enables controlling and proving whether content is dis-

tributed and finally used in accordance with the granted

‘‘rights’’. Therefore a law suit based on copyright law can be

based on that fact.

4.5.4. Key statement 4In fact, DRM enables enforcing the granted ‘‘right’’ to use the

content irrespective of national copyright laws and copyright

enforcement regulation.

In contrast, the national copyright law applies when it

comes to the enforcement of copyrights. Therefore, national

differences and national loopholes would make different dis-

tribution systems necessary.

5. Impact of the regulation of DRMon mobile content

The question for this article is what impact the legal situation

regarding DRM has on the development of mobile content.

The implementation of DRMs is important for the develop-

ment of mobile content. The reasons for this can be found in

the following conclusions on mobile content and DRMs:

� The development of mobile content is towards content

which is dependent on the ability to control and bill the con-

tent. Especially for services based on the MP3 format, prob-

lems can be seen in the markets to protect the owner of the

rights for this kind of content.

� In addition, in the value chain for mobile content, which is

based on a situation with a disintegrated value chain (no

market player controls the content end-to-end) and multi-

ple retail distributors (mostly the mobile operators or in

case of an open market solution, the internet content plat-

forms), it is difficult to control the content and thereby to

enforce the rights of the content owners.

� In order to solve the problems arising out of this situation,

DRMs have been or will be implemented.

In case the implementation of DRMs is not successful, the

owners of the content will hardly be able to control their con-

tent leading to problems with billing it and thereby realising

revenue streams. Without the revenue streams though, no

one will get paid for creating the content with the result, that

the quality of content will erode. This imposes a risk for the

complete development of mobile content, as the content in

itself is what is creating value for the end users.

In order to make the DRMs effective, some requirements

have to be fulfilled regarding the legal framework, including

the rights to implement DRMs and the enforceability as

well as the opportunities to prevent the users from by-

passing the DRMs (i.e. by changing the source code of the

DRM).

In this paper we have identified three important

legal issues which are impacting the development of mobile

content.

A considerable proportion of mobile content is interna-

tional and the DRM systems to be implemented have to be in-

ternational if they are to be integrated in the mobile handsets.

On the other hand, we have concluded above that the legal

systems in Europe when it comes to DRMs are regulated on

a national level instead of being harmonized at EU level.

This is problematic for the enforcement of DRMs as the con-

tent can be distributed over national borders from countries

which have not implemented the legal framework needed

for DRMs. This means, for the development of mobile content,

that the implemented DRMs will be less enforceable in prac-

tice with less revenue created for content providers with the

risks of lower quality of content and thereby lower take up

in the content markets.

Another impact on the markets is that the local or na-

tional content, i.e. content that is only valuable in a specific

country, will be better protected by DRMs than international

content. Thereby, an unequal competition situation arises

between national and international content which might

cause a suboptimal market equilibrium and hence cause

negative welfare effects. This also has an impact on the com-

petition situation between mobile operators, as the national

based operators can access the national content on an equal

basis compared with the international operators like Voda-

fone, T-Mobile and Telefonıca, which is not always the case

when it comes to international content. Hence, a harmonisa-

tion of the legislation regarding DRMs would benefit the

large mobile operators as well as the multinational content

providers.

Another problem identified is the problem of private cop-

ies. Because there are countries granting users the right to pri-

vate copies, this is an aspect which has to be included in every

DRM system. Due to the functionality though, there is a risk

that a loophole is created which might negatively impact the

efficiency of the DRM systems.

The overall conclusion of the legal impacts of DRM on the

development of mobile content is positive though. As the legal

systems in Europe provide for the enforceability, the legal ba-

sis required for the implementation of DRMs exists, which will

have a positive impact on the development of mobile content.

As there are still problems though, further harmonisation and

development of the regulation at EU level would have a posi-

tive impact on DRM and thereby increase the possibilities for

the mobile content markets.

Jens Eckhardt ([email protected]) Attorney-at-law (Dussel-

dorf, Germany), Martin Lundborg (MSc), senior consultant, and

Claudia Schlipp consultant, JUCONOMY Rechtsanwalte and

JUCONOMY Consulting, Dusseldorf, Germany.

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