Antitrust Law - A Stranger in the Wikinomics World? Regulating Anti-Competitive Use of the DRM/DMCA Regime

Abstract:     
Unlike traditional markets, Information Technology (“IT”) markets are characterized by special and unique features that shall be discussed in this paper. Competition in IT markets is dynamic; nonmarket based information production models (‘peer production’) play a significant role in IT markets; and IT market are usually data market rather than product market. The combination of the legal rule prohibiting circumvention of technological measure under the DMCA and the use of DRMs, created a new regime, the DRM/DMCA regime, which bestows the entertainment industry with a new and strong right to control the access to and use of the copyrighted work. The use of such a strong right under the DRM/DMCA regime may have, in some instances, anti-competitive effects in IT markets. A recent example for such allegedly anti-competitive use of the DRM/DMCA regime can be found in the litigations initiated by movie studios and the DVD CCA against two IT companies, Kaleidescape and RealNetworks. These cases demonstrate the attempts of the entertainment industry to block the marketing of technological device or software products which allow their end users to upload the content of their DVD to the device’s hardware and replay it afterwards from the device itself or their own PC. The key question I would like to address in this paper is the limits of the conceptual framework of antitrust law and of copyright law for regulating possible anti-competitive effects of the DRM/DMCA regime on competition in IT markets in the U.S, given the unique features of IT markets.

Keywords: Information Technology, DRM/DMCA regime, anticircumvention, copyright, antitrust, competition, peer production, dynamic competition, Kaleidescape, RealNetworks, RealDVD, DMCA, anti-competitive, IT market

JEL Classifications: K21, K19

Accepted Paper Series