Peggy Hoon is a polite, soft-spoken librarian at North Carolina State University. But she's not your traditional librarian. She's a “Scholarly Communication Librarian” who specializes in helping students obtain information online. And one of her key job functions has brought her into a confrontation with the FCC, TV networks and the Motion Picture Association of America (MPAA).

Hoon regularly posts video clips from TV shows to the Internet for students enrolled in distance-learning courses. Thanks to the Technology, Education and Copyright Harmonization Act (TEACH), she is breaking no laws. The 2002 Act gives accredited, non-profit educational institutions the right to freely use copyrighted works in distance education.

However, the FCC, backed by the TV and movie industries, was looking to change that. Due to go into effect July 1, the FCC's so-called “broadcast flag regulations” would have required technology companies to build protections into their products that would stop consumers from infringing high-definition TV broadcasts. But these protections also would have stopped Hoon from uploading the clips students needed.

So Hoon helped seven non-profit groups file suit. “They needed some hands-on, real-life examples to establish standing,” Hoon says.

Thanks to Hoon's affidavit, the U.S. Court of Appeals for the D.C. Circuit ruled May 6 that the plaintiffs had standing to challenge regulations–and went on to find them invalid. While the entertainment industry wasn't too happy, consumer electronics and computer companies were relieved the

challenge succeeded. If the court had upheld the regs, technology companies would have had to change their products to meet new governmental restrictions.

“This would have imposed significant costs on technology companies ?? 1/2 slowing down the development process and probably decreasing functionality to consumers,” says Jonathan Band, an IP expert who recently left Morrison & Forester to start his own practice.

It turns out, however, that the battle over the broadcast flag is far from over.

Digital Protections

The FCC adopted the broadcast flag regulations in November 2003 to prevent unauthorized creation and dissemination of perfect copies of high-definition TV broadcasts. Pirated analog copies of broadcast TV shows and movies are widely available online, but the quality of these files is poor. Digital copies of high-definition TV broadcasts, however, are flawless. The FCC, the movie industry and the broadcast industry feared that with the growing popularity of high-definition TV, infringers would soon stock the Internet with perfect copies.

To prevent this from happening, the FCC mandated that any TV set capable of receiving high-definition broadcasts manufactured after July 1, 2005, and any device that could be attached to that set, would have to recognize and respond to broadcast flags–codes embedded in each digital broadcast that indicate whether the program can be copied.

If the flag indicates a broadcast program is copy-protected, the receiving device could only send the file to other devices that recognize the flag and prevent copying. For instance, a television could send the data to a computer, and the user could make a personal copy of the program (if both the TV and computer recognized the broadcast flag).

If the sending machine couldn't determine whether or not the receiving machine recognized the broadcast flag, it wouldn't transmit the digital file.

The broadcast flag “is the Lady Godiva of content protection,” says Mike Godwin, legal director for Public Knowledge, one of the non-profits that challenged the regulations. “It's not that it protects anything itself, it's just that everyone else has not to look.”

FCC Power Grab

The broadcast flag rules instantly inflamed opposition from consumer groups, librarians, electronics firms and the computer industry. Detractors argued the FCC's regulations were an unjustified attempt to enforce copyright protection at the expense of fair use rights.

Moreover, critics claimed, the regulations were an unlawful power grab by the FCC. If the regulations went into effect, they would give the FCC veto power over the design of virtually all consumer electronic equipment.

“The regulations would have stopped you from adding new software or technology to computers,” Godwin says. “It could have destroyed the whole computer industry.”

Critics charged that the FCC had no right to impose design restrictions on such a broad swath of technology products, and the Court of Appeals agreed. The court noted that the FCC can regulate consumer electronics used for the receipt of wire or radio communications, but only in so far as those devices are receiving a radio or wire transmission.

By contrast, the broadcast flag rules governed what devices could do after a transmission. This, the court held, went too far.

“The FCC has no congressionally delegated authority to regulate receiver apparatus after a transmission is complete. We therefore hold that the broadcast flag regulations exceed the agency's delegated authority under the statute.”

The ruling was a major victory for the electronics and computer industries. “This would be the beginning,” Band says. “The FCC would keep finding new areas of technology to regulate.”

Congress' Options

The battle to protect broadcast content is now expected to move to Capitol Hill.

“We're talking to Congress about trying to find a solution,” says John Feehery, a spokesperson for the MPAA, a leading proponent of the flags. He adds that the organization isn't currently lobbying for the enactment of any specific method to protect content. “We're just making our case to Congress, going through a general education campaign,” he says.

Getting Congress to act may not be easy, however. “For this to work, you have to have control over a whole lot of consumer electronics,” Godwin says. “What narrow legislation looks like that? It's almost the definition of broad legislation.”

Many legislators are leery of passing such a broad law. Industry groups and interests on Capitol Hill would put up considerable opposition to giving a government agency control over what innovations can and can't be put into new technology.

If no new law is passed, however, Hollywood predicts dire consequences.

“If Congress doesn't act, the content companies will be less willing to put their content onto the free over-the-air system,” Feehery says. “This will greatly diminish the amount of high-quality content that viewers can get.”

Some think that's just an idle threat. The studios have made similar warnings in the past. In 2002, for instance, Viacom told the FCC that new protections for broadcast content needed to be put in place by 2003, or there would no new broadcast programs.

“Then they [Viacom] come out with 'Lost' and 'Desperate Housewives,'” Godwin says. “How often do they get to make this threat before we just laugh?”