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[House Report 113-356]
[From the U.S. Government Publishing Office]

113th Congress  }                                             {  Report
  2d Session    }        HOUSE OF REPRESENTATIVES             { 113-356

=======================================================================

 
         UNLOCKING CONSUMER CHOICE AND WIRELESS COMPETITION ACT 

                                _______
                                

 February 25, 2014.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

   Mr. Goodlatte, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                     MINORITY AND ADDITIONAL VIEWS

                        [To accompany H.R. 1123]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1123) to promote consumer choice and wireless 
competition by permitting consumers to unlock mobile wireless 
devices, and for other purposes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     2
Background and Need for the Legislation..........................     2
Hearings.........................................................     3
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     5
New Budget Authority and Tax Expenditures........................     5
Congressional Budget Office Cost Estimate........................     5
Duplication of Federal Programs..................................     7
Disclosure of Directed Rule Makings..............................     7
Performance Goals and Objectives.................................     7
Advisory on Earmarks.............................................     7
Section-by-Section Analysis......................................     7
Minority Views...................................................     9
Additional Views.................................................    14

                             The Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Unlocking Consumer Choice and Wireless 
Competition Act''.

SEC. 2. REPEAL OF EXISTING RULE AND ADDITIONAL RULEMAKING BY LIBRARIAN 
                    OF CONGRESS.

  (a) Repeal and Replace.--Paragraph (3) of section 201.40(b) of title 
37, Code of Federal Regulations, as amended and revised by the 
Librarian of Congress on October 28, 2012, pursuant to the Librarian's 
authority under section 1201(a) of title 17, United States Code, shall 
have no force and effect, and such paragraph shall read, and shall be 
in effect, as such paragraph was in effect on July 27, 2010, subject to 
subsections (c) and (d).
  (b) Rulemaking.--Not later than 1 year after the date of the 
enactment of this Act, the Librarian of Congress, upon the 
recommendation of the Register of Copyrights, who shall consult with 
the Assistant Secretary for Communications and Information of the 
Department of Commerce and report and comment on his or her views in 
making such recommendation, shall determine, consistent with the 
requirements set forth under section 1201(a)(1) of title 17, United 
States Code, whether to extend the exemption for the class of works 
described in section 201.40(b)(3) of title 37, Code of Federal 
Regulations, as amended by subsection (a) of this section, to include 
any other category of wireless devices in addition to wireless 
telephone handsets.
  (c) Unlocking at Direction of Purchaser or Family Member.--With 
respect to paragraph (3) of section 201.40(b) of title 37, Code of 
Federal Regulations, as made effective by subsection (a) of this 
subsection, and with respect to any other category of wireless devices, 
in addition to wireless telephone handsets, with respect to which, as 
determined by the Librarian of Congress in a rulemaking conducted under 
subsection (b) or otherwise under section 1201(a)(1)(C) of title 17, 
United States Code, circumvention of a computer program by the owner of 
a copy of the program is permitted solely in order to connect to a 
wireless communications network when such connection is authorized by 
the operator of such network, in the case of a purchaser of such 
handset or device for personal use, such circumvention may be initiated 
by the purchaser, by a family member of such purchaser, or by another 
person at the direction of such purchaser or family member, for the 
sole use or benefit of such purchaser or family member.
  (d) Rule of Construction.--Nothing in this Act alters, or shall be 
construed to alter, the authority of the Librarian of Congress under 
section 1201(a)(1) of title 17, United States Code, including the 
authority, with respect to the applicable 3-year period, to modify or 
delete paragraph (3) of section 201.40(b) of title 37, Code of Federal 
Regulations, or modify or delete any category of wireless devices 
exempted under subsection (b) of this section.

                          Purpose and Summary

    The legislation repeals an existing exemption made by the 
Librarian of Congress pursuant to Section 1201 of Title 17 
concerning the circumvention of access control measures on cell 
phones, also known as ``unlocking'', reinstates an earlier 
version of this exemption, directs the Librarian of Congress to 
undertake a new rulemaking for other cellular devices such as 
tablets with cellular connectivity, and permits unlocking to be 
initiated by the owner of a device or by an entity or person of 
their choosing under specific purposes for current or future 
exemptions related to wireless devices. The legislation is not 
intended to enable bulk unlocking by resellers.

                Background and Need for the Legislation

    The legislation repeals a current exemption in favor of 
reinstating an earlier exemption for which the Librarian of 
Congress previously determined that an adequate record had been 
established. Rapid technological change in the cellular 
telephone industry, including consumer interest in more 
expensive smartphones, has resulted in a shift away from the 
earlier practice of consumers essentially disposing of their 
old cell phones after a few years of ownership. Especially for 
smartphones, consumers now use their cell phones for longer 
periods of time; reuse their devices upon upgrading by giving 
their older devices to family members; or sell their used 
devices in a growing marketplace for used phones and then using 
the proceeds from the sale to offset the cost of replacement 
devices. Since consumers with a legitimate interest in 
unlocking are unable to do so without risk of violating 17 
U.S.C. Sec. 1201, the Committee has supported this legislation. 
Even with the recent industry announcement in December 2013 
concerning unlocking, the legislation is needed to avoid the 
potential for criminal or civil sanctions for those who unlock 
cellphones for consumers.
    Consumers seeking to own a cellphone without the initial 
upfront cost are more willing than ever to purchase a used 
cellphone, but may be prevented from using their newly acquired 
device on their network of choice since that device may be 
locked to a particular carrier. Since consumers may have 
acquired the used cellphone via an online store or auction 
site, they may not be able to work with, or even know, the 
original purchaser and/or network carrier to have the device 
unlocked by the original network carrier. Consumers seeking to 
switch network carriers may also need assistance unlocking 
their cellphones, either out of personal preference or an 
inability to enable the unlocking on their own. The Committee 
believes that consumers should be able to seek help from others 
such as relatives, neighbors, cellular providers and their 
agents, etc. . . . to effect the unlocking. The Committee does 
not support efforts to use this legislation for bulk unlocking. 
In these situations, the consumer must already be in possession 
of the cellular device in order to use this provision.
    The Committee considered H.R. 1123 with a focus on 
individuals being granted the right to unlock, or seek 
assistance to unlock, their wireless devices. Such actions 
would be opposite not only the Committee's legislative intent, 
but also the specific statutory language adopted by the 
Committee. The Committee received testimony on, and is aware 
generally, of ongoing criminal enterprises in large cities that 
profitably steal large numbers of smartphones for resale after 
they are unlocked. This legislation would not enable such 
enterprises to avoid prosecution under the law for the 
underlying theft or for the circumvention.
    The Committee also considered H.R. 1123 with a focus on the 
specific issue of unlocking wireless devices, rather than the 
broader issue of circumvention.

                                Hearings

    The Committee's Subcommittee on Courts, Intellectual 
Property, and the Internet held a hearing on H.R. 1123 on June 
6, 2013. Testimony was received from Michael Altschul, Senior 
Vice President and General Counsel, CTIA The Wireless 
Association; Steve Berry, CEO, Competitive Carriers 
Association; Steve Metalitz, Partner, Mitchell, Silberberg, and 
Knupp, LLP; and George Slover, Senior Policy Counsel, Consumers 
Union. Additional material was submitted by Disruptive 
Innovation and the Library Copyright Alliance.

                        Committee Consideration

    On July 31, 2013 the Committee met in open session and 
ordered the bill H.R. 1123 favorably reported with an 
amendment, by a voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that one 
rollcall vote occurred during the Committee's consideration of 
H.R. 1123--the Committee considered a 2nd degree amendment 
offered by Mr. Watt of North Carolina that would have limited 
the legal right to unlock a cell phone to the purchaser or a 
wireless communications network provider or its authorized 
agent or licensed vendor. The Watt amendment was defeated 8 to 
17.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................
Mr. Labrador (ID)..............................
Ms. Farenthold (TX)............................
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................              X
Mr. Garcia (FL)................................
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................      8      17
------------------------------------------------------------------------

    There were two amendments adopted by voice vote: the 
underlying manager's amendment offered by Mr. Goodlatte of 
Virginia and the 2nd degree amendment offered by Mr. Chaffetz 
of Utah and Ms. Lofgren of California.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1123, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, November 5, 2013.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1123, the 
``Unlocking Consumer Choice and Wireless Competition Act.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie, 
who can be reached at 226-2860.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member

   H.R. 1123--Unlocking Consumer Choice and Wireless Competition Act.

      As ordered reported by the House Committee on the Judiciary 
                           on July 31, 2013.

    CBO estimates that implementing H.R. 1123 would have no 
significant effect on discretionary spending over the 2014-2018 
period. Enacting H.R. 1123 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    H.R. 1123 would repeal a rule published in October 2012 by 
the Librarian of Congress (LOC) that would limit the ability of 
certain owners of wireless telephone handsets to ``unlock'' 
their phones, that is, to circumvent software protections that 
prevent the owner from connecting to a different wireless 
network. The bill would reinstate an earlier rule that provided 
broader authority to circumvent such software protections. H.R. 
1123 also would direct the LOC to consider, within a year after 
enactment, whether to extend that broader authority to other 
categories of wireless devices in addition to smartphones. 
Based on information from the LOC, CBO expects that 
implementing the provisions of the bill would not have a 
significant effect on the agency's workload.
    H.R. 1123 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act and would not affect the 
budgets of state, local, or tribal governments.
    H.R. 1123 would impose a private-sector mandate by 
eliminating an existing right of action for wireless carriers 
(and others)--who are currently able to pursue legal action 
against those who, without permission, circumvent the access 
controls on wireless telephone handsets sold after January 26, 
2013. The cost of the mandate would be the forgone net value of 
settlements and damages in such cases. A search of the 
literature suggests that few, if any, of those types of 
lawsuits have been brought against individual consumers. 
Because such claims would probably be uncommon in the future 
and the damage awards allowed in such cases would be relatively 
small, CBO estimates that the cost of this mandate would be 
small and fall below the annual threshold established in UMRA 
for private-sector mandates ($150 million in 2013, adjusted 
annually for inflation). If the Librarian of Congress decides 
to broaden the exemption allowed under the bill to cover other 
types of mobile devices, such an action would expand the limit 
of such rights of action. The cost of that expansion would 
depend on what devices the Librarian would include under the 
exemption. CBO has no basis to estimate additional costs as 
they would depend on the regulatory actions taken by the 
Librarian.
    The CBO staff contacts for this estimate are Susan Willie 
(for Federal costs), and Marin Burnett and Nathan Musick (for 
the private-sector impact). The estimate was approved by 
Theresa Gullo, Deputy Assistant Director for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 1123 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that H.R. 1123 specifically directs 
the Librarian of Congress to conduct one rule making proceeding 
within the meaning of 5 U.S.C. 551.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
1123 reinstates an earlier exemption to 17 U.S.C. 1201 to 
permit individuals to unlock their cell phones, creates a new 
rulemaking to determine if that exemption should be extended to 
other cellular devices, and enables others to legally provide 
technical assistance for the purpose of unlocking.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 1123 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
    Sec. 1. Short title. Section 1 sets forth the short title 
of the bill as the ``Unlocking Consumer Choice and Wireless 
Competition Act.''
    Sec. 2. Repeal of Existing Rule and Additional Rulemaking 
by Librarian of Congress. Subsection 2(a) reinstates an 
exemption in paragraph (3) of section 201.40(b) of title 37, 
Code of Federal Regulations, that was in effect on July 27, 
2010. This exemption was made pursuant to the authority of the 
Librarian of Congress as a part of his statutory authority 
under Section 1201(a). This exemption, set forth in paragraph 
(3) of section 201.40(b) of Title 37, Code of Federal 
Regulations states ``(3) Computer programs, in the form of 
firmware or software, that enable used wireless telephone 
handsets to connect to a wireless telecommunications network, 
when circumvention is initiated by the owner of the copy of the 
computer program solely in order to connect to a wireless 
telecommunications network and access to the network is 
authorized by the operator of the network.''
    Subsection 2(b) creates an expedited process to determine 
whether or not the reinstated rule should cover other 
categories of wireless devices. The Committee added this 
provision to permit the Librarian of Congress to create parity 
among devices with cellular connectivity. Although the language 
of Subsection 2(b) does not limit the categories of devices 
that connect to wireless telecommunications networks to be 
considered, the Committee anticipates that this Subsection will 
be most relevant to computer tablet devices that have the 
ability to connect to wireless networks. The Committee expects 
robust debate among interested parties before the resulting 
Copyright Office rulemaking process concerning which additional 
categories of devices, if any, should be exempt from the 1201 
anti-circumvention restrictions. Given the technical 
similarities among cellular connected devices, the Committee 
expects the Register of Copyrights and Librarian of Congress to 
either create a blanket exemption or no exemption in the future 
for all cellular devices.
    Subsection 2(c) allows an act of unlocking to be initiated 
by the purchaser of a wireless telephone handset, by a family 
member of such person, or by another person at the direction of 
such purchaser or family member for the sole use or benefit of 
such purchaser or family member. This circumvention must be 
within the constraints of the exemption that had previously 
been granted by the Librarian of Congress, that are adopted by 
the Librarian based on the narrow additional rulemaking 
authorized by this legislation, or that may be adopted for the 
same purpose in subsequent proceedings under Section 
1201(a)(1)(C). As reinstated, section 201.40(b)(3) of title 37, 
Code of Federal Regulations, allows such acts of circumvention 
to be initiated by the owner of the copy of the computer 
program on the phone that enables it to connect to a wireless 
telecommunications network, and then only when performed solely 
in order to connect to a wireless telecommunications network 
and such access is authorized by the operator of the network. 
For accuracy, the Committee notes that language of the 
exemption adopted by the Librarian should have referred to the 
owner of the device, rather than the owner of the copy of the 
computer program since most computer programs are licensed, 
rather than sold, although the Committee believes that the 
difference in language has no substantive effect. However, the 
Committee will change the language of this legislative 
provision accordingly in future actions.
    As these limitations imply, the legislation does not grant 
the Librarian authority to authorize circumvention in any other 
context in which the Librarian may grant an exemption under 
Section 1201(a)(1)(C). The Committee understands that unlocking 
a handset to enable it to connect to the network of another 
carrier typically involves the simple entry of a code, and that 
doing so results in nothing more than enabling the phone to 
connect to another network. In reporting this legislation, the 
Committee notes the unique circumstances of the phone unlocking 
situation, including the fact that the circumvention that is 
authorized enables the purchaser only to connect his or her 
device to a wireless telephone network other than the one 
associated with the device when it was purchased. Circumvention 
for unlocking does not compromise the security of the 
information on the phone, and it does not expose any 
copyrighted works present on the phone to increased risk of 
infringement. Legalization of circumvention that has such 
harmful effects is not the intent of this legislation and it 
would not be authorized by its provisions.
    Nothing in this Act is intended to serve as a limitation on 
section 1201(a)(2) or section 1201(b), which remain critical to 
the effectiveness of Chapter 12 of Title 17 and are in no way 
altered or modified by the provisions of this legislation.
    Section 2(d) contains a rule of construction to clarify the 
legislation's impact upon the Librarian's existing authority. 
Specifically, as a result of this legislation, the Librarian is 
not allowed to modify the usual 3-year cycle for its section 
1201 rulemakings, to modify or delete existing exemptions, or 
to modify or delete exemptions created by subsection (b).

                             Minority Views

    H.R. 1123, the ``Unlocking Consumer Choice and Wireless 
Competition Act,'' as introduced, was a bipartisan, bicameral 
bill designed to restore consumers' ability to unlock their 
cell phones. We support this common sense proposal because it 
provides consumers with greater choice by allowing them to keep 
their existing cell phones if they choose to switch to a new 
cellular network provider. We also agree that individuals who 
are not technologically savvy should be allowed to obtain 
assistance with unlocking their cell phones.
    Nonetheless, we believe that amendments adopted during the 
Judiciary Committee's markup of this legislation merit further 
attention. In particular, Congress should consider the possible 
unintended policy consequences of the following key changes 
made by the manager's amendment: (1) the expansion of the 
universe of persons authorized to unlock cell phones; (2) the 
imposition of the third party assistance requirement on any 
future exemptions involving the category of works that includes 
tablets; and (3) the potential impact on the Copyright Office 
rulemaking process. We submit these views to highlight these 
changes and identify issues of possible concern regarding the 
bill as reported.
    We would also note that since the Committee's markup of 
H.R. 1123 on July 31, 2013, the five largest mobile carriers 
have agreed to allow cell phone unlocking after a consumer's 
service contract expires. Specifically, in December 2013, five 
major U.S. wireless companies entered into a voluntary 
commitment with the Federal Communications Commission that will 
make it easier for consumers to unlock their devices and switch 
from one carrier to another.\1\ The adoption of these voluntary 
principles undoubtedly will assist consumers and may mitigate 
the need to rush legislation to the floor.
---------------------------------------------------------------------------
    \1\The five wireless companies are: AT&T, Sprint, T-Mobile, U.S. 
Cellular, and Verizon Wireless. Letter from Steve Largent, President & 
CEO, CTIA, to Thomas E. Wheeler, Chair, Federal Communications 
Commission et al. (Dec. 12, 2013), available at http://www.fcc.gov/
document/ctia-letter-carrier-unlocking-voluntary-agreement-fcc-
statements.
---------------------------------------------------------------------------

                       DESCRIPTION AND BACKGROUND

    Public policy surrounding the use of cell phones is 
increasingly important as a result of the growing popularity of 
smartphones, which enable consumers to access a variety of 
services and perform multiple functions from a single device. 
Given the technology involved with these devices, these policy 
decisions invariably involve overlapping issues of copyright 
law, competition and communications law.
    Consumers often obtain new cell phones at a deep discount 
as part of their contract. Cell phone locking has been used as 
a means to ensure that consumers do not switch cellular 
providers before carriers have recouped the initial device 
subsidy. The process that enables a device to work on other 
cell phone networks by changing the software settings is known 
as cell phone unlocking. By changing internal software settings 
that are usually secured by technological protection measures, 
cell phones can operate on alternate carrier networks.
    Under current law, it is prohibited to circumvent access 
controls that protect copyrighted works.\2\ Because software 
contained in cell phones is often protected by copyright law, 
an exemption is legally required to circumvent those protection 
measures for purposes that do not constitute an infringing use 
of the copyrighted work. These anti-circumvention provisions 
were established by the 1998 Digital Millennium Copyright Act 
(DMCA), which also created a triennial review, called the 1201 
proceeding, to provide a process to determine whether 
exemptions to the prohibition against circumvention are 
warranted for various categories of works.\3\ The DMCA 
authorizes the Librarian of the Congress to issue temporary 
exemptions during a triennial rulemaking process.\4\ This 
process allows the Copyright Office to issue rules that keep 
pace with advances in technology and account for and reflect 
changes in business practices and consumer needs, and avoids 
statutory proscriptions that are outdated by rapid advances in 
technology and business practices.
---------------------------------------------------------------------------
    \2\17 U.S.C. Sec. 1201 (2014).
    \3\Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 
2860 (1998).
    \4\17 U.S.C. Sec. 1201(a)(1)(c) (2014).
---------------------------------------------------------------------------
    The Copyright Office recommended an exemption for cell 
phone unlocking in the 2006 and 2010 rulemaking proceedings.\5\ 
In 2012, however, it determined that an exemption was no longer 
warranted because the evidentiary record showed that carriers 
were now offering unlocked cell phones in the marketplace and 
providing consumers with greater choices. The 2012 rulemaking 
concluded that an exemption should continue for phones 
purchased by consumers on or before January 26, 2013, but that 
phones purchased after that date would not be provided an 
exemption from the anti-circumvention prohibition.\6\ The 2012 
decision by the Copyright Office was intended to provide a 90-
day period during which consumers would have sufficient time to 
purchase phones that would be covered by the exemption.
---------------------------------------------------------------------------
    \5\See http://www.copyright.gov/1201/2006 and http://
www.copyright.gov/1201/2010.
    \6\See U.S. Copyright Office, Section 1201 Rulemaking Fifth 
Triennial Proceeding to Determine Exemptions to the Prohibition on 
Circumvention, Recommendation of the Register of Copyrights (Oct. 2012) 
[hereinafter Recommendation of the Register of Copyrights].
---------------------------------------------------------------------------
    Shortly after the 2012 rulemaking decision was issued, more 
than 114,000 individuals signed a petition criticizing it and 
demanding that unlocking be exempted from the prohibition. 
Likewise, the White House and the Federal Communications 
Commission also expressed support for an exemption for cell 
phone unlocking.\7\
---------------------------------------------------------------------------
    \7\R. David Edelman, It's Time to Legalize Cell Phone Unlocking, 
available at http://
petitions.whitehouse.gov/response/its-time-legalize-cell-phone-
unlocking; Ajit v. Pai, Don't Treat Consumers Like Criminals, N.Y. 
Times, Jun. 5, 2013, at A23.
---------------------------------------------------------------------------

                     SECTION-BY-SECTION EXPLANATION

    The following is a description of the substantive 
provisions of H.R. 1123, as reported.
    Sec. 2. Repeal of Existing Rule and Additional Rulemaking 
By the Librarian of Congress. Subsection (a) of section 2 of 
the bill reinstates the previous exemption by negating the 
October 2012 change and reinstating the 2009 exemption, subject 
to subsections (c) and (d), which deal with unlocking at the 
direction of the purchaser or family member and rules of 
construction.
    Subsection (b) directs the Librarian of Congress, upon the 
recommendation of the Register of Copyrights, to consult with 
the Assistant Secretary for Communications and Information at 
the Department of Commerce and undertake a new rulemaking 
within 12 months to determine if any other category of wireless 
devices in addition to wireless telephone handsets should also 
be covered by an exemption.
    Subsection (c) permits circumvention by the purchaser of 
the handset, by a family member of the purchaser, or by another 
person at the direction of the purchaser or family member, for 
the sole use or benefit of the purchaser or family member.
    Subsection (d) states that nothing in the bill alters or 
can be construed to alter the authority of the Librarian of the 
Congress under section 1201(a)(1) of title 17, United States 
Code, including the authority, with respect to the applicable 
3-year period, to modify or delete paragraph (3) of section 
201.40(b) of title 37, Code of Federal Regulations, or modify 
or delete any category of wireless devices exempted under 
subsection (b) of this section.

                       ISSUES RAISED BY H.R. 1123

I. Inadequate Process
    H.R. 1123, as originally introduced, represented a 
carefully crafted agreement that was supported by Members of 
both parties, industry experts, and key consumer and business 
stakeholders. On the eve of the Committee's markup, however, 
this compromise was replaced with the text of an amendment by 
Representatives Jason Chaffetz and Zoe Lofgren (Chaffetz/
Lofgren Amendment), which was not officially released to all 
Democratic Members until 9:00 pm on the night preceding the 
markup that was scheduled for 11:00 am the following morning. 
As a result, our Members neither had sufficient time to review 
the language and assess its potential ramifications nor to 
consult with consumer groups, as well as governmental and 
private sector representatives for their analysis.
II. Third Party Assistance
    As introduced, H.R. 1123 restored the 2010 exemption, which 
adequately responded to the concern that consumers should be 
able to unlock their cell phones. The two prior exemptions by 
the Copyright Office never explicitly authorized third party 
assistance, and the introduced bill was consistent with that 
approach.
    The Chaffetz/Lofgren Amendment, however, added a third-
party assistance provision that expanded the universe of 
individuals who could lawfully perform the unlocking service 
which exceeded the exemptions previously allowed by the 
Copyright Office. Under the Amendment, any ``family member''--
which is not defined in the measure--or any third-party that a 
purchaser (or family member) authorizes to unlock a phone can 
do so. The Amendment's failure to define who would qualify as a 
``family member'' could invite unnecessary and unenforceable 
probes into who may qualify as a ``family member.'' In 
addition, this language may unintentionally aid those who 
traffic in stolen devices and encourage the bulk purchase and 
sale of unlocked phones by unauthorized dealers. Further, the 
Amendment's explicit authorization of third-party assistance 
was made permanent and thus would be virtually unreviewable 
under the traditional 1201 proceeding even though future 
advancements in technology may render the provision 
unnecessary. This third-party assistance provision was not 
included in the bills introduced by the House and Senate on a 
bipartisan basis in March.
    This last-minute expansion has been made without a record 
showing that it is necessary and without any safeguards to 
minimize the possibility of fraud or other activities that 
could harm consumers. Testimony from the hearing on the 
original bill indicated that having carriers involved in 
unlocking would not pose an obstacle to consumers as they 
should be able to unlock with a new carrier or agent of the new 
carrier. This allows the individual to get the appropriate 
technical assistance from the carrier to whom he or she wants 
to transfer service. This process would be effective, and would 
ensure that a cottage industry does not form that can exploit 
consumers. As Mr. Mike Altschul, General Counsel, CTIA 
testified during the Committee's hearing on the bill, ``the 
benefit of having the carrier do the unlocking is that you do 
not go to a third party source on the Internet or elsewhere 
which, in the unlocking process, increases the risk of malware 
and viruses being inserted into the devices.''\8\ These are 
issues that we do not take lightly and the bill as reported 
could increase the likelihood of these concerns.
---------------------------------------------------------------------------
    \8\Unlocking Consumer Choice and Wireless Competition Act: Hearing 
on H.R. 1123 Before the Subcomm. on Courts, Intellectual Property, and 
the Internet of the H. Comm. on the Judiciary, 113th Cong. 55 (2013) 
(testimony of Michael Altschul, General Counsel, CTIA--The Wireless 
Association).
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    In response to the Chaffetz/Lofgren Amendment, Committee 
Ranking Member John Conyers, Jr. (D-MI) and Subcommittee on 
Courts, Intellectual Property, and the Internet Ranking Member 
Melvin Watt (D-NC) offered at the markup a substitute amendment 
that would have limited the measure's third-party assistance 
provision to carriers or their authorized agents (Watt/Conyers 
Amendment). The Watt/Conyers Amendment was offered in 
recognition of the concern that the explicit authorization in 
the Chaffetz/Lofgren Amendment that would allow virtually 
anyone to perform the act of unlocking is perceived as a 
potential erosion of the prohibition in 1201(b) that applies 
beyond the cell phone market. The Watt/Conyers Amendment failed 
by a vote of 8 to 17.
III. Imposition of Third-Party Requirement on Future Exemptions 
        Involving the Category of Works that Includes Tablets
    As introduced, the bill would have restored the previous 
authority for cell phone unlocking and authorized an out-of-
cycle 1201 rulemaking proceeding for related wireless devices 
such as tablets and other connected devices. Following the out-
of-cycle proceeding, requests for a cell phone unlocking 
exemption as well as that for tablets and other devices would 
be considered along with any other exemption request every 3 
years under the customary processes and procedures mandated by 
the DMCA.
    The bill as reported by the Committee requires third party 
assistance to unlock devices beyond cell phones whenever the 
Copyright Office issues an exemption for those devices. The 
Copyright Office has never recommended an exemption for ``other 
categor[ies] of wireless devices,'' in the first instance. 
Under H.R. 1123 as reported, if the Copyright Office grants an 
exemption for cell phones or the other category of wireless 
devices in future proceedings, it is mandated to also permit 
third party unlocking. This issue--unlocking and the need for 
assistance for devices beyond cell phones--deserves and 
requires further examination.
IV. Potential Impact on Copyright Office Rulemaking
    The bill as introduced preserved the 1201 process by 
narrowly focusing on the specific determination concerning an 
exemption for cell phone unlocking. This targeted approach left 
intact the valuable proceedings under which the Copyright 
Office gathers evidence to determine whether exemptions are 
warranted to the legal ban against circumventing technological 
measures that protect uninhibited access to copyrighted works.
    The Chaffetz/Lofgren Amendment also requires an out-of-
cycle proceeding to consider whether tablets and other wireless 
devices should be exempt from the anti-circumvention 
prohibition. As noted above, however, the amendment also added 
the third-party assistance requirement to any future 
rulemakings in which an exemption is authorized for cell phones 
or any other wireless devices, including tablets, for which 
there has never been an exemption provided in prior triennial 
reviews. The technology in wireless devices as a category, as 
opposed to cellular handsets, has never justified an exemption 
in prior 1201 proceedings. In an effort to ensure that third 
party assistance to unlock tablets is statutorily mandated 
whenever the Copyright Office grants an exemption for the 
category of works that includes tablets, the Chaffetz/Lofgren 
Amendment removes the ability of the Copyright Office to 
evaluate relevant evidence and intervening developments, and it 
does so without regard to its impact on the broad range of 
devices that are encompassed by that category.
    The current process of evaluating the options and 
technological advances available to consumers to ensure a 
healthy competitive marketplace and protect copyrights has been 
time-tested. Steven Metallitz, Counsel to the Joint Creators 
and Copyright Owners, explained the reasons why we should 
respect the Copyright Office rulemaking:

        First, instead of the Copyright Office ranging the 
        field to regulate uses of access controls that a 
        government official might think are problematic, it 
        relies on private parties to step forward to identify 
        exactly where the exemptions are needed. Second, 
        exemptions are reserved for situations in which they 
        are necessary or it is impossible or extremely 
        burdensome to make a noninfringing use without 
        circumventing access controls. Third, all the 
        exemptions expire after 3 years. So the Copyright 
        Office and the Librarian take another look at that 
        point. That makes sense, given the pace of technology 
        and pace of change in market developments. And fourth, 
        the Copyright Office has consistently provided detailed 
        explanations of its recommendations. We do not always 
        agree with them, but they provide a lot of useful 
        guidance.\9\
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    \9\Id. at 41 (testimony of Steven J. Metalitz, Counsel, Joint 
Creators and Copyright Owners).
---------------------------------------------------------------------------

                               CONCLUSION

    We support legislation that restores the ability of 
consumers to unlock their cell phones and that preserves the 
Copyright Office's role in conducting a robust review of the 
requests for exemptions from the DMCA's anti-circumvention 
provisions. As originally introduced, H.R. 1123 achieved these 
goals. Unexamined changes to the original bill made during the 
Committee's markup raise issues that may result in unintended, 
adverse consequences. In light of the voluntary agreement 
reached in December 2013 by the major cellular network 
providers that further improves consumer's ability to unlock 
existing phones and switch carriers, these issues may also 
warrant further examination.

                                   John Conyers, Jr.
                                   Jerrold Nadler.
                                   Robert C. ``Bobby'' Scott.
                                   Sheila Jackson Lee.

                            Additional Views

    The Unlocking Consumer Choice Act as reported by the 
Judiciary Committee is intended to fix a problem caused by a 
Copyright Office decision in implementing section 1201 of the 
Digital Millennium Copyright Act. Section 1201 forbids 
circumvention of technological measures that control access to 
a work protected by copyright. The penalties for violations 
include civil liability, imprisonment, and heavy fines.
    Under section 1201, persons are legally barred from 
unlocking their personally owned cell phones or tablets, even 
after the expiration of their service contract.
    Allowing consumers to unlock their wireless devices enjoys 
wide support from multiple stakeholders. In an official 
response to a ``We the People'' petition, the White House gave 
full support for allowing consumers to unlock their cell phones 
and tablets.\1\
---------------------------------------------------------------------------
    \1\https://petitions.whitehouse.gov/response/its-time-legalize-
cell-phone-unlocking.
---------------------------------------------------------------------------
    Subsequently all the major wireless service providers 
voluntarily agreed to unlock cell phones and tablets for 
customers who were no longer under contractual obligation with 
the service provider. In announcing the agreement to unlock 
cell phones and tablets, CTIA stated that the ``agreement will 
continue to foster the world-leading range of devices and 
offerings that Americans enjoy today.''\2\
---------------------------------------------------------------------------
    \2\CTIA Announces Voluntary Principles on Unlocking Wireless 
Devices, http://blog.ctia.org/2013/12/12/ctia-announces-voluntary-
principles-unlocking-wireless-devices.
---------------------------------------------------------------------------
    By permitting consumers to unlock phones for personal use, 
this bill will strengthen consumer choice and protections. It 
allows the tech savvy to assist their less savvy family members 
and friends in unlocking their device. Additionally, allowing 
any third-party to assist with the unlocking will ensure that 
any fees associated with unlocking will be reasonable. This 
also provides consumers with the freedom of not having to deal 
with former service providers, or potentially face restrictions 
on cell phone unlocking in foreign countries when taking their 
phone overseas.
    However, this bill is just a small step in the right 
direction of a much bigger issue. The current broad protections 
for other types of ``digital locks'' harms consumer choice, 
encourages anti-competitive behavior, and stifles innovation 
and does not conform to the thinking outlined in Lexmark V. 
Static Control Components.\3\
---------------------------------------------------------------------------
    \3\Lexmark Intern. v. Static Control Components, 387 F. 3d 522.
---------------------------------------------------------------------------
    Lexmark had developed a microchip based authentication 
system for its printer toner cartridges that prevented the use 
of refilled cartridges as well as the use of third-party 
competing cartridges.
    Lexmark asserted that section 1201 of the Digital 
Millennium Copyright Act prevented Static Control Components 
(or any other printer cartridge manufacturer) from creating its 
own version of the authentication chip because of the copyright 
associated with the software used to operate the printer, even 
though the lock itself did not protect this software or any 
other copyrightable content. This essentially eliminated all 
competition.
    The court in Lexmark sided with Static Control Components 
and, recognizing the potential for future abuses, in his 
concurring opinion Judge Merritt wrote that: ``our holding 
should not be limited to the narrow facts surrounding either 
the Toner Loading Program or the Printer Engine Program. We 
should make clear that in the future companies like Lexmark 
cannot use the DMCA in conjunction with copyright law to create 
monopolies of manufactured goods for themselves . . .''\4\ In 
other words, using a lock to assert control over a non-
copyrightable product rather than to protect copyrightable 
content was not a permissible understanding of 1201. Otherwise 
the DMCA could impermissibly be used to protect monopoly.
---------------------------------------------------------------------------
    \4\Lexmark Intern. v. Static Control Components, 387 F. 3d 522, 
Judge Merritt Concurring at 551.
---------------------------------------------------------------------------
    The view that circumvention alone is illegal cuts off the 
potential of innovation to use devices in unique but otherwise 
lawful ways not intended by the manufacturer. In essence, at 
stake is what it means to ``own'' a device that has been 
purchased. Individuals should be free to tinker with and 
customize the devices they own to the fullest extent unless the 
rights of others, such as copyright owners, are infringed.
    Judge Merritt understood that ``Congress did not intend to 
allow the DMCA to be used offensively in this manner, but 
rather only sought to reach those who circumvented protective 
measures `for the purpose' of pirating works protected by the 
copyright statute.''\5\
---------------------------------------------------------------------------
    \5\Id. at 552.
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    While I support the Unlocking Consumer Choice Act as 
introduced and as reported out of the Judiciary Committee, it 
is time for Congress to reexamine section 1201 and make clear 
that circumvention for uses that do not infringe on copyright 
are permitted--as was the original intent of the law.

                                   Zoe Lofgren.

                                  

```