Copyfutures

NOBODY IS BETTER OFF WITH INDUCE/DONT INDUCE

The media industry supports the “Inducing Infringement of Copyrights Act of 2004” (commonly known as Induce Act) as an effort to crack down on digital piracy by amending 17 U.S.C. §501 to allow liability for an “intent to induce infringement.”

The Home Recording Rights Coalition (HRRC) has drafted and sent an alternative to the Induce Act called the Discouraging Online Networked Trafficking Inducement Act of 2004 (DONT Induce). The primary difference is that DONT Induce narrows liability to those who traffic in software that engage in indiscriminate infringement with the specific and actual intent to reap financial gain by “encouraging” such behavior.

Opponents of the Induce Act state that the standard for liability is hopelessly vague and subjective. Intent, by its very nature, is a subjective state of mind and passage of the Induce Act would gut the heart of “substantial non-infringing uses” in Sony v. Universal City Studios and leave an empty shell of protection by allowing copyright owners to essentially haul anyone into court where a reasonable person might infer an intent to induce infringement. Thus, the Induce Act would move away from the objective standard of substantial non-infringing uses and allow the subjective standard of intent to induce infringement to reign over infringement suits.

However, DONT Induce doesn’t fare much better. DONT Induce aims to narrow liability to those with a specific and actual intent to reap financial gain through infringing activities. Again, the standard is subjective and an assessment of the actor’s state of mind needs to be made in determining liability for copyright infringement. Technology companies are fair game as targets of copyright infringement suits because it is arguable that the technology they provide encourages infringement and was provided for the ultimate goal of financial gain. An argument can be made for financial gain even when the technology is gratis because the company gains market identification (brand recognition) and ultimately goodwill by providing the technology to the public.

An argument can be made suggesting that DONT Induce is actually worse off than the Induce Act because DONT Induce requires at least two judicial determinations and the Induce Act requires at least one judicial determination. Under DONT Induce, the courts have to decide whether the infringement is the predominant function of the defendant’s software and whether it is the distributor’s predominant source of revenue. The Induce Act only requires a judicial determination whether the defendant intended to induce infringement.

It is clear that the Induce Act would shift the infringement analysis to a subjective standard. If the goal is to preserve the objective standard in Sony v. Universal City Studios, the best solution is defeat the Induce Act rather than enacting DONT Induce Act and requiring a greater judicial expenditure of resources in adjudicating infringement cases. The objective standard is an almost universally accepted method to conserve judicial resources and reduce the number of cases that require adjudication. Copyright owners remain free to identify and sue copyright infringers individually under Sony v. Universal City Studios.

It is worthwhile to note that this writing examines only one of the controversial issues of the Induce Act/DONT Induce Act (specifically the burdens that would be created for the courts in determining intent to infringe). There are other issues of the Induce Act/DONT Induce Act that have not been examined but are important to consider in fully understanding the Induce Act/DONT Induce Act.

AN ALTERNATIVE INTERPRETATION OF FAIR USE

Judge Richard Posner recently guest-blogged at Professor Lessig’s blog page. One of the many topics on which Judge Posner writes about is the concept of fair use in copyright. As it is now, the fair use doctrine is very vague. Judge Posner has recently written an article, which will appear in the California Law Review, that offers an alternative interpretation of the fair use doctrine.

I. Current Law

The current law that governs fair use is given in Section 107 of the Copyright Act of 1976.
Section 107 gives four factors to be considered in determining whether the use of a work in any particular case is a fair use:
1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.
In one of Judge Posner’s posts, he notes that the weighing of the factors is often quite subjective. Each person may give different weight to each factor. The subjective weighing of the factors will, of course, lead to an inconsistent standard for determining what type of use is considered fair use.

II. Alternative Interpretation

In another post, Judge Posner mentions an article (co-authored with Bill Patry) that will soon appear in the California Law Review, which offers an alternative interpretation of fair use. This new interpretation will solve the problems that arise with extending copyright terms. Specifically, Judge Posner and Mr. Patry argue “it should be considered fair use to copy an old work if the copyright owner hasn’t taken reasonable steps to provide notice of his continued rights, as by entering his name and address in a copyright registry.” By following this alternative, it will reduce problems that may arise like those encountered by JibJab Media, Inc.

III. JibJab

A recent situation arose in which a group, JibJab Media, Inc., was using the Woody Guthrie song “This Land Is Your Land” in a political parody where President George W. Bush and Senator John Kerry are slinging insults at each other. Ludlow Music, Inc. claims to own the copyright to the song. In the complaint, JibJab claimed that their use of “This Land Is Your Land” was fair use. If the alternative interpretation of fair use proposed by Judge Posner and Patry were used, it would be a simple matter of checking a national registry to see if the owner of the song’s copyright had indeed taken steps to protect his/her rights in the song.
As it turned out, JibJab and Ludlow Music settled and JibJab dismissed its suit. According to the Electronic Frontier Foundation, the song went into the public domain in the early 1970s. Guthrie wrote “This Land Is Your Land” in 1940, when copyright laws granted a term of twenty-eight years. The copyright term was triggered in 1945 when Guthrie sold the first version as sheet music. The copyright on the song ran out when Guthrie failed to renew the term. Of course, Ludlow disputes this, but the matter is now moot because the parties have settled. As part of the settlement, JibJab will remain free to distribute its parody.

IV. Conclusion

As shown by the JibJab situation, the alternative proposed by Judge Posner and Patry will save a lot of time. If it was not for the parties settling, the case may have been a long, drawn out process. Following the alternative interpretation, all one would have to do is check something like a national registry to see if the copyright owner had taken steps to protect his/her rights. This will likely create more consistency in the interpretation of what is considered fair use, instead of generating inconsistency by weighing the four factors in Section 107 of the Copyright Act.

Recording Satellite Radio Broadcasts

Wired Magazine is running an article about a Canadian programmer, Scott MacLean, who wrote a program to digitally record XM radio broadcasts and concerts directly onto his hard drive. In addition to recording the concerts, the program arranges the songs and catalogs the artist name and song title information. The RIAA and XM trying to figure out if MacLean has broken any copyright laws. Here's a snippet

MacLean's software essentially marries the song information with an analog recording of the broadcasts, then stores this in MP3 files. The user can leave the software running unattended for hours and amass a vast library of songs.

That feature has been a central concern in the music industry as it lobbies regulators to place restrictions on free copying of digital broadcasts before many more radio stations add digital broadcasts. About 300 stations already offer digital broadcasts.

Music labels fear the convenience of MacLean's software will lead millions more to copy and distribute songs over file-sharing networks such as KaZaA, a music industry source said.

This type of software proves to be an interesting area. Potentially it could be viewed as simply an analog recording akin to a tape recorder or a VCR. On the other hand, is it really an analog recording when there has been no conversion of digital to analog?

XM Radio surrenders

XM Radio has decided it’s not worth the fight to continue to make its XM PCR device. (NY Times) In connection with a third party software title called Timetrax, PCR allowed listeners to download the music directly to their personal computers. With Timetrax, PCR can capture songs, artist and title information from the radio. Since XM Radio discontinued the PCR, these devices are hot commodities on eBay. XM Radio will not discuss the reasons why they discontinued the PCR but it is pretty obvious why they did so. You can basically score another one for the recording industry. XM Radio has seen other companies spend large amounts of money in litigation and end up losing in courts and ultimately going out of business. So rather than go through this process, the executives at XM have appeared to surrender, for now, and stop making PCR’s.
The recording industry is going after anyone and everyone. Digital radio appears to be the next one for the recording industry to either stop or gain control of. An article in the San Francisco Chronicle (SF Chronicle) talks about the development of HD Radio. AM will sound like FM and FM will sound like cds. The transition from normal radio to HD radio is still years away but the fear is that people will be able to download cd quality music for free. For p2p to work, someone in the beginning has to buy the cd and then share the music. But now, no one has to buy a cd. They can just get the song for free on the radio and eventually have a whole collection of songs without ever buy a single cd. What the courts will decide and if a balance can be struck is still up in the air. The idea of better sounding radio or to hear any station clearly, especially driving in the middle of no where, is extremely appealing. I want to be able to use the technology that is out there. I also understand it is the companies and artists livelihoods we are talking about.

A proposed new US copyright model

In his blog, Joe Gratz details an upcoming Stanford law review article by Chris Sprigman, entitled Reform(al)izing Copyright. Sprigman offers a compelling argument that after the United States eliminated required formalities within the copyright renewal process, there was a paradigm shift in the economics governing creative works of limited commercial value.

Prior to the move to unconditional copyright renewals in the late 1970’s, copyright holders had to decide whether or not it was worth expending the time and money to renew expiring copyrights. Although the costs and efforts required were slight, they were enough to ensure that many works were not renewed. These works then moved into the public domain, offering the possibility of future re-use by others.

In order to comply with the Berne Convention governing copyrights, the United States dropped its formality requirements. As a result, there is no incentive for American authors or copyright holders to take any form of action with regards to works that have little commercial value. Furthermore, works are now automatically copyrighted for 70 years after the death of the author.

Sprigman suggests that the perhaps the most viable solution is to change US law in a manner that would not run afoul of the Berne Convention.

This system of formally voluntary formalities plus default licenses - which I have referred to previously,
and will hereinafter, as "new-style" formalities - establishes indirectly what the traditional system of
compulsory formalities did directly: it eases access to commercially valueless works for which
protection (or the continuation of protection) serves no purpose, and focuses the system on those
works for which protection is needed to ensure that the rightsholder is able to appropriate the
commercial value of the expression. For the filtering function to work, of course, the government
would have to maintain an easily accessible and up-to-date public registry. Given current computer
database and search technology, this will not be difficult.

It will be interesting to see if the political will exists to actually improve United States copyright law. Read Judge Posner's take on overly strong copyright protection at Larry Lessig's blog for another look at the problem.

Posner on Grokster

Judge Richard Posner--guest blogging on Lessig Blog--has a post entitled In the Wake of Grokster… . Here's a taste:

The Grokster decision last week, if it holds up, will facilitate circumvention of copyright law by file sharing, by placing the sellers of the software for such sharing beyond reach of the copyright law. The liability of the sharers themselves is not affected; and already as we know hundreds of them have been sued by the recording industry. But copyright law also authorizes criminal sanctions. The Justice Department has not yet indicated an interest in prosecuting individuals who download just an occasional copyrighted song. But it is sometimes possible to deter unlawful behavior by a very slight threat of prosecution. Economists have the useful concept of an “expected cost.” If there is a 1 percent probability that you will incur a $100 cost, the expected cost is $1 ($100 x .01), and if you’re risk averse, you will spend up to $1 to avoid it. If the expected cost is an expected cost of punishment, it may be very great even if the probability of punishment is slight: many kids will stop downloading copyrighted songs if they think there is a 1 percent probability that they will be sent to prison for 6 months.

Actually, I think Judge Posner meant to say that if you are "risk neutral" you will spend $1 for to avoid a .01 chance of a $100 loss; if you are risk averse, then you will spend more than $1. But at least one interesting question is what the expected penalty from filesharing actually is. In the United States, there are probably more than 50 million users of filesharing programs. The total number of civil actions against P2P users (to date) is well under 5,000. The cost of being prosecuted is something like $10,000. Hence, there is about a .0001 chance of a $10,000 cost or an expected cost of $1. (Of course, this number could be off either way by an order of magnitude.) The benefit of using filesharing is, on average, fairly large; let's estimate it, very, very conservatively at $100 per user--probably low by an order of magnitude. Of course, the actual chance of being prosecuted seems currently to depend on the number of files that one makes available to others. Users who share fewer than 100 songs probably incur no costs at all. And this leads to a further wrinkle. P2P filesharing involves what economists call a "free rider" problem. That is, you can get the benefit of file sharing--the ability to download--without paying the cost--offering files to others by making them available to the P2P network. Why do P2P users share any files at all, given that they could be free riders? Part of the answer may be that P2P users enjoy sharing their files; it is a mode of self expression. Part of the answer may be the emergence of a social norm that rewards sharing and punishes (with social disapproval) free riding behavior. Read Posner's post!

In the wake of Grokster, is BitTorrent bulletproof?

In holding that Grokster is not illegal due to the potential for non-infringing use, the 9th Circuit seems to have given powerful legal ammunition to other P2P technologies with more promise for legitimate commercial uses. Specifically, swarming technologies like BitTorrent appear to have an even stronger case for commercial viability than the admittedly pirate-friendly (and legal) decentralized P2P programs like Grokster. The New York Times already has BitTorrent pegged as the next paradigm in file sharing.

A quick tech recap - BitTorrent allows publishers to post "torrent" files on a tracker, which is essentially a dedicated network only for that specific published file. The file is broken into small chunks and each downloader receives these chunks in a random order. Simultaneously, the pieces the downloader has already received are uploaded to his peers who are connected to the torrent. The net result is that a large number of users downloading the file at the same time equals faster download speeds for everyone. Once a file is no longer in high demand, the torrent eventually dies out. The technology is especially useful for large files because it alleviates the burden placed on the publisher's server in a traditional download. Swarming makes everyone who wants to get the file share the workload.

How does all of this technology relate to the current legal debate? Swarming has proven to be a viable legal distribution mechanism, as evidenced by high profile legitimate business uses. Linux is an open-source operating system, intended to be freely modified and made available for no cost to users. New builds of the Linux software are typically quite large, frequently exceeding 1GB. Problem - when the publishers of any popular Linux variant release a new version they are quickly overwhelmed with downloaders. Excessive bandwidth demands mean that servers are overloaded, users must wait in queues for their turn, and download speeds decrease for everyone. Enter BitTorrent. When users share the load amongst themselves, the publisher saves bandwidth and the downloaders are happy to get their large file in a speedy manner.

More examples of legitimate BitTorrent use are popping up every day. Blizzard Entertainment, one of the biggest names in the computer game industry, used BitTorrent to distribute beta versions of their World of Warcraft game to testers. Why bother printing CDs or taxing the company's servers when you can just harness the power of a bunch of anxious gamers who are waiting to grab your software the instant you choose to release it?

Sounds like a valuable business lesson for rival game maker Valve, who made a major download of their highly anticipated Half Life 2 game available on the company's proprietary Steam service on August 26. Valve's service sends encrypted files directly to registered users' machines, and paying the registration fee allows users to unlock the encryption. However, high demand for the game resulted in the following message for much of the first day of release: "The Steam servers are currently too busy to handle any more preloads of Half-Life 2. Please try again in a few hours." Applying swarming principles to similar future versions of the distribution service seems like a move that could ease frustrations for both the company and their customers. It appears that Valve is already aware of the potential - the company hired BitTorrent's creator, Bram Cohen, this spring.

The software industry is not the only one that can benefit from applying some of these peer-to-peer principles to their distribution strategies. It is certainly not inconceivable to envision a near future in which movie studios deliver encrypted digital versions of the latest hit film directly to users over high speed internet connections. Think of it as iTunes for movies. In order to make such a project feasible, the studios would want to address the problem of the massive bandwidth required to distribute such unavoidably large files. Swarming based technologies would take some of the burden and offload it to downloaders. Even if the system was not 100% peer-to-peer, a hybrid technology designed to kick in during peak download times and use the resources of concurrent downloaders doesn't seem like an entirely unrealistic proposition.

Ironically, the decision in Grokster might be the best thing that could have happened for the music labels and movie studios. The technologies that the entertainment companies are fighting may very well be incorporated into their future business models. Much like the RIAA's legal "victory" over Napster actually hurt the music companies by ushering in the age of decentralized P2P, the music industry's defeat in Grokster could be a key in the development of the next big thing for commercial entertainment.

The 9th Circuit was wise in taking a stand that will protect innovation. Now enterprising software developers are encouraged to push the boundaries of new technology with less fear of being sued by big entertainment. Besides, isn't giving authors an incentive to create one of the rationales of having intellectual property law in the first place?

See also nationally known network security expert Joe Stewart's 2004 paper "BitTorrent and the Legitimate Use of P2P"

Lessig on Copyrighting the President

Over at Wired, Larry Lessig has a column entitled Copyrighting the President. Here's a taste:

The US president owns neither his words nor his image - at least not when he speaks in public on important matters. Anyone is free to use what he says, and the way he says it, to criticize or to praise. The president, in this sense, is "free." But what happens when the commander in chief uses private venues to deliver public messages, holding fewer press conferences and making more talk-show appearances? Who controls his words and images then?

The Future of Copyright

Copyfutures will go live around August 24, 2004. This theme of copyfutures will be "The Future of Copyright." This group blog will include posts from members of Lawrence Solum's Intellectual Proprety Seminar: The Future of Copyright at the University of San Diego for the Fall of 2004.

Students enrolled in the Seminar can begin to post over the summer. Email me for details.

Sterk on Real P and IP

Stewart Sterk of Cardozo Law School has a very interesting new paper up on SSRN. The title is What's In a Name?: The Troublesome Analogies Between Real and Intellectual Property. Here's a taste from the abstract:

After exploring the weak correlation between justifications for rights in land and in works of authorship, the article explores how the disparate justifications should and do shape doctrine. In particular, the article suggests that differences in duration of rights, in the scope or the right to exclude, and in the availability of injunctive relief can be explained by differences in justification for property rights. The article then turns to the interplay between copyright and contract, and suggests that here, too, the difference in foundation for real and intellectual property rights cautions against resort to easy analogies to resolve unique and difficult problems.