April 2005

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April 21, 2005

The Future of Copyright

Many of the themes explored in the seminar that produced Copyfutures are examined in The Future of Copyright, available for download on SSRN. Here is the abstract:

    Sometimes technological change is so profound that it rocks the foundations of an entire body of law. Peer-to-peer (P2P) filesharing systems - Napster, Gnutella, KaZaA, Grokster, and Freenet3 - are mere symptoms of a set of technological innovations that have set in motion an ongoing process of fundamental changes in the nature of copyright law. The video tape recorder begat the Sony "substantial noninfringing use" defense. The digital cassette recorder begat the Audio Home Recording Act. The internet begat the Digital Millennium Copyright Act.6 Napster begat Napster. We see the law morph right in front of our eyes, but its ultimate form is still obscure. As a consequence, the future of copyright is up for grabs. We live in a magical, exhilarating, and frightening time: Many alternative copyfutures8 shimmer on the horizon, sometimes coming into sharper focus and sometimes fading away. In this heady atmosphere, the idea slingers are at work. Richard Posner and William Landes have proposed indefinitely renewable copyrights. Neil Netanel, William Fisher, and others propose to legalize P2P filesharing and replace the lost revenues with a tax on hardware and internet service. Joseph Liu suggests that the scope of fair use should grow with time. Mark Lemley is debunking ex post justifications for intellectual property. No surprise, the academics do not have a monopoly on idea slinging. The Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA) have gone on the offensive, proposing legislation like the "Induce Act," targeted at shutting down P2P filesharing services that allow third parties to share copyrighted content. No copywarrior is more prominent and influential than Larry Lessig. Lessig was the brilliant architect of Eric Eldred's failed challenge to the CTEA's retroactive twenty-year extension of copyright terms - effectively a twenty-year moratorium on new works entering the public domain. In Free Culture, Lessig has remade himself as a "norm entrepreneur" - a public figure with the towering ambition of reshaping "copynorms" - the fundamental set of social norms that shape perceptions of the morality of filesharing and the legitimacy of legislation that shrinks the public domain. This essay examines the ideas in Free Culture in the context of current controversies over the future of copyright.

Continue reading "The Future of Copyright" »

December 21, 2004

Can I Call This a "Solution" if I Don't Think There's a Problem?

    It seems as if no one in our class likes the current copyright regime.  What I find most interesting, however, is what we identify as its problem.  Some think the problem is that the regime is too restrictive, and concentrates too much power to a few large corporations.  Others think the problem is that the current regime is so easily, and repeatedly infringed upon, with little consequence that it's viability is in question.  I tend to agree more with the latter than the former. I will focus exclusively on the relationship between digital media copyrights (specifically music and movies) and P2P, the area we spent the most time on and also the most interesting.  I may post more, but this post will serve as my "final post" wherein I identify the problems I see with the current regime (including their tactics), and offer a practical solution on how to remedy them.

    The biggest problem I see with the current copyright regime is that it is so easily and repeatedly violated that I fear the content providers will seek to regulate emerging technologies in some way.  And succeed.   We may  feel smug in our "knowledge" that the "horse is out of the barn," but  content providers don't appear to uniformly hold this view.  Also, history shows the content industry isn't shy when it comes to prosecuting and regulating enabling technologies (Betamax, Napster, Grokster, INDUCE, etc.). 

My solution for content providers is three-pronged:

  1. Selectively sue infringers
  2. Tell your story more effectively
  3. Cut prices


I. Selectively Sue Infringers

    Even at this late date, many people do not think of downloading content for personal use as "stealing."  This doesn't much matter so long as they know it's illegal and will be punished for it.  A recent Harris Poll  of 2,306 adults revealed some disturbing results:

Fully three in four adult Americans (75%) agree that "downloading and then selling the music is piracy and should be prohibited, downloading for personal use is an innocent act and should not be prohibited."

This is consistent with a Harris Interactive survey of teens released in October 2003 which showed that roughly three in four teens feel that downloading music files without paying (74%) and letting others download files from them (78%) should be legal.

Nearly two of three adult Americans (64%) agree that musicians and recording companies should get the full financial benefit of their work. (all emph. added)

    Certainly I can't be the only one who finds it strange that 75% of respondents would simultaneously believe that "downloading for personal use is an innocent act and should not be prohibited" and, that "musicians and recording companies should get the full financial benefit of their work."  If we're to assume - correctly, I might add - that the extent of the financial benefit musicians and record companies receive is almost exclusively a function of the legal rights afforded them, then this these two beliefs are contradictory.  Musicians and record labels   I suspect that most people don't view copyright law this way. 
   
    The majority also agreed w/ the first part of the statement that, "downloading and then selling the music is piracy and should be prohibited."  I think most people feel that if someone were to do this, they would receive the financial benefits that rightfully belong to the musician and record labels, thus depriving the rightful parties of that financial benefit.  I think  those same people feel that when they are "downloading for personal use[,]" they are committing an innocent act because they are not receiving any financial benefit.

    Content providers should file lawsuits against the largest individual infringers on the sharing (supply) side.  Fellow classmate, Tommy O'Reardon, has a similar proposal.  He seems to have been met with more skepticism, resulting in a post titled, "Why won't anybody listen to me?"  (I'm listening Tommy!).  Lawsuits would serve two purposes: (1) Reduce the number of large file-sharers, thus, reducing the number of copyrighted files on the network and (2) Educate the public that downloading or uploading  copyrighted content, even for personal use, is a crime.

    In, "Reducing Digital Copyright Infringement Without Restricting Innovation," author Mark Lemley states:

While the number of users of p2p networks such as Morpheus and (before the injunction) Napster is massive, the overwhelming majority of those users engage only in downloading. Indeed, by one estimate, 3% of the users of a p2p network upload 97% of the files on that network. These high-volume uploaders also seem to be the users most likely engaged in uploading illegal content, rather than providing access to legal files. They are easy to identify, both because they will repeatedly appear in content searches and because many run so-called "supernodes" that facilitate fast downloads.  (emph. added)

     While the exact effect is unknown, a likely drop in file sharing would occur.  The only question is how substantial that drop would be.  The content providers need not sue every infringer - a "solution" that many have rightfully criticized as impractical - to substantially reduce infringement.  The secondary effect would be to scare current uploaders to stop, as individuals benefit little from uploading.

    George Mason University Economist, Tyler Cowens, argues that, the lawsuits aren't done to scare off downloaders (a point I disagree with, if not in intent, at least in effect), but rather they are:

about spreading the idea that downloading is wrong and illegal... think of the lawsuits as one way to buy space in the newspaper, but without paying advertising rates.

    In a later post on his blog, Marginal Revolution,  Cowens gives us the bottom line:

I see the music companies as trying to hold back a new commercial norm. Specifically, the music companies are trying to maintain the old norm that you should always pay for music.

Two years ago most [American] downloaders did not know that their activities were illegal. Few uploaders felt guilty about making large numbers of songs available for free on the Internet. It was viewed as akin to lending your CDs out to your friends, except that the "friends" here were both anonymous and large in number. "Art should be free," right?
...
The music industry knows that the long run will bring a network of free music. It knows that free music may have illegal status, a "grey" status, white status (recorded from the radio), or perhaps be pirate (from abroad) but not illegal in the actionable sense. But there will be two networks, a pay network and a free network.
...
The music companies - present and future suppliers of the pay network - do not wish to face a ten year period where everyone is used to getting music for free. They do not want an entire generation to grow up thinking of music as a free commodity. They do not want hackers and illegal downloaders to become established as folk heroes.

Once commercial norms become established, they are difficult to dislodge. We are all used to breathing air for free. Imagine the response if suddenly we had to pay for air as we now pay for ice cream cones. Maybe the air would have a better quality and the price would be very low. Still I predict there would be a public outcry....  They cannot live with a norm that music should be free.  (emph. added)

    This ties back in to that other horse, still in the barn.  This is the single most important tactic that content providers must implement.  The MPAA is has announced that it plans to sue infringers, a decision partly based on what they saw the music industry go through.  The MPAA believes that the RIAA acted too slowly in filing civil actions against infringers, resulting in unnecessary losses.  They also believe that the the music industry's recent uptick is in some part due to the RIAA's renewed vigor in pressing ahead with lawsuits.
   
    Almost every foreseeable consequence from filing suits favors the content providers.  There is very little downside to this tactic because in reality, consumers have little else to choose from.

II. Tell Your Story More Effectively

    America's media companies are the richest, most influential, and most effective in the world.  To gaze across the global expanse is to witness American cultural hegemony, in large part shaped by these media companies.  Which is why I am always surprised at how inept and ineffective their anti-piracy advertising campaigns always turn out.  Content providers should leverage their natural institutional skillset, emphasizing storytelling.
    Show real individuals - no millionaire rap stars, please -  that were really harmed in some way and tie that back to downloaders.  At the same time, dramatize a real life lawsuit that will be prosecuted without mercy to show what can happen to violators.  Make an example out of a particularly egregious violator and explain that anyone could be next.  And then prove it by dramatizing a real court case against an "average Joe" or "average Jane."

III. Cut Your Prices

    Content providers will have to accept the fact that they can not completely stop P2P infringement.  In turn, they can no longer depend on their traditional distribution channels to provide the revenue streams they once did.  This does not mean, however, that content industries are headed towards inevitable decline, but it does mean that they will have to compete with P2P in the short term until they can innovate new channels and/or mediums.  The DVD is a great example of this innovation.  The new format / medium enabled content providers to generate nearly pure profit via the reissuing of hit films from their catalog; films that were producing little or no revenue prior.  The same Harris Poll cited above also shows:

[A]lmost... 70% say, "If the price of CDs was a lot lower, there would be a lot less downloading of music off the Internet."

    The hope is that lawsuits, coupled with a "good cop / bad cop" media blitz should make illegal file sharing much less attractive.  However, most of the hesitation towards file sharing  should be as a result of fear of punishment rather than some moral epiphany from the ad blitz.  I have no delusions that the 75% of the population who think that "downloading for personal use is an innocent act and should not be prohibited" will now view their actions as culpable of deserving of prohibition.  When consumers have only two choices, as they do here, the attractiveness of either option is a function of the other.  If content provider, for example, were to implement a five fold increase in prices (e.g. $55 movie, $90 CD) at the same time, file downloading would appear much more attractive, especially to the large segment of the population that was effectively shut out from the legal market.   

    For the short-term (1-4 years), content providers should cut their prices 15-30% across the board.  This will have several effects:

  1. Welcome Back!  Lower prices would soften the financial blow to those consumers that are being (re)-incorporated back into the legal market - helping to ease them (back) into the habit of paying for content.
  2. It makes P2P less appealing, legal content more appealing: See above
  3. It serves as a gesture of goodwill.  We punish those who cross us, reward those that are loyal.
  4. Keeps "grudge factor" down.  There is a small segment of the population that possesses the technical skill and resources necessary to create very good P2P software.  Let's say one of these people were to develop an alternate program that closed all the loopholes that content providers had been currently using to identify infringers.  This would be an expensive setback until alternate means could be found.  In the meantime, content providers would have to fight the spread of this technology, losing money all the while.  The hope is to reduce the number of people who would do this - out of spite, or a sense of being wronged - from the subset of people that are capable of doing this.  Equally important, it serves as a hedge against wide adoption from the consumer base, so that even if a new P2P technology were to come out, the hope is that they will be used to paying what they believe is a fair price for their content.

After that, well, there should be some other innovation that makes these technology specific problems moot.

 

 

 

 

 

 

 

 

The Court isn't the answer, so what now?

As a busy year in the world of digital copyright comes to an end, we have one big question.  Where to go from here?  We have seen failed attempts at legislation (the Induce Act), renewed attempts to go after end users as criminals (the MPAA joining RIAA in lawsuits against downloaders), the decline of some older technologies (Kazaa), and the growth of others (eDonkey, BitTorrent). 

[Oh wait, this just in… maybe BitTorrent is on the decline now too, at least for pirates.  Perhaps with the strengthened name recognition gained from *gasp* pirates, BitTorrent will become more of a widespread tool for legitimate purposes.  Maybe 2005 will be the year that people start to really see P2P as a legitimate non-infringing technology and not simply as having potential but with little actual non-infringing use.  It’s sure to come in time, just like the once-pirate technologies of radio, recorded music, and the VCR ended up being accepted in the  mainstream.]

One question that so many observers seem to think of as THE big one going into 2005 is the Supreme Court’s decision to hear the Grokster case.  Such a high profile case going to the highest court in the land sure does seem like news, especially to those of us who concentrate on the interplay of law and technology.  I thought the case was a big deal too.  But I’ve been thinking some more, and the question that I keep coming back to is this - 

Does the Supreme Court’s Grokster decision really matter very much at all?

If the Court rules for the content industry, it’s just the beginning of another cycle.  Maybe we push P2P infringement further into the underground for a while, but sooner or later the general public will catch up to the new technology learning curve and we will have the same problems again with a newer technology.  Perhaps widely used encrypted anonymous filesharing will be the hot button issue of 2006.  And regardless of what our Court decides, 15 year old hacker kids in Scandinavia aren’t going to change their ways just because Uncle Sam says so.  Even if the content industries win they’re just buying time until the next big threat, and the development cycle for threats to the content industries is awfully short these days.

Suppose the Supreme Court decision comes out the other way.  OK, so what.  The multi-billion dollar industries aren’t just going to admit defeat.  They’ll pay off some politicians, pass some legislation, and be on their merry way. 

The real question to me seems to be how to make P2P work as a business model.  No one really wants P2P to be destroyed.  The technology isn’t what the mega-corporations really hate.  What they really hate is that that it has so much potential to make money and they don’t control it.  After a bit of kicking and screaming about not getting their way, these companies will roll up their sleeves and get to work on innovating so that they can make some cash off this stuff.  (Doesn't that sound like the internet in general?  It started out more like a wild untamed frontier, and now it's becoming nothing but a pretty digital face for good old fashioned crass commercialism.)

First of all, in order to work, the P2P system has to be more appealing than the alternatives.  Even if the alternatives are free, they aren’t necessarily better.  A number of factors go into consumers’ decisions, including price, convenience, ease of use, marketing/image, and the law.  There is no magic solution.  Nobody is going to come up with the perfect law to prevent IP “theft”.  The real battle is to get consumers to weigh all of the factors and decide that the most efficient decision also happens to be a legal one.  Right now, the content industries haven’t innovated enough and the average consumer finds it fairly easy to use the illegal alternative.  Bad combination.  The industry has to combat that problem, and I see two keys that should work in tandem:

1.  Ally with consumer electronics.  People don’t mind migrating to new technologies – records to tapes to CDs, VHS to DVD, etc.  New hardware can even be backwards compatible, so consumers can use their old discs (Sony’s Blu-ray standard seems to follow that ideal).  Add DRM or copy protection to new hardware and compatible media.  You can’t really protect what’s already out there, but the media companies already know that old stuff doesn’t make them their money anyway.  Protecting the already-released Spider-Man 2 from piracy is now close to impossible, but that shouldn’t stop the rights holders from coming up with a new way to protect Spider-Man 3 and 4.  You won’t be able to stop piracy altogether, so get rid of that thought.  There will always be someone who just gets a kick out of defeating protection schemes.  However, hardware can make it more difficult for the average users to infringe, if only for a while.  While the average users are slowed down from rampant copying…

2. … shift priorities toward high quality electronic distribution.  Make a really good system for acquiring content – easy to search, easy to use, affordable, fast.  Perhaps use a two pronged sales approach – a la carte or subscription.  Cheap, high quality, easy to use single downloads (iTunes model) for those who don’t want to sign up as a subscription.  ALSO, a subscription model.  Ally with ISPs and tech companies (Google, Microsoft, AOL Time Warner).  Cable companies might be a good ally, because the cable industry is looking for an edge too.  Comcast is losing subscribers to satellite, so it has to try a little harder at selling high speed internet service.  What if that the cost of internet service was $50 a month, but the service came with unlimited downloads or streaming audio from the catalogs of the RIAA members?   Perhaps $6 every month goes straight from the ISP to the recording industry.  It’s a win-win situation.  The ISPs have their “killer app” in free, legal digital content.  The industry gets a nice revenue stream.  The consumers get lots of content for a low price. 

Don’t forget cell phone technology.  One interesting aspect of this area is that the media companies are getting stung by the comparatively poor mobile service we have in America when compared to Europe and Asia.  We are a couple generations behind on our wireless standards, at a time when advanced wireless could play a vital role in creating a new product that people really want to use.  The ability to play the entire catalog of Sony Music on your cellphone sure would sound nice to a lot of people.  Just plug in your headphones and you have an iPod without needing to download songs or rip music.  Oh yeah, and this little device also lets you surf the internet.  Oh, and it makes phone calls. 

The players who stand to lost the most in the future might be the major music labels.  After all, they are really just middlemen.  Artists don’t need a label to create music, and distributing that music is becoming easier by the day.  If a truly high-quality and high-profile digital distribution system is put into place (let’s say by Google), artists can deal directly with a distributor who can give them a better cut, rather than the artist exploitation that goes on with today’s outdated label system.  If a band needs publicity, they can hire a marketing agency for a lot less than they have to give up to be on a big label today.  What’s a label to do?  I would propose that they try to do less selling to the end user and more selling to/partnering with other corporations.  If the RIAA cartel gets together and makes a deal with Google, they might be set.  Rather than try to make a fortune convincing one user at a time to buy a shiny disc, try to partner up with a bigshot tech company and make the best damn digital distribution service conceivable.  How is some next-gen Kazaa really going to compete with the combined might of a Microsoft/MPAA/RIAA alliance?  With a technology shift frustrating the casual would-be pirates along with the combined marketing power and ubiquitous software, most people simply wouldn’t bother with trying to infringe. 

I suppose that’s where I stand now.  I’m rejecting the idea that the courts or the legislature have any say in the solution to this problem.  The people who have the ability to make the ultimate decision are the consumers.  Content industry – make your option more attractive to the people who have that power.  I’m not saying to give up on trying to use the courts or to stop creating DRM lock-out schemes.  Those things have their place.  But all those things are really doing is making piracy a little more frustrating for users.  Eventually the public will overcome it, the content industries will counter, and the cycle will repeat.  Make a good alternative to infringing and the cycle that repeats will become smaller and smaller every time because consumers will not think it’s worth trying to beat the system. 

Towards a New Copyright Regime: A Modest Proposal

Note: This post represents my proposal for an ideal copyright regime, free of any political considerations with respect to feasability of adoption.  My later post will differ in that I will advocate the use of  certain tactics by content providers, who, on the whole, I tend to support more than those who oppose them.

    "Property, a creation of law, does not arise from value, although exchangeable -- a matter of fact." So begins this post by Prof. Cass Sunstein, quoting J. Holmes in INS v. AP. Although Sunstein’s post is on a different topic, he explains the quote:

“What Holmes is saying here is that even though property is exchangeable, it doesn't arise from value; it's a creation of law. And that's simply a matter of fact.”

“Property rights, as we enjoy and live them, are a creation of law; they don't predate law.”

    Like Holmes, I take this as simply a matter of fact. It is the foundation for my proposal so if you disagree, you’ll have to play along for this post to make sense. Property rights, whether in real or intellectual property, are not “natural rights.”  Private property rights (aside from the Crown) is a relatively young idea and practice; the notion of property rights in IP even younger. This proposal is aimed at works that can be digitalized and easily and widely distributed; namely music and movies.

The 2 questions I’ll try to answer are:

1. What is the goal of copylaw?

2. What regime would best further that goal?


First Things:

    The Congress shall have Power… To promote the Progress of Science and useful Arts, by securing for limited Time to Authors and Inventors the exclusive Right to their writings. U.S. Const, Art I, sec. 8.

    Even though this proposal is an ideal one, free from political considerations, I’ve restricted myself from any solution that requires modifying the text of the Constitution. Since we’ve covered this in class, I’ll exclude any detailed discussion. Like real property rights, the goal of copylaw is essentially a public policy argument, “To promote… the useful Arts.” The usefulness, or utility, of a particular work varies depending on the person deriving utility. I find Milli Vanilli’s most recent album "useless" in this sense.  Perhaps you agree...

    In this light, my proposal serves a pure public policy goal, concerned only with maximizing overall utility.  While imperfect, I offer the free market system as the best mechanism to measure the utility, or value, of any particular piece of IP.  Simply put, the goal of copyright law is to make the most money possible for society as a whole.  Of course, we have to take into account fairness norms; we couldn't, for example, revoke someone's copyright simply because we thought they weren't maximizing the utility of a particular piece of IP.  In this sense, the proposal should greatly reflect the society's current notion of private property (and IP) as a natural right.

    We’re limited in our means: “securing for limited Time to Authors and Inventors the exclusive Right to their writings “

    Implicit in the text is the notion that a grant of exclusive right in a work – essentially,  the exclusive right to profit from ones labor – is an incentive that encourages the production of more “useful [a]rts” by society as a whole. This gain must be balanced against the lost potential gain the public bears for the duration of the copyright.  For example, George Clinton may have written a song back in the 70's that is no longer sold anywhere.  The Backstreet Boys may want to sample a riff from that song in order to create a new, hit song.  Clinton could refuse to sell the right to sample that riff, even if offered $1 million, and society overall would be poorer for it.  Following my proposal to an extreme conclusion, the governement would be authorized to rescind the right of exclusivity from Clinton and grant permission to the Backstreet Boys to use it.

    But this is an individual case, and even though we don't behave rationally in every instance, on the whole, the market behaves both rationally and efficiently.  Most people could be offered some price that they would agree to so the fact that there are some instances - and there always will be - where the market is not efficient does not show that the overall market system is inefficient.

    My argument is that an exclusive right to profit, for a limited time, from a piece of IP is the regime that would best serve the goal.  The time should be limited to 70 years from the time of creation (roughly one generation), however, this is not to be applied retroactively.  I support this long duration because certain works and brands possess great value and reflect a substantial investment on the part of the copyright holder.  Disney holds copyrights to their many characters and their movies, which they have invested a substantial amount in.  Protecting their ability to profit from this work is in society's best economic interest - unless you believe that society at large would be better able to generate revenue from Disney's copyrights.

    Registry: There should be a registry of all works copyrighted, more to serve notice to potential infringers than anything else.  However, the registry should be free, much like the "Do Not Call" registry.  This is to prevent an undue burden being placed on individuals who create IP.

It's Question and Answer Time

Over this past semester, our class has been discussing an area of law (and culture) that is in flux, with many new developments actually taking place during the semester, and many more yet to come. We were left with unanswered questions and no foreseeable solutions. With all these unanswered questions, I decided I would do a little question and answer session with myself ... interview style. So here it goes:

1) Will Congress intervene with new legislation aimed at thwarting p2p networks? Probably not in the immediate future. The failure of the INDUCE Act made it apparent that it will be difficult for the content industry and the electronics industry to reach a compromise. It is possible that Congress may try to pass a bill designed to eliminate "illegal" p2p networks if the Supreme Court does not rule in the content industry's favor in the Grokster decision. However, any potential legislation is not likely to be successful because it will fail to effectively stop p2p file sharing, but will probably have a chilling effect on innovation. I feel that we must find potential solutions that do not obstruct innovation or creativity.

2) Are intellectual property rights really necessary in order to provide incentives? Yes, they are. And I posted about that here.  Many scholars have argued for less copyright protection. The content industry has, of course, argued for more. I feel that we do not need to further extend the protection already conferred to copyright owners; instead we should focus on just how much protection is necessary without losing any of the incentives to create. I certainly feel that the Sonny Bono Act has extended copyright terms well beyond the length of time necessary for the requisite incentives. Many copyrighted works are abandoned or unused after only a few years and not allowing them to enter the public domain means these works essentially go to waste.

3) So just how long should copyright terms be? I don't know if there is an ideal answer for that yet, but I do like the Posner/Landes idea of a copyright registry with renewable terms. However, I do not think that the original author, or his/her heirs, should be able to renew the work indefinitely. I think an initial term of 20 years, plus one renewable term of another 20 years is sufficient. Thus, the work enters the public domain after either 20 or 40 years. I recognize that congestion effects are a potential problem with works that become available to the public. But seriously, after 40 years? I can't think of any work from 40 years ago that, if it entered the public domain, would suffer from congestion problems. There is just too much other content out there for people to focus that much attention on one work. Further, I don't think that placing the rights to the work in the hands of the author's heirs (or assignees) will necessarily bring about the most efficient use of the work.

4) So what does the future hold? The use of file sharing networks is going to continue to increase, especially as newer generations get introduced to the instant gratification of downloading free music. Some studies have reported that the introduction of p2p networks has increased music consumption, and contrary to what the content industry would like you to believe, has not hurt music sales. While music consumption may be up, there is no question that there are people out there who just aren’t buying CDs, but are downloading a significant amount of "pirated" music. This is hurting the content industry and its only going to get worse. Inevitably, the content industry at some point will have to absorb the blow and will be forced to scale back somewhere, and my guess is that it will not be in executive compensation. Instead, it will hurt content, as less money will be invested in new artists, and much of the money going to new artist development will be poured into those artists that are more “main stream,” and more likely to have higher record sales.

5) Is there a solution in sight? As our class has seen this semester, there is no quick and simple solution to the fine mess we’re in. It's not going to happen. You know it is bad when even Orrin Hatch cannot solve the problem. The Grokster decision could be, at the very least, a moral victory for the content industry if decided in their favor; but how much of an impact will it really have? In reality, p2p networks can still exist without any actual organization running it. With p2p protocols, the networks can still exist in a virtual sense. These type of networks are difficult to police or regulate, and once one shuts down another can go up immediately, and we’re back to square one.

6) What about vertical integration? In class we discussed the possiblity of the the ISPs becoming immensely powerful corporations, while the content industry dwindles to such a degree that eventually the ISPs buy them out. With the ISPs in control of the internet service and the content, they can effectively shut down file sharing networks and bring back the content. However, I don't foresee this as a possibility. With the content industry having the resources and capital that it currently has, I think it is much more likely that the content industry, if desperate, will band together and pay the ISPs to eliminate the p2p networks before such a "buy-out" can occur.

7) What about criminal sanctions? Criminal sanctions are one solution that has a real  possibility of stopping illegal file sharing. Then again, we could also effectively deter most people from speeding with criminal sanctions. Is this something we want? I don't think society is ready to label file sharers as "criminals" (an important point to consider before instituting criminal sanctions). Additionally, I don't think that locking up kids for sharing their music is going to have any beneficial result. There is also the difficulty of actually policing this sort of thing: will there be enough enforcement to effectively deter? And do we want to spend up law enforcement resources in this area? Some like to compare it to stealing a CD out of a music store, but I still feel a significant distinction can be made based on the fact that, with file sharing, no one is actually being deprived of personal property.

8) So what should the content industry do now? Lower their prices. Don’t fight the new technology, work with it. The content industry should try to take advantage of the immense popularity of mp3 players, along with the capability of storing digital music on hard drives. And they can do this by lowering their prices. Not very many people (especially college-aged people or younger) are willing to pay 99 cents for a song from a “legal” network like ITunes when they can get the same song for free from Kazaa. However, I think many of those same people would be willing to pay say 25 cents for a song if they’re able to get the added benefits of quality, convenience, and legality. Likewise, consumers may be more willing to buy CDs if they are sold at a reduced price, i.e. $5.00. If prices were to be lowered, the industry of course loses the profit that could have been made from those consumers who are willing to pay the current prices. However, the consumers willing to pay those amounts will continue to decrease, and it could cause the industry to collapse. So why not take the hit now, but potentially save the industry’s future? Granted, with price reductions, the industry will have change some of its practices. They will have to cut back in certain areas, perhaps promotions, and possibly even salaries (although they may be able to save some money by distributing the majority of their music digitally). But is anyone -- other than the industry itself -- opposed to this? Seriously, not every rapper should be able to afford their own record label. I -- for one -- don’t think the industry making less profit will be such a bad thing. The demand for content will always be there, and the industry will find a way to meet that demand, even if it means slightly less money for those involved. Or at least that is how it should be.

In the end, we have learned that their is no simple solution. No one really knows where this area of law is headed. However, reaching this anti-climatic result has been a thoroughly enjoyable journey for me.

December 20, 2004

Where Do We Go From Here?

The future of copyright is no big mystery.  In fact, it is quite clear, and can be easily summed up with four simple words: uncertain and very problematic. With obvious sarcasm aside, the question of copyright’s future is a very troubling one; one that has been known to frustrate many an individual and, in some instances, create dispositions bordering on insanity.  Nonetheless, in this post I will attempt to summarize where I believe the future of copyright can and should be heading, focusing particularly on the music industry’s conflict with peer-to-peer file sharing, which appears, for now, to be the most troubling issue affecting copyright.       

To understand where the future of copyright is heading, one first needs to have an understanding of where it has been.  The framers of the Constitution intended for copyright to be used as a means to “promote the progress of science and the useful arts.”  The intention was to create an incentive for individuals to pursue endeavors in these fields, by offering the creators of such works exclusive rights to copy and distribute their creations (copyrights).  However, the music industry has since come to revolve around large companies known as record labels, to which the original creators of such works assign these copyrights.  These entities, with their corporate muscle and global reach, represent an ability to exploit the power of copyright in a way the framers probably could not have imagined.  As a result, the evolution of these entities created an industry where finding enough incentive for individuals to create music was certainly not a problem.  For a long time, life was very good for content creators (artists) and providers (labels), and if there was any problem at all, it was perhaps that the incentive to pursue this creative practice had become too great. Consumers found that they were being held somewhat at ransom, while the music industry was making a fortune off of content that was often criticized for both its quality and its price. 

That is, until a young man by the name of Shawn Fanning created Napster, introducing the world to the phenomenon known as peer-to-peer file sharing (P2P), and forever changing the face of copyright and the entertainment industry.  P2P, which was made possible by the development of the internet and digital technology, allows individual users to copy and (essentially) distribute copyrighted material without obtaining any authorization from the rightful copyright owners.  Although Fanning’s original creation of Napster has since been shut down, it opened the door for the development of many new P2P services, which have thus far managed to avoid the long-arm of the law.  Currently, there are over 6 million P2P users in the United States alone, meaning there are a lot of people who the music industry has lost the ability to sell music to. 

The music industry is, understandably, not too happy about this, and has spent the last several years employing various attacks, aimed at different opponents, in an attempt to counter the effects of P2P.  They have filed thousands of copy infringement suits against both individual P2P users and the distributors of P2P software, but neither has proved very effective at slowing down P2P.  Although the suits against individual users have almost all ended in the industry’s favor, the costs of bringing these suits have simply proved too large to allow the industry to make any kind of significant dent in the pool of 6 million users (think of these suits as the equivalent of taking a bucket of water out of the ocean).  On the other hand, the problem with bringing suits against the P2P distributors is that such cases have not all resulted in the music industry’s favor.  Although the industry did experience some early success with cases such as Napster, more recent decisions, such as Grokster, have failed to hold the distributors liable as contributory infringers.  Furthermore, attempts at finding legislative solutions to the problem have also proved unsuccessful, due largely to Congress’ reluctance to disregard the technology industry and the music industry’s reluctance to compromise their broad proposals. 

However, there are many who argue that even if new legislation were passed, or if the Grokster decision was overturned, the P2P problem would still not go away.  This argument rests on two basic ideas: [1] the “horse is out of the barn,” meaning that the software is already in the hands of users, out of the control of the distributors, and thus beyond the reach of any reasonable means of regulation; [2] the internet, itself, is essentially one large P2P service, so P2P will always occur as long as the internet exists.    

If you accept either of the two arguments in the last paragraph, or simply that the music industry can’t stop P2P for the reasons given in the paragraph before the last, then you begin to understand why so many music industry people are feeling, well, let’s say insecure.  Under the current structure, P2P represents the ability to completely wipe out the music industry as we know it.  If the phenomenon is not stopped, it is not too hard to imagine a time when no one will be willing to pay for music, a situation which would return copyright to its initial position of needing to create some incentive for individuals to pursue the practice of creating music. 

Thus, many have suggested that since stopping P2P is not an option, the only available choice the music industry has is to develop some alternative system that embraces and accepts the role of P2P.  Of these alternative models, two of the most prominent are the “creative commons” and “musical socialism”.  However, neither of these alternative systems appear practical to me, for reasons which I cannot discuss in great detail here.  However, I will say that the bottom line appears to be that in order to implement any new system, its benefits would have to outweigh the costs of maintaining the current system, by a substantially great amount.  This is because many years and many livelihoods have been invested in developing the system we currently have, and to overturn it would be an extremely costly endeavor.  In order to undertake such a task, the alternative system would have to offer seemingly no drawbacks and the current system would have to be utterly desperate for reform.  To this point, neither the proposed systems nor the current system fulfill these requirements, and thus, it appears that implementing a drastically new system for copyright in the music industry is not a practical alternative.   

So, does this mean that copyright and the music industry are inevitably doomed by P2P?  Well, it may, but personally, I’m not ready to concede that just yet.  The main reason why is because I don’t necessarily agree with the arguments painting P2P as an inevitable force that cannot be stopped or controlled. 

First of all, I believe that distribution of P2P services can be halted, either by legislation or by an overturning of the Grokster decision.  If the music industry could compromise their aspirations and propose legislation that simply required P2P services to implement a central control mechanism that checked for authorization of transferred files, I believe that the technology industry would have no justifiable reason to object and Congress would be willing to pass it. Alternatively, this same result could be achieved through an overturning of Grokster, if the Supreme Court chose 1 of 2 routes: [1] The court could apply the “substantial non-infringing use” defense established by the Betamax decision, but hold that the non-infringing use that P2P is capable of is not “substantial”; [2] The court could reject that approach, finding that P2P is a problem involving sharing (and not just copying), and create a new standard for sharing which would require central control mechanisms. 

Secondly, assuming that P2P distribution could be halted by one of the means above, I am not ready to accept either the “horse out of the barn” argument or the “internet as P2P” argument as justifications for failing to do so.  Although users would still have the P2P software on their computers, it seems to me that there would still be ways to curtail its use.  One option would be to involve ISPs in the attempt to police use of unauthorized P2P services; a plan that would possibly involve shifting the costs of such efforts from the ISPs to the content providers.  In addition, the simple fact that these services would no longer be monitored and updated by their distributors would ultimately lead to their ineffectiveness.  Also, I believe that the power to create is ultimately the power to destroy, meaning that since we were able to design these P2P networks, I am not willing to concede that we cannot develop a way to control and destroy them, if given the authority to attempt to do so.  And finally, the argument that the internet is P2P, so P2P will always resurface, does not justify, to me, the stance that we should not attempt to fight P2P in the form in which it currently exists.  Although the “internet is P2P” argument certainly may hold some validity, it does not justify turning a blind eye to the current problem, out of fear that the immediate solution might someday be undone by the surfacing of a similar problem in a new form.  Until a viable alternative to the current structure of copyright in the entertainment industry arises, we have a duty to those who have invested their livelihood in the industry and to the integrity of our legal system, to enforce the laws, as they exist, to the maximum of our capability.  This requires us to fight the illegalities of P2P. 

Finally, I will conclude by saying that if my opinion does not win out, and P2P does prove unbeatable (or we simply decide not to try), the music industry will not certainly be doomed.  Although the music industry’s coexistence with P2P seems less than promising, it is may not be inevitable that P2P ultimately equals death to music.  For example, it may be possible that P2P can simply cut the fat off of a formerly inefficient industry, causing entities, such as the record label, which were once needed but are now less imperative, to become extinct, and placing the focus of copyright on the original creators, as the framers had intended.  It also may be possible for some sort of vertical integration to take place among the P2P distributors, the ISPs, and the content providers, by which all three could coexist.  However, I do not believe that the existence of these possibilities justifies a failure to enact our laws to the maximum of our capability, as long as they are the controlling laws on the books. 

P2P may prove to be a force that will ultimately cause the music industry and copyright to fundamentally restructure their make-up.  However, that is not yet where we are at today, and until we are, we have a duty to fight P2P by all means reasonably necessary.

Final Thoughts

"Publishing is a very ancient and crafty industry that existed and flourished before the idea of copyright even existed. When copyright came into existence, the publishing industry dealt with it and moved on. My suspicion is that everything that's been going on lately will amount to a sort of fire drill that will force publishing to scurry around and make some new arrangements so that they can get back to making money for themselves and for authors."

- Neal Stephenson, author.

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SHAKAPOW!

"If you buy a DVD you have a copy. If you want a backup copy you buy another one." --Jack Valenti

"I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone." --Jack Valenti

And I say to you, sir, SHAKAPOW!

No other word embodies how I feel about the current status of copyright law and the painful trek it took to get where it's at today. SHAKAPOW!, to me, is the epitome of an emotional feeling so strong that it erupts forth in an otherwise unintelligible manner. Kind of like after I eat a steak fajita burrito from Chipotle. A feeling so strong, so guttural, and so pure, that no word in the English language can encompass it. SHAKAPOW! is not to be whispered, nor merely spoken in passing - it is only to be bellowed from the depths of your soul. Unfortunately, I use this holy word among holy words to express my frustration with the current copyright situation:

Is the DOJ justified in treating illegal file swappers as terrorists trafficking in counterfeit drugs and cell phone batteries? SHAKAPOW! Can someone injunctify a public library for putting up a public text, which is in its public domain, for public consumption? SHAKAPOW! Are movie downloaders really going to make Manny lose his job because nobody is going to the movie theaters anymore, and yet somehow films like Ocean's Twelve are still generating almost $40 million in box office openings? SHAKAPOW!

Incidentally, did anyone actually go see Ocean's Twelve? Spoiler Alert: Were you as amazed as I was with the French thief's ability to use Capoeria, a Brazilian martial art, to dance his way through the most complex laser security system the world has ever seen, a la Britney Spears' Toxic music video? An excellent use of my $10, by the way. SHAKAPOW!

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December 18, 2004

Where's the Cheese?

These past four months, I have felt like a rat in a maze searching for cheese that doesn’t exist.  I have come to the conclusion that neither copyright law nor new technologies will ever be able to provide an acceptable solution to digital copyright problems.  People will always figure out how to use software they have written to ignore, circumvent, or just plane laugh at the law. Future technologies which are more limiting than current technologies will not be accepted. Even if they are, they will be circumvented by hackers.

Why copyright laws won't work
I don’t think copyright laws will significantly change the present course of media.  If the vast majority of people don't think copyright infringement is morally wrong and some form of P2P filesharing remains available, P2P will always exist.  American laws are useless because the internet is global.  There will always be countries willing (and even eager) to ignore American laws.  People will find a way to obtain the technology from other countries who don't follow our laws and P2P programs that could never be released in the

US

will be released to the world from other countries.

Technology that won’t work
Media protection will be, almost solely, technology based.  I recently posted on a copy protected CD (Norah Jones) that was giving me problems.  I think I have above average computer skills, but I had no idea how to copy a protected CD onto my hard drive or transfer it to my MP3 player.  I think there are very few people who could copy this CD.  I searched Google for a good hour looking for tips and I was still in the dark.  I also spent a lot of time on my friend’s computer searching Kazaa for the songs.  I only found 2 songs that were actually good copies. This leads me to assume that copy protection actually works pretty well.  A false assumption on my part.  I'm sure if I spent a little more time and tried a few other P2P programs, I could find all the high quality Norah Jones songs I want. 

Unfortunately, there are only so many ways you can change a CD to add copy protection while still allowing it to play on an unchanged player.  So, the electronics will have to change as well.  Laws could be passed requiring electronics manufacturers to make devices with very limited playing capabilities. This change would have to be global.  I guess the

US

could place trade embargos on any country who does not adhere to US standards.  But this would require a whole new media to be developed that only plays on these special players, and, only new songs would be protected.  Further, I find it hard to believe that the public would support this in any way.  In the months and days before the enforcement date of the new law, iPod sales would be enormous as consumers stock up on a lifetime supply of barrier free players and the majority of people would not buy any songs released in this new shackled format.  Finally, even if these new products were released and purchased, hackers will always be able to find a way to use software to circumvent the protections embedded in the hardware. 

Is there a technology based solution?
Yes.  But it is a solution that all of us fear.  Copyright infringement can be vastly controlled with a fundamental restructuring of the internet.  ISP's can close individual ports and keep people from accessing files on other computers.  Without access to the files of others, one would be very limited in the way that they could infringe on copyrights of digital media.  If I wanted to give some music to a friend, I would have to do it the old fashioned way: I would have to physically give him a hard copy.  Of course, people would not share with anyone other than people they personally know, so the amount of infringement (and the usefulness of the internet) would be greatly reduced.  People could still view content on web pages but nothing could be downloaded unless it came from a government certified host. 

While this solution might be terrifying to the majority of the public, I'm sure much of the government would love it.  I imagine that the government hates the internet as it is now structured.  Had they known what the internet would become, they would never have allowed for its public release.  The Secret Service, FBI, CIA, and a host of other government entities are horrified by the fact that even a 10 year old kid can send or receive a file from anywhere and to anywhere without any governmental knowledge whatsoever.  They would love to be able to control the ISP's and most of the internet traffic.  Let's all take a few seconds in silent prayer.  "Please don't ever let that happen." 

Is a bright future possible?
I sure hope so.  I'm hoping for a future that embraces the Creative Commons.  We need to find a variety of ways to make Creative Commons music profitable.  I think Wired Magazine is onto something.  They recently released a Creative Commons Licensed CD included with one of their issues.  I assume they paid each artist a set amount that was funded by Wired's advertising department.  Other companies could do the same.

This class has left me with more fear than hope.  I guess we will all just have to wait and see what happens. 

December 17, 2004

Where have we gone: Where do we go?

The Problem:  Let's face it, the threat of rampant and unprecedented theft of digital media continues to grow.  And as technology continues to grow, that threat and theft will grow simultaneously.  The music industry has already faced, and continues to face, this threat, but has largely failed in defending musicians' intellectual property.  With the advent and increasing popularity of high-speed Internet connections, Hollywood faces the same dilemma and is fighting back. As Time magazine writer Amanda Ripley recently noted, "Studio executives, no strangers to melodrama, have begun to talk about movie piracy the way FBI agents talk about terrorism: they watch the Web for "chatter," they embed films with hidden 'fingerprints,' and they speak without irony about 'changing hearts and minds.' They even use night-vision goggles. It's not going too far to say they are completely paranoid, which doesn't mean they are wrong."  As the battle rages, is guerrilla warfare the best method to fight a "menace" that may represent the entertainment industry's greatest opportunity?

The Entertainment Industry's Modern Approach    In the summer of 2003, the music industry commenced a widespread, yet selective offensive against individual dowloaders. The RIAA has since sued over 1900 users, with more than 400 users paying fines averaging $3000. In March 2004, the RIAA brought an additional 532 lawsuits against anonymous users, including eighty-nine individuals from universities.  Additionnally, there has been an effort to educate potential infringers that downloading is an illegal activity.  Unfortunately, ignorance is probably not the problem the entertainment industry is facing.

Alongside this aggressive strategy, there are also the well publicized lobbying efforts. Through these efforts, there has been a push for heavily increased penalties, including criminal sanctions, against illegal dowloaders.  As Professor Samuelson noted in her presentation, the entertainment industry's goal is to enlist the Department of Justice as the "Hollywood Police."  As we all know, many of these efforts have been stymied, or delayed, by groups such as the EFF( amongst others).

Perhaps the best effort thus far has been to join the fray.  Online music stores like iTunes not only give consumers the option to download only the songs they desire without having to buy an entire album, they allow artists to release individual tracks without releasing a complete album. At the conclusion of 2004's first quarter, Apple reported that iTunes sold 50 million songs, with 2.5 million more songs downloaded every week. Following iTunes' success, new competitors, including Roxio's Napster and MusicMatch, have entered into the mix.

Copyright in the Digital Age:  The purpose behind the Copyright Clause has been debated since the time of the Constitution. Four main theories have been proposed: "that copyright is to protect the author's rights; that copyright is to promote learning; that copyright is to provide order in the book trade as a government grant; and that copyright is to prevent harmful monopoly."  I think it is safe to assume that the concept of Intellectual Property, to Professor Lemley's disdain, has turned protecting the author's rights into a full fledged property law regime for individuals and corporations alike.  Moreover, protecting the author's right has expanded dramatically over the years with the amendments of 1976 and the enactment of the infamous DMCA of 1998.

We have looked at various alternatives in an attempt to protect copyright law in the digital arena.  Musical Socialism came and went quickly.  Really, though, did it ever have a chance in the capitalist world($$)?   Broad taxation schemes, in my opinion, seemed like a viable option for time.  Taxation and blanket licensing both discourage the development of copying technology.  This social cost is probably greater for blanket licensing because licensing usually leaves less surplus to consumers. Consumer surplus from using the copying technology is an incentive to create it.  Taxation and blanket licensing have a similar effect on the market for the shared work--sharing is permitted and the tax revenue received by the copyright owner rises as the number of people sharing rises. Compared to licensing, profit is generally lower under a tax scheme, even if the tax revenue is paid to the copyright owner.  However, profit tends to be lower because sellers lose control over sharing; a single linear tax rate is chosen by the government. And thus, another strategy probably fails in light of varying private interest in the collection and division of shrinking profits. 

Anti circumvention technologies, which help to control and define viewer use, seemed like another potential, and likely, option to aid in the protection of copyright. These types of technological protection systems, including Digital Rights Management (DRM) tools and encryption, were the recommendation of the former head of the MPAA, Jack Valenti.  While this approach has some backing, I remain skeptical.  Although its a simple rebuttal, DRM will fail because history has dictated that once something is encrypted, it is just as quickly decrypted. And aside from that simple, but effective rebuttal, getting the manufacturers of playback devices to universally drink the DRM coolaid could prove to be a daunting task.  Furthermore, while DRM would create an interesting underground market for playback devices, the strategy would be hindered by current owners not wanting to go out and re-purchase another CD/DVD player with no added technologically beneficial features for themselves.

I think Professor Solum was dead on when commenting that the Horse was never really in the barn. Cyberspace is what it was created to be, a separate space and time that cannot be shut down.  Regardless of any Copyright Reform, P2P networks will continue to exist and most likely thrive.  Unless ISP's join content providers and decide to completely re-invent the architecture of the Internet, which is far beyond even highly unlikely in my humble opinion, the entertainment industry will have to deal with illegal file sharing in whatever way it sees fit.  If that means hiring hundreds of thousands of attorneys to pursue the exponentially growing numbers of P2P end-users, so be it.  At least we'll all have jobs!