Journal of Law, Information and Science
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ARTHUR HOYLE
The ease with which digitally stored information can be precisely duplicated has meant that the traditional methods of protection from, and even detection of, unauthorised dealing with the property of others, have proven ineffective.
The ‘Napster experience’ has resulted in a very different view being taken by both sides of the issue of freedom to copy what is published on the internet - those who wish to preserve their economic interests through application of the traditional Intellectual Property (IP) law and who have resorted to the courts for the full range of redress; and those who seek to subvert those interests from a political, economic or anarchic view have sought to do so by exploiting the unsuitability of the present IP law, and copying almost at will.
The result, and this is as unprecedented as the very issue before the courts, has been that, far from seeing one side victorious (and the law then decided in a relatively straightforward manner), the two sides have in fact each given ground, and a new digital paradigm has emerged. This has arguably left the fundamental issues unresolved, and in doing so has not only sowed the seeds of more discontent amongst all parties involved, but has exposed the traditional owners of music copyrights (and which are seldom the creators themselves) to unprecedented attacks by those creators (be they the songwriters or the performers themselves), and their fans.
The emerging issue is that of whether the attempt to utilise the full range of IP law protection represented by the Napster action has failed, and whether in doing so, this has necessitated a thorough re-thinking of the whole issue, with the very real possibility that this will usher in a new and fundamentally different paradigm – one in which economic pragmatism overrides the exercise of legitimate legal IP rights.
The advent of the ‘digital age’ has had a significant effect on the development, interpretation and application of IP law. The ease with which digitally stored information can be precisely duplicated has meant that the traditional methods of protection from, and even detection of, unauthorised dealing with the property of others, have proven ineffective. This has lead to calls for a fundamental rethinking of both the policies behind, and methods of, ensuring IP protection.
The response has been to both follow the traditional evolutionary legal process whereby new categories of law are created (such as for example happened with business method patents) or existing ones are subjected to new interpretation by the courts and ‘adapted’ to the new circumstances and to simultaneously develop new non-legal (or ‘self help’) solutions.
A case study of this in action is where legal action has been taken by the holders of traditional copyright in music against a range of new technology music ‘swap’ sites including Napster and MP3.com. These businesses use MP3 technology[1] to allow the transfer of identical digital copies of music and video over the internet without any requirement that the legally essential IP holder’s approval be first obtained. Users who obtain Napster's software can share MP3 music files with others accessing the Napster system via the internet. These files, which reproduce nearly CD-quality sound in a compressed format, are available on a variety of websites either for a fee or free-of-charge. The most difficult aspect of Napster from a copyright holder’s point of view is that it allows users to exchange MP3 files stored on their own computer hard-drives directly, without payment, and boasts that it "takes the frustration out of locating servers with MP3 files".[2]
At the time of writing, and importantly for the development of the necessary body of case law, these cases seem likely to be settled through a series of out of court agreements not involving the traditional payment of monies by the copyright transgressor to the transgresee. In the case of the Napster v BMG Entertainment (owned by music giant Bertelsman AG), and in an unprecedented action, the alleged victim reportedly paid a large sum of money[3]
in order to share in the business opportunity which they perceive Napster to provide.[4]
It is arguable that in the world of IP and the internet, the certainty traditionally provided by legal resolution of IP disputes is at best some way off. The basis of the original action was that Napster had facilitated the theft of the IP of A&M Records through its system. This theme was taken up by a host of recording industry heavyweights and the Record Industry Association of America, rock band Metallica and rap artist Dr Dre (amongst others) have sued Napster for copyright infringement. In its defence, Napster has argued that its services should be afforded immunity under the U.S. Digital Millennium Copyright Act, which provides protection to internet service providers (ISP) in relation to the actions of customers.
There is far from universal acceptance that the ‘threat’ provided by Napster and other MP3 based swap services is just that, with many groups such as ‘Metallica’ and ‘Rage Against the Machine’ discovering to their dismay that it is one thing to take overt legal and punitive action to protect your IP based income stream against an anonymous business, and another to actually threaten the very fans on whose goodwill you depend for that income stream.
The internet has proven extremely suitable for providing vocal minorities with a platform from which to launch significant and damaging attacks such as those recently mounted by disgruntled Metallica fans.
In Australia, the High Court decision in Telstra v APRA[5] caused consternation in the internet community when it held that liability for the content of transmissions made by a telecommunications carrier attaches to that carrier (in this case it was for music transmitted over the telephone network when a customer was ‘on hold’).
The issues raised by the Telstra v APRA decision have been dealt with in the recent Copyright Amendment (Digital Agenda) legislation, which provides[6] that:
A carrier or carriage service provider is not taken to have authorised any infringement of copyright in a work merely because the carrier or carriage service provider provides facilities used by a person to do something the right to do which is included in the copyright.[7]
The Explanatory Memorandum to the Copyright Amendment (Digital Agenda) Act 2000[8] observes that the practical effect of this is that “For example, a carrier or other service provider will not be liable for having authorised a copyright infringement merely by providing the facilities by which the communication was facilitated”. The result is that a carrier will not be held liable for whatever transgressions of the copyright holder’s rights have occurred on-line and through the carrier’s system by another and identifiable entity, such as when the carrier hosts Napster type activity.
It is likely therefore, as intended under the new international regime promoted by the WIPO treaties, that the Australian courts will treat Napster and other MP3 copying systems as have the US courts, which raises the distinct possibility that the economic model seemingly gaining support in the USA will be seen in Australia in the near future.
In a similar digital development (where the power of the internet is being used to flout IP law), this time involving the ‘decryption’ of region encoded and copy protected Digital Versatile Discs (DVD), the industry has been fighting a battle through the US courts to prevent the publishing of the source code for the system. The suits target open-source Linux computer code known as DeCSS which defeats the security software on DVD-formatted media. The code was posted on the internet in October 1999 by a 16-year-old Norwegian student and quickly spread across the Web.[9]
That lawsuit seeks to put an end to the distribution of the source code, arguing that it violates the US federal Digital Millennium Copyright Act in New York[10] and State trade secrets law in California. The different legal basis of these actions is an indication of the complexity of the issue. The multiplicity of fundamentally different and often competing pieces of legislation and legal concepts (caused by the advent of the new technologies and the use of digital means of doing business) appearing in the recent past mean that any action seeking to protect legitimate rights to IP may include anything from contract and trade practices through to trade secrecy law.[11]
Evidence is emerging that this ‘heavy handed’ approach using purely legal means to control exploitation of IP is actually having the opposite to the desired effect, with a backlash from both the performers and their fans. On 7 December 2000, fans of ‘Rage Against the Machine’ attempting to download works by that group were reportedly blocked from logging on and sent instead to a Web page saying they had been identified as probable copyright infringers.[12] Perhaps unsurprisingly, reaction amongst the fans was strong and immediate, with massive negative publicity and a sudden and severe fall off in legitimate CD sales. More surprising however was the reaction of the band itself, which immediately broke ranks with its management and the owners of the IP in their music, posting a disclaimer on the internet,[13] complete with instructions on how to work around the website block put up by Napster, which had apparently been instituted at the insistence of the band’s management.[14]
On 14 December 2000, Rage Against the Machine went further in their criticism of their publishers, stating that "while we were not aware of this plan to deprive our fans of our music, once we were made aware of the situation, we started taking steps to correct it… we want to apologise to our fans, and it is important to us to make it right." They then posted 15 song files and eight videos, all previously unreleased and many of them live recordings, to the site as evidence of their sincerity and in apparent direct breach of their IP liabilities to their publishers.[15]
There is much anecdotal evidence that the internet has become a major avenue for the creators of the IP so vigorously marketed and protected by the traditional music publishers to in fact directly market the product of their genius on their own. As such it has allowed the whole market to grow, especially in that hot bed of Napster activity, the colleges and universities of America, to some extent at least offsetting any sales losses which the advent of MP3 has caused. The College market has long been a major source of sales to the big publishers and distributors, and as such has seen particular sensitivity on their part whenever they have sensed a threat, such as that posed by MP3. An unlikely ally in the war which has developed between these two parties are the colleges and universities themselves, as the unprecedented demand for ‘bandwidth’ or data transmission capacity has seen many university systems suffer a severe and sustained disruption to their core business, or to crash completely under the load of thousands of students downloading MP3 files simultaneously. The result has been the imposition of download capacity limits, and this has reduced, but not eradicated the problem.
It is becoming clear that the parties in the MP3 divide are not adopting the traditional and adversarial positions on which an IP action for infringement of copyright depends, and are in fact moving towards compromise and joint enterprise. This course of action is not without its dangers however, as the music giant Universal Records has recently found to its cost. Although it won an action in copyright infringement against the firm MP3.com, Universal Records now finds itself being sued by songwriters and music publishers who charge that Universal Records is engaging in exactly the same unlicensed activities that were found illegal in its own, prior litigation. The action[16] alleges that some of America's best known songs are being infringed by the on-line activities of Universal.[17] In an indication of the seriousness of this for Universal, the plaintiffs in the action include many of the nation's leading songwriters and music publishers, including The Rogers & Hammerstein Organization, The Songwriters' Guild of America, Inc., Jerry Leiber, Mike Stoller, Louis Alter Publications, Irving Berlin Music Company, Williamson Music Company, Freddy Bienstock Music Company, Criterion Music Corporation, Frank Music Corp., MPL Communications, Inc., Peer International Corporation, and Elvis Presley Music.
An indication of the changing attitudes towards the ‘threat’ posed by Napster and other MP3 based internet services is a recent statement by George Weiss, President of the plaintiff Songwriters' Guild of America, who observed[18]
that
The American music copyright community has made it known that we view the Internet as presenting enormous opportunities for the distribution of our music, and we want to fashion business solutions with copyright users that benefit everyone. If music is to continue to thrive in the Digital Era as it has in the past, however, it is essential that the contribution of the songwriter be respected and fairly rewarded. Industry leaders should be setting a positive example by taking licenses and paying for the music they use, not following the destructive example of the Napsters of the world.
It is clear on the facts pleaded in the recent US cases that the actions of Napster may have represented a very clear violation of the US copyright statute, and that the same situation could apply in Australia. Napster’s legal position in the USA has been strengthened by the precedent established in the handling by the courts of the issue of private videotaping on television broadcasts in the Betamax decision,[19] and this may have influenced BMG in its decision to discontinue its action against Napster.
In an indication of judicial appreciation of the fact that the advent of new technologies may have rendered centuries of evolution in IP law inappropriate, their Honours in the Betamax case set aside both precedent and arguably, legislative intention in a pragmatic decision to virtually rewrite the relevant statute in order to permit a widespread flouting of the then existing US copyright law.[20] In the not dissimilar situation with respect to MP3 technology, it may well be that the owners of IP in both the USA and Australia will be compelled, not so much by force of legal argument, or even moral persuasion, but by the pace of technological development combined with the business opportunities which it provides, to adopt a new economic model for copyright.[21]
Such an economic model could pragmatically recognise what most internet users have known for some time now - that the very nature of the internet means that it will be impossible in practical terms for either the law or the owners of allegedly misused IP to catch most transgressors, let alone successfully prosecute them.
The seeds of this new economic model are likely to be found in the BMG/Napster agreement which provides for a very low cost alternative to traditional CD sales, aimed at both bringing the actions of millions of otherwise law abiding net users under the law, and at the same time using their interest to boost traditional (and more profitable) CD sales. BMG has called for the other music industry ‘giants’ to join in with this initiative, but others such as Sony Music and Universal records have been slow to follow suit, with a noticeable reluctance to drop their legal actions without clear financial and market advantage in return for doing so.
The practical result of this development may well be that, even though the owner of IP who detects unauthorised dealing with it by another has available the costly and relatively slow process of legal redress, it may elect to come to a financial arrangement in which they implicitly authorise such an infringement in return for sharing in the spoils. This could well be described as pragmatism triumphing over the application of clear and enforceable legal rights, and may in turn lead to developments both in the common law courts and in the legislature which have the effect of lessening the effect of traditional law in this area.
As the available remedies for copyright infringement are pecuniary in nature, it ought to be relatively easy for potential litigants to make a decision on whether to adopt a purely financial solution which holds out at least the possibility of short to medium term gain, or to take the uncertain but familiar route of calling in the lawyers. IP rights holders who feel aggrieved may conclude that rather than fight an expensive battle through the courts (against what is often a party with limited resources from which to pay any ultimate settlement), using their strong legal position as collateral with which to negotiate a stake in it may be more lucrative and as such seductive.
As with all such potentially fundamental market shifts, only time will tell if it renders all that has gone before it obsolete. It seems fair to say that should either of the two major music firms still involved in the Napster/MP3.com actions[22] (Sony Music Corporation and Universal) elect to follow BMG’s lead and invest in the very technology from which they presently seek legal remedies, then a wholesale rejection of their presently enforceable legal rights in this market sector will have occurred in the USA.
Given the global nature of the internet and the e-business market, and the ever increasing reach of WIPO and its related treaties and agreements, it is more likely than not that Australia will follow suit, at least with respect to MP3.
The situation with DVDs is following a similar pattern to that experienced with respect to Napster, with the IP owners and litigants chalking up early tactical victories (in this case the decision by the Federal Court in New York to issue a preliminary injunction preventing the defendants from publishing the DeCSS code), but with signs emerging that not all courts will be equally sympathetic to their cause (the Federal Court in California looks at the time of writing set to throw out most of the complaints made under trade secrecy law there). It was in just this scenario in the MP3 saga that BMG saw fit to break ranks and reach a settlement which gave it a ‘piece of the action’ and to take a giant step towards establishing the new economic paradigm for IP in the digital age.
[1] MP3 (MPEG-1, Layer 3) is a compression format that can be used to turn compact disk recordings into computer files. Effectively, music on any compact disc can be converted to MP3 format. The Motion Picture Experts Group first created MP3 in the early 1980s as the audio layer 3 of the MPEG-1 audiovisual format. MP3 technology allows for the fast and efficient conversion of compact disc recordings into computer files that may be downloaded over the Internet. See generally Recording Industry Ass'n of America v. Diamond Multimedia Systems Inc.[1984] USSC 14; , 180 F.3d 1072, 1073-74 (9th Cir.1999) (discussing MP3 technology).
[2] A&M Records, Inc. v. Napster, Inc. U.S. District Court, Northern District of California 12 May 2000
[3] Bertelsmann, home to BMG Music , said its e-Commerce Group would provide a loan to Napster and hold a warrant to acquire a portion of Napster's equity. The size of the loan has not been disclosed
[4] Under terms of the deal, Bertelsmann , parent of one of the five major music companies that is suing Napster for copyright infringement, agreed to withdraw its lawsuit once Napster successfully introduces the new membership-based service.
[5] Telstra Corporation Limited v Australasian Performing Right Association Limited http://www.austlii.edu.au/au/cases/cth/high_ct/unrep338.html
[6] at Section 39B
[7] The new s.39B is intended to encompass the provision of facilities by digital storage service providers in addition to carriers, carriage service providers and any other persons who provide facilities for making, or facilitating the making of, a communication. A corresponding section in respect of audio-visual items is provided by s.112E (see Item 95). (Revised Explanatory Memorandum to the Copyright Amendment (Digital Agenda) Act 2000
[8] at paragraph 60
[9] http://news.cnet.com/news/0-1005-200-4159594.html?tag=st.ne.1002.thed.ni
[10] The movie industry trade group has sent more than 500 cease-and-desist letters to Web site operators accusing them of violating U.S. copyright law. http://news.cnet.com/news/0-1005-200-1528497.html?tag=st.ne.ni.rnbot.rn.ni
[11] Although California state law specifically allows reverse engineering, the plaintiffs have argued that anyone who takes possession of their CSS anti-copying software must promise not to reverse-engineer the product. That agreement is demanded in the form of a so-called click-wrap license, which must be accepted before the software can be downloaded.
[12] Band Joins Fan Rage Against Napster by John Borland, Special to ZD Net http://www.zdnet.com/zdnn/stories/news/0,4586,2662648,00.html
[13] Band member Tom Morello wrote in a posting on the band’s web site.
[14] Sony Music Group is the parent company of Rage Against The Machine's label, Epic, and is one of several record companies suing Napster.
[15] Band posts songs as apology for Napster ban by John Borland Staff Writer, CNET News.com, 15 December 2000.
[16] The Rodgers & Hammerstein Organization, et al. v. UMG Recordings, Inc.
[17] Musical compositions named in the action include "White Christmas" (Irving Berlin), "Jailhouse Rock" (Jerry Leiber and Mike Stoller), "Peggy Sue" (Buddy Holly, Jerry Allison and Norman Petty), "My Favorite Things" (Richard Rogers and Oscar Hammerstein, II), "Besa Me Mucho" (Consuelo Velasquez), "Salt and Pepper" (Sonny Stitt and Paul Gonsalves), "Love Me Tender" (Elvis Presley and Vera Matson), and "You Turned the Tables On Me" (Louis Alter and Sidney Mitchell).
[18] http://mi2n.com/press.php3?press_nb=15839 Music Industry News Network
[19] Universal City Studios, Inc v Sony Corp of America No. CV 76-3520-F, United States District Court, Central District of Californis, 480 F. Supp. 429; 1979 U.S. Dist. LEXIS 9390; 203 U.S.P.Q. (BNA) 656; 5 Media L. Rep. 1737, October 2, 1979, As Amended December 5, 1979.
[20] As a result of this decision, a small impost was added to sales of blank video tapes to cater for possible (indeed probable) copyright infringement in their use by private parties. A similar situation applies in Australia.
[21] James Rogers <jetan@ionet.net> 5 May 2000
[22] Of the five which commenced the action (Bertelsmann's BMG Entertainment, Vivendi Universal's Universal Music Group, EMI Recorded Music, Warner Music Group and Sony Music Group.
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URL: http://www.austlii.edu.au/au/journals/JlLawInfoSci/2000/15.html