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Douglas, Guy --- "Copyright and Peer-To-Peer Music File Sharing: The Napster Case and the Argument Against Legislative Reform" [2004] MurdochUeJlLaw 7; (2004) 11(1) Murdoch University Electronic Journal of Law

Copyright and Peer-To-Peer Music File Sharing: The Napster Case and the Argument Against Legislative Reform

Author: Guy Douglas BA (Hons), LLB (Hons), PhD
Issue: Volume 11, Number 1 (March 2004)

Contents

    Copyright Law: the Napster case and its successors

    Introduction

  1. This paper is about copyright law, and the challenges it has faced in response to internet-based 'peer to peer' (P2P) file sharing networks. P2P sharing was pioneered by Napster; a website and software application that facilitated and promoted the swapping of MP3 music files[1] such that it has become a world-wide phenomenon, with millions of participants. The P2P networks enable a person to search for and access digital copies of recordings. This technology has created a significant problem for the recording industry that previous methods of illegal copying did not. Reasons for this include, first, that there is no loss of quality with each generation of copied file.[2] With the introduction and now common availability of CD burners, a digital copy can be presented in the same medium and of the same quality as the original. A second reason is that Internet P2P networks allow you to locate and acquire the required song within minutes, any time of the day or night. Thus it is arguably easier to obtain an illegal copy of your favourite song than it is to obtain a legal copy from a shop, or by ordering it online. Third, Internet P2P networks allow you to obtain just the songs you want, without having to buy a whole album.

  2. P2P sharing is therefore clearly distinct from previous technologies which enabled copying, where one was limited to one's network of friends and family, and could obtain only a lesser quality copy.

    Structure

  3. The first part of this paper is primarily descriptive. First I will describe the Napster case, how Napster enabled P2P sharing and the most important legal arguments presented in that case. Next I will describe how subsequent P2P networks, the successors to Napster, differ technically from Napster and how this is relevant from a legal perspective. I will then describe how Australian law has responded to changes in technology, and discuss the relevant issues that would arise in a legal action against a P2P operator in Australia.

  4. Having thus considered the legal case copyright owners have against P2P sharing networks, the software owners and the users I then look more broadly at other remedies the music industry may seek. I argue that attempting to control P2P network in the courts is not an effective strategy, and that as a matter of policy a program of legislative reform to prohibit this technology is not justified.

    The Napster Case

  5. A&M records and several other recording companies filed suit against Napster for contributory and vicarious copyright infringement under the US Digital Millennium Copyright Act (DMC Act).[3] Napster freely distributed software allowing users to share music files on the Internet, and maintained a central search engine for locating desired files residing on users' PCs or servers. At the time there were plans to turn Napster into a commercial venture, but Napster never received funds for its service or products.[4]

    How did Napster work?

  6. Napster provided a peer-to-peer network enabling users to share music files. A user downloaded the free Napster software, and nominated a folder on his or her hard-drive on which to store downloaded music (and music available to be accessed by other users). The software added the titles of these music files to a central directory to enable searching by other users. A user could then search for music titles and download these files directly from the folders of other users. The music files themselves did not exist on a central directory, but were transferred directly from the computer of one user to another, hence the name 'peer-to-peer' (P2P).

    Figure 1 - The file sharing structure of Napster[5]

    The legal arguments used in the Napster case

  7. The music industry made the following claims against Napster:

    1. That its users were directly infringing the plaintiff's copyright;
    2. That Napster was liable for contributory infringement of the plaintiff's copyright; and
    3. That Napster was liable for vicarious infringement of the plaintiff's copyright.

  8. There was no real issue of direct infringement - it was accepted that users were illegally copying music files and so infringing copyright law.[6]

  9. Under US copyright law, contributory infringement requires the following three elements: [7]

  10. Concerning the first element, the appeal court of the Ninth Circuit upheld the lower court's finding that at least some of Napster's users were direct infringers through their activities of reproducing and distributing copyrighted music without permission.[9] Napster was also held to have had actual knowledge of this infringing activity. Evidence of this was the list of 12,000 files provided by the RIAA and internal company emails. It was also held that Napster should have known of the infringing activity, owing to:

    1. the downloading activities of their own executives;
    2. the appearance of well-known song titles in certain promotional screens used by Napster; and
    3. their recording industry experience.[10]

  11. Finally, the appeal upheld the finding that Napster's provision of the site and facilities materially contributed to the direct infringing activities of its users.[11]

  12. Next, to successfully show that Napster was vicariously liable, the plaintiffs needed to show that:[12]

    1. There was direct infringement on the part of Napster's users;
    2. Napster had the right and ability to control or supervise the direct infringement; and
    3. Napster gained a direct financial benefit from the infringement.

  13. As with the contributory infringement finding, the Ninth Circuit upheld the lower court's analysis concerning these elements. First, it was clear that some (at least) of Napster's users directly infringed the plaintiff's copyright by copying and distributing the music without permission. Second, because Napster retained the right to block a user from accessing its network, this was sufficient to control the infringing activity. Third, Napster obtained a financial benefit from its users' activities, because Napster's value related to the size of its user base, and the ability to take part in the infringing activities was the major attraction for users.[13]

  14. It is worth noting that whether or not Napster had direct knowledge of its users' infringing activities is not relevant to vicarious liability, once an ability to control the users was established. As the court observed, "the right to police must be exercised to the fullest extent. Turning a blind eye to detectable acts of infringement for the sake of profit gives rise to liability."[14]

  15. Napster unsuccessfully argued several defences, including a right to free speech, and the fact that an injunction would result in considerable hardship for Napster. The court held that the hardship borne by Napster did not 'trump' the interest of the holder of copyright, and an injunction was granted. Two of the more important defences argued were the so called 'Betamax' defence, and the service provider exemption. Both of these defences are explained below.

    The 'Betamax' defence against indirect infringement

  16. The US Supreme Court decision of Sony Corp. of America v. Universal City Studios, Inc.,[15] (the 'Betamax case') supports the proposition that creators of new technology should not bear the burden of preventing copyright infringement where the technology is capable of substantial non-infringing use. In that case, the court found that the Video Cassette Recorder had a number of non-infringing uses including 'timeshifting', where a person copies a broadcast work for the purpose of viewing at a more convenient time. It is of some importance that it was the court's view that it does not matter what percentage of users are actually using the product for non-infringing uses, only whether the product is capable of a substantial non-infringing use.[16] In this way the underlying policy of supporting innovation[17] is not stifled by the protection of an individual instance of innovation. In other words, the underlying goal of using copyright to develop one kind of art work (for example recorded music), should not always or necessarily take precedence over the development of another kind of innovation such as P2P technology, or the Video Cassette Recorder. A nascent technology with potential for useful application should not meet legal obstacles only because it can facilitate infringing of existing copyright.

  17. In the Napster case, the court found that the Betamax defence does not apply where there is actual knowledge of specific infringements.[18] Thus the Napster case has further refined the Betamax defence. In the Betamax case, it was not possible to prevent infringing use of the technology, without also preventing non-infringing use. The similarity with the Napster case is that banning the technology would have prevented non-infringing use, so in principle the defence could have applied. However, the court in Napster made a distinction between the architecture of Napster having the potential for non-infringing use, and Napster's "conduct in relation to the operational capacity of the system" where Napster had "specific knowledge of direct infringement".[19] This is because where there was specific knowledge of direct infringement, Napster had the power to remove the infringing material by blocking that user. Thus the court stated: "We agree that if a computer system operator learns of specific infringing material available on his system and fails to purge such material from the system, the operator knows of and contributes to direct infringement."[20] This ability to control maintains the connection with the primary infringement, and is what distinguishes the Napster case from the Betamax case.

  18. More support for this position arises from the court's analysis, in Napster, of Religious Technology Center v. Netcom On-Line Communication Services, Inc:[21] "in an online context, evidence of actual knowledge of specific acts of infringement is required to hold a computer system operator liable for contributory copyright infringement."[22] The important point is that where documented evidence of infringing activity is provided, in the Netcom case "the court reasoned that Netcom would be liable for contributory infringement because its failure to remove the material and thereby stop an infringing copy from being distributed worldwide constitutes substantial participation in distribution of copyrighted material."[23]

  19. The Napster case, in conjunction with the Betamax case, has therefore imported a requirement for control into the threshold test for knowledge in contributory infringement. Where a technology has both infringing uses and non-infringing uses, it is not enough for contributory negligence that a person knows infringing activity is taking place. Following Napster, contributory infringement in this kind of case requires the ability to control the infringement. Alternatively, it might be said that in these cases the threshold for material contribution, the third element of contributory negligence,[24] is the provision of the facilities and the ability to stop infringing activity where it is known to occur. In other words, you are only contributing to the infringement if you provide the facilities and you have the ability to stop the infringement. Merely providing the facilities is not sufficient.

    The service provider exemption

  20. Another of Napster's arguments in its defence was that it was exempt from liability because it was a service provider under section 512(a) of the Digital Millennium Copyright Act,[25] which allows an Internet service provider to provide connections for material that is temporarily stored on its service with impunity, provided it meets the following conditions:[26]

    1. An individual, other than the service provider, initiated or directed the transmission of the material at issue;
    2. The Internet service provider did not select the material being transferred, routed, or stored, but instead the process is completed automatically;
    3. Another person, not the service provider, selects the recipient of the material;
    4. The material housed on the server is not available to individuals other than the named recipient, nor is it available to the intended recipient for an unreasonably long period of time; and
    5. The Internet service provider does not alter or modify the material's content.[27]

  21. Napster argued that they met each of these conditions, but the plaintiffs argued that because Napster maintained a search facility, and thus 'locator tools' they had to meet the more stringent condition in section 512(d)[28] regarding knowledge and awareness of the infringing activities, and obtaining a financial benefit from those activities. In particular, section 512(i) requires that the provider adopt a policy of terminating users who infringe copyright, and informing users of this policy. Although Napster did implement such a plan, it was not until the commencement of the litigation that they began to enforce it and inform their users of the plan.

  22. The court held that s 512(a) did not apply to all of Napster's functions, and thus did not provide a safe harbour for all Napster's functions, because of the fact that Napster acted as, and represented itself as, a locator of songs.[29] More generally, the court concluded "Because Napster does not transmit, route, or provide connections through its system, it has failed to demonstrate that it qualifies for section 512(a) safe harbor."[30] In other words, Napster failed classification as a service provider under the Act.

  23. Napster lost the case in the District Court and appealed to the U.S. Court of Appeals for the Ninth Circuit. Although the Ninth Circuit found that Napster was capable of commercially significant non-infringing uses, it affirmed the District Court's decision. On remand, the District Court ordered Napster to monitor the activities of its network and to block access to infringing material when notified of that material's location. Napster was unable to do this, and so shut down its service in July 2001. Napster finally declared itself bankrupt in 2002 and sold its assets. It had already been offline since the previous year owing to the effect of the court rulings. The trademark has been sold to Roxio, and a new subscription service using this name is due to be released 29 October 2003.[31]

    Grokster/Kazaa and beyond

  24. Despite Napster's demise, P2P file sharing has gone from strength to strength. The music industry, however, has continued to pursue Napster's successors, including Kazaa, Grokster, Morpheus, Streamcast, Madster[32] and others.[33]

  25. From a technological perspective, there is an important difference between these later P2P platforms, and the pioneering technology of Napster. These networks are not maintained or controlled by a central body. Instead, the software sets up users as part of a system of nodes which interconnect with each other. Also, importantly, the searching facility is not conducted through a centralised search engine which contains the titles of available files. Instead, all of the machines on the network communicate available files using a distributed query approach. The diagram below depicts the structure of the Freenet network and its searching process as a typical example:

    Figure 2 - A P2P distributed query system[34]

  26. It soon became apparent these differences have important legal repercussions. In October 2001 MGM and a long list of other representatives of the music and film industry commenced an action against Grokster, Morpheus and MusicCity (which was to become Sharman Industries, the owner of the Kazaa software)("Sharman").[35] The action was for an injunction ordering that the defendants 'cease and desist' from further infringing activities, and pay damages for all infringements that have already occurred. The plaintiffs alleged that Sharman are liable for:

    1. Direct copyright infringement: "knowingly and systematically participating in, facilitating, [and] materially contributing to" the copyright infringement, by having "actual and constructive knowledge of the infringements committed on and through their network."[36]
    2. Contributory infringement; and
    3. Vicarious infringement.

  27. From the music industry perspective, there were two main problems with the action against Sharman as a solution to the problem of copyright infringement by its users. The first was jurisdictional. The second was that the network can operate without intervention by Sharman, so that shutting down Kazaa will not immediately, or necessarily, prevent further copyright infringement by those users on that network.

  28. On the jurisdictional issue, Sharman moved to dismiss for lack of jurisdiction, but the court held, essentially, that because there was a significant user base in the California, and much of the effect of the infringement is on business in California, it was suitably within the jurisdiction of a Californian court. The jurisdictional issues are themselves of some importance and interest, as Sharman apparently went to some lengths to distribute its operations across the world in a way that seemed contrived to avoid US jurisdiction.[37]

  29. Another issue is that Sharman can reintroduce the Betamax defence that failed for Napster, thus creating yet another hurdle for the music industry. Sharman have teamed up with Altnet, and the Kazaa software is delivered to support Altnet, a company supplying legitimate material for which the user pays using an innovative 'micro payment' model.[38] Altnet allows publishers and (for example) unsigned bands to deliver their material onto the network. Altnet collects fees and commissions from these artists and publishers, and in return provides the platform and collects payment for the material. This is potentially a very convenient way of selling music. Presently, however, the product offered by Altnet is insignificant in comparison with the appealing array of pirate material that is available on the Kazaa network. This technology has, however, already been used by Microsoft to deliver new products and so shows a great deal of potential as a plausible 'non-infringing' use of the Kazaa software and the P2P networks.

  30. The more this aspect is developed, the stronger the argument becomes that the technology itself should not be withdrawn from the market, owing to its potential for substantial non-infringing use. Sharman, therefore, has two features of its case that distinguish it from Napster's. First, the distributed nature of the way the network functions means that they do not have control - a necessary element for vicarious liability. Second, the evidence of, and potential for, non-infringing use negates the essential 'knowledge' element in contributory infringement. The fact that Sharman know (and profit from) infringing use can be irrelevant, if legitimate use is evident and promoted.

  31. In April 2003 the United States District Judge Steven Wilson ruled that P2P file-sharing websites "Grokster.com" and "StreamCast" should not be banned simply because they can be used to swap material covered by copyright.[39] Whether or not the music industry has accepted it yet, this is likely to become a significant turning point for the music industry on this issue.

    The Australian Jurisdiction

  32. This section will consider how Australian copyright law could respond to a case involving P2P sharing of music files. The Copyright Act 1968 (Cth) was recently amended by the Copyright Amendment (Digital Agenda Act) (Cth) 2000 (Digital Agenda Amendments). The aim of this amendment was to update Australian Copyright law in response to developments in communication technologies. There remains, however, uncertainty of the extent to which copyright owners are protected against the illegal P2P sharing of music files.

  33. The concepts of contributory infringement and vicarious liability, which formed the basis of the Napster case, do not exist under Australian law. However, there is liability for 'authorising' infringements under the Copyright Act, and liability as a joint tortfeasor, both of which potentially apply in this instance.[40]

    Authorisation

  34. The Digital Agenda Amendments to the Copyright Act, which came into effect in 2001, made changes to the provisions relating to the concept of authorisation of infringement of the copyright in sound recordings. The Copyright Act s 101 states that infringement occurs when any act is either done or authorised which is not comprised in the copyright.[41] The Act (s 101(1A)) lists some of the factors that must be taken into account. They include:

  35. In the Explanatory Memorandum to the Amendments, it is noted that these factors are a codification of the common law, in particular as it is expounded in the case of University of New South Wales v Moorhouse.[42]

  36. In what follows I will expand on the concepts of this section of the legislation as they are analysed in Moorhouse, in particular as they may apply to cases involving P2P sharing.

  37. Moorhouse involved an action against a university library which provided photocopying facilities. The issue was whether the provision of these facilities in a lending library amounted to authorising the illegal photocopying of books.

  38. Justice Gibbs held[43] that 'authorise' means "sanction, approve, countenance"[44] or 'permit'.[45] Moreover, express or formal permission is not required, and "inactivity or indifference, exhibited by acts of commission or omission" may be of a sufficient degree to infer permission or authorisation.[46] It is important, however, that a person knows or has reason to suspect the infringing activity is likely[47] to take place, as the word 'authorise' connotes a mental element.[48]

  39. Justice Gibbs[49] infers from these authorities that:
    It seems ... to follow from these statements of principle that a person who has under his control the means by which an infringement of copyright may be committed - such as a photocopying machine - and who makes it available to other persons, knowing, or having reason to suspect, that it is likely to be used for the purpose of committing an infringement, and omitting to take reasonable steps to limit its use to legitimate purposes, would authorize any infringement that resulted from its use.[50]

  40. It would appear when applying these principles to the case of P2P sharing, that making software available that is likely to be used for the purpose of committing an infringement, without taking reasonable steps to limit its use to legitimate purpose, would be to authorise this infringement.[51]

  41. Justice Gibbs notes that some authorities hold that it is necessary that a person who authorises an infringement must have knowledge or reason to suspect that the particular act of infringement is likely to be done. However, he affirms that in his view it is "clearly sufficient if there is knowledge or reason to suspect that any one of a number of particular acts is likely to be done, as for example, where the proprietor of a shop installs a gramophone and supplies a number of records any one of which may be played on it: Winstone v. Wurlitzer Automatic Phonograph Company of Australia Pty. Ltd."[52]

  42. Justice Gibbs makes the following points which are of particular relevance to the issue of P2P sharing. First, the copy machines were used extensively for activities that did not infringe copyright, but it was likely that unless provisions were made to prevent the copying of books subject to copyright, such infringing activities would take place. Thus the University had reasonable grounds to suspect that infringement would take place. Second, the University had power to control the use of the machines and the use of the books. Thus it follows that where a person is allowed to use the library and the photocopy machines, and does so in a way that infringes copyright, it can be inferred that the University authorised him or her to do so.[53]

  43. It follows from this, that in the case of P2P sharing, if the distributor of the P2P software has reasonable grounds to suspect that infringing activities were likely to take place, and they have the power to prevent or control those activities and do not take reasonable steps to do so, then they have authorised these infringements. This situation would therefore amount to copyright infringement under s 101 of the Copyright Act.

  44. Whether or not the supplier of P2P software actually does have the power to prevent infringing activities is an important issue, and one that was given some attention in the Napster case. The relevant section in the Copyright Act is Section 101(1A)(b), which states that the relationship between the alleged 'authoriser' and the primary infringer is to be considered, and Section 101(1A)(c) considers whether any reasonable steps are taken to prevent the infringing act.

  45. The distinction between the US and the Australian jurisdictions appears to be that the Australian jurisdiction, by using the concept of 'authorising' a copyright infringement, has brought together the elements of both vicarious and contributory infringement in a way that is clearer than the US law. As I argued earlier, the Napster case imported the element of 'control' into the knowledge requirement of contributory infringement. It is only subsequent to this point that the tests in the two jurisdictions have become more closely aligned.

  46. Consider now, in both jurisdictions, a party who knows of an infringement and has the power to control it, but does not. In Australia the party may have authorised the infringement and so have breached copyright. Under US law, however, there is still the additional element of material contribution to the infringement required for contributory infringement, or material benefit required for vicarious liability. The conclusion is that following the Napster case, it is now clear that the Australian jurisdiction has greater protection for the copyright owner in these circumstances, than the US jurisdiction.

    ISP liability

  47. Similar to the US jurisdiction, in a case where a P2P operator has 'authorised' copyright infringement in the legal sense described in the Copyright Act, there is a 'defence' for those persons who 'merely provide facilities' for these acts. This defence (below) is designed to protect an Internet Service Provider (ISP) from being liable for the copyright infringement.
    112E Communication by use of certain facilities

    A person (including a carrier or carriage service provider) who provides facilities for making, or facilitating the making of, a communication is not taken to have authorised any infringement of copyright in an audio-visual item merely because another person uses the facilities so provided to do something the right to do which is included in the copyright.[54]

  48. In the Explanatory Memorandum it states that the "New clause 112E has the effect of expressly limiting the authorisation liability of persons who provide facilities for the making of, or facilitating the making of, communications." [55]

  49. It is unlikely that a P2P provider will meet the definition of a 'carrier'[56] but a P2P provider could still argue that it is 'a person providing a facility' and is included under this defence, because s112E does not exclude those who are not carriers or carriage service providers.

  50. The difference between the US and the Australian law is that the US law apparently has more stringent requirements for qualifying for the defence. While stating that merely being the carrier of infringing material is insufficient for liability, the Australian legislation does not expand on the meaning of 'merely' in the same way as the US legislation. However, it is likely that the test for 'authorise' expounded in Moorhouse would provide the basis for such an analysis, and therefore any act which demonstrates knowledge of copyright infringement, in the context of a carrier's ability to block or control such activity, is likely to be considered the requisite level of permission or authorisation that would disqualify the carrier from the defence.

    Liability of a joint tortfeasor

  51. Liability as a joint tortfeasor arises where a tort is committed by a person on behalf of or in concert with another.[57] Therefore, where a person commits a copyright infringement 'in concert with' another, they are liable as a joint tortfeasor. In Walker v Alemite Corporation,[58] it was held that a supplier would only be liable as a joint tortfeasor where they make themselves 'a party to the act of infringement'. Like the Betamax case in the US jurisdiction, merely facilitating an infringement by selling, manufacturing or providing equipment for the infringing, even where the person knows that the equipment will be used for infringing activity, would therefore seem to be insufficient, unless there was some knowledge of and control over the infringing activity. Thus liability appears to accord with the standard in the Copyright Act. In relation to the circumstances of a P2P provider and its relationship with a direct infringer, the test for 'authorising' and the test for being 'a party to the act' are likely to be very similar.

  52. In Rotocrop International Limited v Genbourne Limited[59] it was established that where components are accompanied by instructions that persuade the user to infringe, this would be sufficient for liability. In the case of P2P sharing, therefore, it would need to be established, for example, that the instructions on using the software invite the user to infringe copyright.

  53. This first section demonstrates two points. The first is that the statutory copyright regimes in Australian and the US, with some small differences, provide a level of protection that prevents a centralised endeavour to facilitate copyright infringement.

  54. The second point is that in this post-Napster era of P2P sharing, there is a conscious move away from the centralised network. This is of significant legal importance. P2P sharing has 'come of age' and is now truly peer-to-peer. This puts the new form of mass copyright infringement on the same legal standing as the VCR and the tape recorder.

  55. What response the music industry could, or should, make to this situation, is the subject of the next section.

    Music Copyright and Strategies for Protection

  56. This section considers the issue of P2P sharing more broadly, as a problem for the music industry and the protection of its product and profits. While pursuing individual 'pirates' is impractical,[60] the music industry has had, until recently, reasonable success in suing the operators of P2P networks.[61] Although pioneers such as Napster and "MP3.com" have paid the price of their innovation, the litigation has slowed neither the development nor the usage of the emerging technology. This is demonstrated by the networks and software that emerged in the wake of Napster, and allows exactly the same sharing capability; including gnutella, Madster (formerly Aimster), KaZaA, AudioGalaxy, Morpheus/MusicCity, Grokster, iMesh, Filetopia, BearShare and LimeWare.[62]

  57. The reason for this continued activity, as I discussed in the previous section, is that these networks are distinguished from Napster by not having a centralised server, and thus the legal battles (and any subsequent enforcement) have become more difficult and unpredictable. As the Napster case drew to a close Doug Isenberg predicted of the next wave of P2P networks: "Without an identifiable legal entity to sue, online copyright infringement would flourish out of control."[63] When Napster offered to settle, he argued: "Without a settlement, Napster will die a legal death and music-file swapping will live a long and prosperous life. Because that outcome would benefit no one, Napster and the recording industry must face the music and play together."[64]

  58. Now that this prediction of the prosperity of P2P sharing is coming true, the question is how should the music industry respond to this new technology and the law's limited success in preventing copyright infringement? Yu has argues there are broadly four possibilities:

    1. More litigation;
    2. Lobby the government to create new laws to increase copyright protection;
    3. Use new technologies to prevent copyright infringement; or
    4. Accept the change and opt for an alternative business model.[65]

  59. My primary interest is with strategies (2) and (4), which will be the focus of the remainder of this paper. First, however, I will make some brief comments about strategy (3).

  60. Copy-protection technology can be used to encrypt the data on copyright works. Although hackers will soon develop ways to overcome individual examples of the technology, this may effectively limit the unauthorised copying to some degree. Although this strategy has already been implemented to some extent, it does not promise to be the solution to the recording industry's problems, for at least three reasons.[66]

  61. The first is that as hackers develop ways around the technology, the recording industry is certain to respond with new technology, creating an ongoing 'technology race'. This is likely to channel funds for research and development away from discovering and nurturing artists, and into developing security. This result would be detrimental to artists, consumers and the recording industry.

  62. The second point is that there is at least one limit to the protection encryption can provide. Simply sending a lead out of your computer's 'line out' socket, and into the 'line in' allows quality recordings to be made using available free software. It's also possible that a crackdown on infringement technology in the form of encryption may have a causal effect on the development of more sophisticated technology to improve 'input to output' copying. An earlier example of this is the sale of portable cassette players with two tape decks to allow easy and inexpensive 'tape to tape' copying.

  63. The third point is that there is a risk that copy protected CDs, which so far have not worked well on all kinds of CD players (particularly older players, car stereos and some PCs), will alienate certain groups of consumers and promote an attitude that is more conducive to copyright infringement. Further, this encryption prevents certain allowable 'fair use' copying in the US jurisdiction.[67] An example of this is where a lawsuit was launched by two Californian consumers in response to the release of a Celine Dion CD in an encrypted format.[68] In Australia, a man bought a Nora Jones CD only to find that it would not play on either his Mac, Windows 2000 or Windows XP computers. He was forced to copy the CD in order to listen to it.[69]

    P2P Sharing and Law Reform

  64. Another of the responses that the music industry might take to P2P sharing, which I identified as strategy (2) in the list above, is to lobby for legislative change. To explore this issue, I shall consider this mass infringement of copyright as a problem for law reform. If the copyright in a recorded piece of music is difficult to enforce and control, then before taking steps to secure this right, the legislature needs to consider the following questions:

    (1) What is the foundation of a right to prevent others from copying a recorded piece of music?

    (2) If the right is based on policy considerations, do the balance of policies justify protecting the right?

  65. I will address each of these issues in turn. My argument is that copyright is founded on a policy to foster the production of information and artistic works. Therefore, any reform of the law should be assessed according to this criterion and my analysis is that increased copyright protection in this context is not justified.

    The Foundation of the Copyright

  66. Copyright law can look to three conceptual foundations for the right of control of an artistic work:[70]

    1. Moral
    2. Natural (proprietary)
    3. Economic / public policy

  67. To properly assess the justification for law reform it is necessary to consider which of these is at stake. I argue that increasing protection of musical works against P2P sharing does not concern moral or natural proprietary rights and therefore should be considered on the grounds of economic and public policy. I argue further, that an analysis of these latter considerations is not in favour of increased copyright protection.

  68. The view that copyright is founded on natural rights derives from the principle that a person has an absolute right to the 'fruit of their labour'. In Millar v Taylor,[71] Justice Willes states "It is certainly not agreeable to natural justice that a stranger should reap the beneficial pecuniary produce of another man's work."[72] These views are derived from (or at least instantiated in) the works of John Locke: "Every man has a property in his person. This no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his."[73]

  69. More recently, this view is appears in Article 27(2) of the Universal Declaration of Human Rights:
    Everyone has the right to the protection of the moral and material interests resulting from scientific, literary or artistic production of which he [or she] is the author.[74]

  70. Moral rights, on the other hand, concern the integrity of the artistic product such that an author or artist has control of the way his or her product is presented. Under the Australian copyright law these moral rights allow an artist or author to take action if they are not attributed or credited for their work; their work is falsely attributed to another person; or their work is subject to modification or other derogatory treatment.[75]

  71. Neither natural proprietary rights, nor moral rights are at stake in the issue of P2P sharing. The issue for P2P sharing is whether a third party may profit from the labour of another, by exploiting the free exchange of works that have already been purchased. The view that copyright includes a natural proprietary right avers that where a person creates an artistic work that has some pecuniary value to others, she or he should not be deprived of that work without some compensation. How much compensation, however, and far the control should extend, is a matter of economic policy and market considerations. There is nothing inherently unjust about purchasing property from a person and subsequently making a profit from that product.

  72. Moral rights are not at issue in P2P sharing because the activities do not involve, in relation to the recorded music, false attribution or derogatory treatment.

    Copyright history

  73. Another approach to understanding the foundation of copyright is to look at the history of copyright law in the United Kingdom. The historical development of the common law, although not conclusive regarding the foundation of the present statutory law, can reveal the purposes and intentions that have lead to the development of the current law.

  74. After the invention of the printing press, a system of licensing emerged which put the control and profits from books in the hands of the printer, or 'stationer'. This system was primarily for reasons of censorship.[76] The Act of Anne was the first copyright act, and its preamble begins:
    An Act for the Encouragement of Learning, by vesting the Copies of printed Books in the Authors or Purchasers of such Copies, during the Times therein mentioned.[77]

  75. In the period following the Act of Anne, a number of cases considered the issue of whether there was a common law copyright post-publication, or whether this right was the limited statutory right only. The decision in Millar v Taylor[78] ruled in favour of the former view, but was fairly quickly over-ruled in the House of Lords decision in Donaldson v Beckett.[79] This latter view became settled, and was expressed in Jeffery v Boosey:[80]
    Weighing all the argument on both sides, and looking to the authorities up to the present time, the conclusion I have arrived at is, that copyright is altogether an artificial right, not naturally and necessarily arising out of the social rules that ought to prevail among mankind assembled in communities, but is a creature of the municipal law of each country, to be enjoyed for such time and under such regulations as the law of each State may direct, and has no existence by the common law of England. It would follow from this, that copyright in this country depends altogether on the statutes which have been passed on this subject ...

  76. This brief look at legal history shows that the argument that an author's copyright is one 'necessarily arising out of the social rules that ought to prevail'[81] has famously been tried and rejected in England's highest court. The other point is that there is an interesting parallel between the attempt to expand copyright in relation to P2P sharing, and a similar attempt approximately 200 years earlier. In both cases the irony is that those who are seeking to enforce this right are not the authors or artists themselves, but the party who has purchased the copyright (and whose interest is purely financial) - the publisher.

  77. Halbert explains that one of the methods by which the publisher obtained public support for their proposed rights was to present the story of these early cases in the language of war.[82] The 'Battle of the Booksellers' included villains which were called pirates by the London book cartel, and this piracy was said to be ruining the lives of honest businessmen and their families. Halbert argues that these narratives helped to 'obscure the more powerful logic of profit'[83] and although the battle for perpetual copyright was lost, it did fix the idea of copyright as an author's right, and a proprietary right. The battle narratives, and the users of P2P software being characterised as pirates is again the imagery that is used in the current 'war'.[84]

    Economic rationale

  78. In the remainder of this paper I will assess the music industry's argument for increased copyright protection of recorded music, based on policy. Consider the following view:
    What society appears to do is to use the policy instrument of intellectual and industrial property rights in certain parts only of the total information system - in parts where there is widely agreed [sic] to be a serious problem of underproduction and under processing of knowledge, and where this particular kind of incentive, by itself or in association with others seems likely to be an appropriate means of improving the situation.[85]

  79. Since copyright law not only protects works which comprise knowledge and information, but also artistic works, one can substitute 'underproduction of knowledge' with 'underproduction of quality artistic works' in the statement above. If this standard is accepted, then to produce a convincing argument that P2P sharing ought to be restricted by increasing copyright protection through law reform would require showing that P2P sharing leads to an underproduction of quality artistic works. Simply expanding copyright protection for the benefit of those who create and own music copyright will potentially reduce the opportunities for the users of the Internet and information technology for deriving the full benefit that these developments may bring.[86]

  80. On this issue, the Office of Regulatory Reform (ORR) submitted an economic analysis of copyright law reform in 1995[87] which still provides a useful framework for analysis. The chart below, from that report, depicts their approach.

    Determining the Need for Copyright Reform

    Figure 3 - Decision tree for copyright reform[88]

  81. The ORR contends that the onus is on those advocating any expansion of copyright protection - or indeed provision of other forms of assistance designed to increase production - to show on a case-by-case basis that:

  82. To meet this onus, the music industry would first have to show that there is an underproduction of works, and that this is caused by P2P sharing. The first inference, therefore, is that the music industry's sales revenue is declining in real terms, and that this is a result of potential customers obtaining the products free on P2P networks.

  83. Assume, for the moment, that the first premise in not controversial. Some statistics do show a decline in the sale of music.[90] However, this does not show that P2P sharing is the cause as, for example, competition from other forms of entertainment may be to blame.[91] Furthermore, this does not show that the music industry as a whole is less profitable, or that it will become so. The music industry may develop alternative ways of making profits; which may or may not involve the music industry changing in its structure and business models.

  84. A second argument, from the perspective of the music industry, is that if the industry is losing profits it is the composers and musicians who are suffering. This speaks directly to the policy rationale that copyright law exists to create an incentive for authorship. There is, however, no direct connection between music industry profits, and financial incentives to produce quality music. From the perspective of profits, copyright law has always been the protector of the profit of the publisher, and this continues to be the case. Musicians, as a profession, are not well paid for the sales of their recordings.[92]

  85. It is quite possible, as I will argue below, that restructuring of the market in recorded music, prompted by the availability of P2P sharing, may make recorded music more profitable for the composer/musician. Therefore the author's interest cannot be the only, or the main justification for the prevention of copying. It is not even necessary to argue that this is likely to be the case. The onus is on the advocate of law reform to show that there is a direct financial disincentive that flows from P2P sharing. Lack of profits for the music industry in general is not an issue that should be addressed through copyright law reform in the absence of strong evidence that the current music industry is the most efficient way to produce the maximum quantity and quality of recorded music. Copyright law is not designed to protect the existing structure of the music industry - it is designed to ensure that there are financial incentives for authors and artists.

  86. A third argument that could be made in the interests of the music industry is that the consumer will suffer as a result of P2P sharing, because production of quality work will suffer. Again, this inference is unjustified. First, because it relies on P2P sharing causing a reduced financial incentive for artists to create recorded music. This is not necessarily the case. Second, it relies on the inference that a reduced financial incentive will lead to a reduced body of quality work being produced. This does not follow either. As the composer Arthur Honegger observes "Composing is not a profession. It is a mania - a harmless madness." Fluctuations in financial rewards will not necessarily have a direct effect on production.

  87. Finally, consider the case where the music industry does lose profits, and the composer/musician is disadvantaged financially, to a significant degree. Does this necessarily mean that changes should be made? Again, this does not necessarily follow. As long as the consumer is continuing to benefit, the economic model would still be against tightening copyright law. This is, of course, unfortunate for musicians. Changes in market forces sometimes do affect the fortunes of certain groups, but if society as a whole continues to be the recipient of quality works, then this is not an issue for copyright law reform.

  88. I shall now present some further analysis of what I consider is the key issue required to support the arguments above, that is, does P2P sharing necessarily lead to an under-production of works, and would changes in copyright law lead to increased production?

    Under production of works

  89. I argued above that P2P sharing would not necessarily lead to an under production of works. Moreover, the case that legislative change to prevent P2P networks would increase production of quality recorded music is seemingly based on the following two assumptions:

    1. CD sales are the only or major way in which revenues are, or could be returned to artists for their product; and
    2. There is a strict relationship between potential for profit, and production.

  90. I argue that both these assumptions are false. First, it may indeed be the case that P2P sharing will mean that producing recordings will be less profitable. However, it is alarmist and implausible to predict that it will completely destroy the CD market. People still buy videos and books, even though they can be copied. They like to own the legal copy of a CD with the original artwork, confident that the quality is backed up by consumer protection legislation and the reputation of the record label. To many people the cost is not the most important issue, and not everyone has the technology or the interest to obtain music using P2P networks.

  91. Second, as a significant source of profits for musicians and the music industry, live performances are unaffected. P2P sharing has no negative impact on the role recorded music plays in promoting the live performances.

  92. Third, song-writing royalties may be able to be obtained by paying royalties from the P2P network profits, based on the flow of copying or searching. This would be similar to the way that royalties are obtained in radio broadcasting.[93] This is an example of an alternative business model the music industry could pursue in conjunction with law reform. Currently, when music is exchanged via P2P networks, the rewards for the song writing are flowing from the advertisers to the creators of the software, because the proliferation of the software usage is funded by advertising. This is seen to be unjust from an intellectual property perspective. In order to provide incentives for the musicians who create the music, the rewards ought to flow back to the creators of the music being copied, in an appropriate proportion. Law reform could provide incentives to ensure that the software include a way to quantify the royalties to be paid to the musicians. Thus although the consumers get a product for free, the income that this usage generates through advertising is properly apportioned to suit policy goals.[94]

  93. This kind of model accords nicely with another feature of technology - that with modern recording equipment, amateur musicians can now produce more professional sounding, better quality results. This means that the recording company is, in fact, adding less value to the product, and so should be rewarded less, accordingly. It is therefore fitting that the market should create a way of distributing the wealth away from the recording company, and back to the songwriters and musicians. Anecdotally, the current environment has seen a resurgence in profits for independent record labels, where the artist obtains a greater proportion of the financial rewards for sales of recordings by choosing not the pay for the expensive distribution and recording methods of the major labels.[95] Record companies, after all, do not supply the innovation; they supply the commercial element of distributing the product. Intellectual property rights are designed to protect, and provide incentives for, the innovation itself.

  94. So there is no inevitable causal relationship between P2P sharing, and a reduction in the production of quality works. Mechanisms exist, or could exist, to provide the means and incentives for the continued supply of quality recorded music.

    Will increased protection, increase production?

  95. If it were empirically established that P2P sharing is, or would be, the cause of underproduction of quality works then the next element of the ORR's test provides that it must be shown that any increase in legislative protection would promote production. However, merely increasing copyright protection of music files is not the best way to increase production because:

    1. Arguably P2P sharing cannot be stopped;
    2. There are advantages that are prevented by increasing the protection; and
    3. It is dubious that production is necessarily linked to protection in these circumstances.

  96. I will expand on point (b) in the next section. Further support for (c) can be obtained by summarising the possibilities that have already emerged for effective restructuring of the music industry in a way that still provides incentives for production.

  97. Two workable strategies have emerged for allowing easy access to individual songs in MP3 format, without breaching copyright. One recent (and to date the most successful) example is Apple Computer's iTunes Music Store. This service allows a user to buy music for US$0.99 per song, or $10 per album. A song can be downloaded onto a Mac or Apple iPod portable music player, or burnt onto a CD.

  98. Apple sold more than one million songs in its first week in business - despite the fact that the iTunes service is available only to users of Apple computers, who have less than 4 percent share of the U.S. market.

  99. Along similar lines is the proposed re-emergence of the Napster name, due to occur on the 29th October 2003. Hoping to recapture some of the extensive popularity of the ill-fated free file sharing service provided by the former owners of the trademark, the new Napster offers legal subscriber access to music files.

  100. Another strategy that has been launched is that of Altnet, which I described briefly in the first section of this paper. The Alnet platform invites the music industry as a whole - not just the existing major recording companies - to utilise the technology of P2P networks in an alternative 'user pays' system.

  101. A third possibility (and all of these could be used concurrently) would be to collect data for redistribution of royalties to the copyright owners, as I mentioned above. As a matter of technology, this is easily done by creating a log file that tracks either the searching behaviour, or the downloading behaviour through the user software. The information from this log file can be accessed by the software provider (and ultimately the body responsible for distributing royalties) via a query/search, in a similar way that the content of shared folders is accessed when searching for song titles. Like the shared folder, this could even be an option that the user has control over, so that users can choose to support the royalties being paid to musicians by allowing access, or prevent intrusion to their downloading behaviour. It may even be the case that optional subscriptions to support the distribution of royalties, may assuage the guilt of the P2P user while still providing all the benefits of the network file-swapping.

    Will benefits of protection outweigh the cost to consumers?

  102. According to the model for assessing the justification for legislative change proposed by the ORR above, even where reform is justified on the grounds of preventing a decline in production, it must also be assessed on the basis that the benefits of this increased protection should outweigh the potential cost to consumers.

  103. The primary benefit of using legislative reform to prevent P2P sharing would be to enable the music industry to maintain the control of the artist's product. The costs to consumers of preventing P2P sharing include losing the following benefits:

  104. To expand on the second point above, one of the foundations of intellectual property law is its role in promoting the development of useful technology.[96] Traditionally this has been more within the realm of patent law, but with the arrival of software technology, promoting the development of software technology by copyright protection is a significant policy aim of copyright law. Since the development of technology, and knowledge in general, is the policy behind intellectual property rights, technology that has beneficial uses and effects, should not be inhibited, particularly where the development of that area of technology is likely to continue to create as yet unforseen benefits.

  105. Looking now at the third point, P2P sharing, coupled with more accessible recording technology, supports another important policy aim. Where a person does not have the resources to release their product to a wider audience they should not be prevented from doing so on those grounds alone. Clearly one of the benefits of P2P sharing is its ability to allow an artist to distribute their work at a low cost. Whether or how they are able to then return profit is an entirely different question, and the answer does not affect the value of the former point.

    Conclusion

  106. In this paper I have argued for the relatively conservative position that copyright law should not be substantially changed in response to the development of P2P networks and the subsequent mass infringement that continues to occur. I have argued that the principle in the Betamax case - that if a technology has a non-infringing use, then this technology ought not to be made unlawful - is an important principle and should not be over-ruled by legislation. The most important feature of copyright is that the owner of the copyright has a right to profit from the reproduction of his or her work - not necessarily because this is a natural proprietary right, but because profit is a motive for production. It is a secondary feature of copyright that a user is prevented (with some exceptions) from copying a work for non-profit purpose.

  107. A third feature of copyright, which is one degree further removed from the primary right, is that a person is prevented from contributing or vicariously infringing copyright (US jurisdiction) or 'authorising' copyright infringement (Australian Jurisdiction). I am not advocating that this element of copyright be eliminated. Rather, what I have argued is that the law of copyright already extends to protection that is arguably beyond its original purpose of protecting the profits of authors and publishers, and providing incentives for creating of new works. Where these purposes are not seriously at risk, and I have argued that they are not fatally at risk from P2P sharing, there is insufficient justification to extend the protection of copyright law.

References

Articles/Books/Reports

Arculli, Ronald and Chan, Grace, 'P2P Music in Hong Kong & Australia' (2001) Arculli and Associates, Hong Kong <http://www.arcullilaw.com> .

Australian Copyright Council "Remuneration for private copying in Australia: A Discussion Paper' (2001).

Electronic Frontier Foundation, 'Background Discussion of Copyright Law and Potential Liability for Students Engaged in P2P File Sharing on University Networks' (2003) <http://www.eff.org/IP/P2P/P2P_Joint_Commitee_paper.pdf> .

Emmerson, J, 'Computer Software: Detailed Inquiry Needed Before Legislation' (1984) 58 Law Institute Journal 514.

Berschadsky, Ariel, 'RIAA v Napster: A Window onto the Future of Copyright Law in the Internet Age' (2000) Intellectual Property 429.

Beverly, Keith, 'Peer-to-Peer systems architecture' Technology Solutions <http://www.technosol.com/publications/p2p.htm> .

Costelloe, Raani, 'The New Digital Copyright Law in the Media, Entertainment and Communications Industries' 12 Australian Intellectual Property Law Journal 19.

Dakin, Helen, 'New proposal for private copying and "blank tape" royalties' (2003) Australian Copyright Council Copyright World <http://www.copyright.org.au> .

Diotalevi, Robert N, 'An Education in Copyright Law: A Primer for Cyberspace' (2003) 13 Library and Information Science Research Electronic Journal [III A 1] <http://libres.curtin.edu.au/libres13n1/index.htm> .

Fallenbock, Markus, 'On the Technical Protection of Copyright: The Digital Millennium Copyright Act, the European Community Copyright Directive and Their Anticircumvention Provisions' (2003) 7 International Journal of Communications, Law and Policy 1.

Frith, Simon, (ed) Music and Copyright (1993).

Gordon, W J & Bone, R G, 'Copyright', in Bouckaert, Boudewijn and De Geest, Gerri (eds.) (2000), Encyclopedia of Law and Economics, <http://encyclo.findlaw.com/1610book.pdf> .

Halbert, Debora J, Intellectual Property in the information age: the politics of expanding ownership rights (1999).

Kaplan, B, An Unhurried View of Copyright (1967).

Kretschmer, Martin. 'Digital Copyright: The End of an Era' (2003) 25 European Intellectual Property Review 14.

Kruger, Colin, 'Piracy not the burning issue in CD sales slide: ARIA' (2003) January 28 Sydney Morning Herald <http://www.smh.com.au/articles/2003/01/27/1043534002352.htm> .

Locke, John, Second Treatise on Civil Government. (1690)

Margolis, Lynne, (2003) 'Independents' day: What record industry slump? Independent labels say business has never been better' April Christian Science Monitor <http://www.csmonitor.com/2003/0411/p13s02-almp.html> .

McKeough, Jill & Stewart, Andrew. Intellectual Property in Australia (2nd Ed, 1997).

Office of Regulation Review, An Economic Analysis of Copyright Reform, submission to the Copyright Law Review Committee's review of the Copyright Act 1968 (Cth), (1995).

Okedjii, Ruth. "Givers, takers, and other kinds of users: A Fair Use Doctrine for Cyberspace. (2002) Intellectual Property Law Review 565.

Pemberton, Jayne A., 'Update: RIAA v. Diamond Multimedia Systems - Napster and MP3.com', (2000) 7 Richmond Journal of Law and Technology 6 <http://www.richmond.edu/jolt/v7i1/note3.html> .

Pitiyasal, Saravuth, 'Does Thai Law Provide Adequate Protection for Copyright Infringement on the Internet?' (2003) 25 European Intellectual Property Review 6.

Ricketson, Sam & Richardson, Megan, Intellectual Property: Cases, Materials and Commentary, (2nd Edition, 1998).

Von Lohmann, Fred. (2001) 'Peer-to-Peer File Sharing and Copyright Law after Napster' Electronic Frontier Foundation, <http://www.eff.org/IP/P2P/Napster/20010227_p2p_copyright_white_paper.html> .

Woody, Todd 'The Race to Kill Kazaa'. (2002) November <http://www.wired.com/> Yu, Peter K. 'Why the Entertainment Industry's Copyright Fight is Futile' (2002) <http://www.gigalaw.com>

Cases

Donaldson v Beckett [1774] EngR 47; (1774) 98 ER 257.

Jeffery v Boosey [1854] EngR 816; (1854) 4 HLC 815.

A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004 (9th Cir. 2001).

A&M Records. Inc. v. Napster. Inc. 114 F. Supp. 2d 896 (N. D. Cal. 2000).

Adelaide Corporation v. Australasian Performing Right Association Ltd [1928] HCA 10; (1928) 40 CLR 481.

Falcon v. Famous Players Film Co. (1926) 2 KB 474.

Mellor v. Australian Broadcasting Commission (1940) AC 491.

MGM v Grokster et al, 269 F. Supp. 2d 1213 (U.S. Dist, 2003).

Millar v Taylor [1769] EngR 44; (1769) 4 Burr 2303; 98 ER 201.

Religious Technology Center v. Netcom On-Line Communication Services, Inc 907 F. Supp. at 1371.

Sony Corp. of America v. Universal City Studios, Inc, [1984] USSC 14; 464 U.S. 417 (1984).

The Koursk [1924] P 140 (CA).

UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349.

University of New South Wales v Moorhouse (1975) 133 CLR 1.

Walker v Alemite Corporation [1933] HCA 39; (1933) 49 CLR 643

Winstone v. Wurlitzer Automatic Phonograph Company of Australia Pty. Ltd. [1946] VicLawRp 53; (1946) VLR 338

Legislation

Copyright Act 1968 (Cth)

Copyright Amendment (Digital Agenda Act) (Cth) 2000 (Digital Agenda Amendments)

Telecommunications Act 1997 (Cth)

US Digital Millennium Copyright Act 17 U.S.C

Notes

[1] An MP3 file is a computer file that stores a song in a compressed format. A 32 Megabyte song on a CD can be compressed to about 3 Megabytes without noticeable reduction in quality. MP3 comes from MPEG audio Layer-3, and MPEG is the acronym for Moving Picture Experts Group, the group who developed the compression technology. <http://www.howstuffworks.com> .

[2] "...the digital environment poses a unique threat to the rights of copyright owners, and as such, necessitates protection against devices that undermine copyright interests. In contrast to the analog experience, digital technology enables pirates to reproduce and distribute perfect copies of works - at virtually no cost at all to the pirate. As technology advances, so must our laws." Report of the US House Comm. on Commerce, H.R. Rep. No. 105-551, pt. 2, at 25 (1998), cited in Markus Fallenb”ck, 'On the Technical Protection of Copyright: The Digital Millennium Copyright Act, the European Community Copyright Directive and Their Anticircumvention Provisions' (2003)7 International Journal of Communications Law and Policy 1.

[3] 17 U.S.C. A&M Records. Inc. v. Napster. Inc. 114 F. Supp. 2d 896 (N. D. Cal. 2000).

[4] A&M Records. Inc. v. Napster. Inc. 114 F. Supp. 2d 896, 921 (N. D. Cal. 2000).

[5] Diagram appears in Ariel Berschadsky, 'RIAA v Napster: A Window onto the Future of Copyright Law in the Internet Age' (2000) Intellectual Property 429, 434.

[6] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1013 (9th Cir. 2001).

[7] 17 U.S.C ss 502-505.

[8] The fact that it is not enough that the system is capable of infringing activity is discussed in relation to Sony Corp. of America v. Universal City Studios, Inc, [1984] USSC 14; 464 U.S. 417 (1984), below.

[9] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1013 (9th Cir. 2001).

[10] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1020 (9th Cir. 2001).

[11] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004 , 1022 (9th Cir. 2001).

[12] Berschadsky, above n 5, 440. See also A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1022 (9th Cir. 2001).

[13] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1023 (9th Cir. 2001).

[14] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1023 (9th Cir. 2001).

[15] [1984] USSC 14; 464 U.S. 417 (1984).

[16] Ibid 442.

[17] United States Constitution: Article 1, Section 8, clause 8. ú Robert N Diotalevi, 'An Education in Copyright Law: A Primer for Cyberspace' (2003) 13(10) Library and Information Science Research Electronic Journal <http://libres.curtin.edu.au/libres13n1/index.htm> [18] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1021 (9th Cir. 2001).

[19] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1020 (9th Cir. 2001).

[20] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1021 (9th Cir. 2001).

[21] 907 F. Supp. 1371.

[22] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1021 (9th Cir. 2001).

[23] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1021 (9th Cir. 2001).

[24] See above, or A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004, 1019 (9th Cir. 2001).

[25] 17 U.S.C

[26] 17 U.S.C s 512. Limitations on liability relating to material online. (a) Transitory Digital Network Communications. - A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the provider's transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider, or by reason of the intermediate and transient storage of that material in the course of such transmitting, routing, or providing connections, if - (1) the transmission of the material was initiated by or at the direction of a person other than the service provider; (2) the transmission, routing, provision of connections, or storage is carried out through an automatic technical process without selection of the material by the service provider; (3) the service provider does not select the recipients of the material except as an automatic response to the request of another person; (4) no copy of the material made by the service provider in the course of such intermediate or transient storage is maintained on the system or network in a manner ordinarily accessible to anyone other than anticipated recipients, and no such copy is maintained on the system or network in a manner ordinarily accessible to such anticipated recipients for a longer period than is reasonably necessary for the transmission, routing, or provision of connections; and (5) the material is transmitted through the system or network without modification of its content.

[27] This list summarising the statute is from: Jayne A. Pemberton, 'Update: RIAA v. Diamond Multimedia Systems - Napster and MP3.com', 2000 7 Richmond Journal of Law & Technology <http://www.richmond.edu/jolt/v7i1/note3.html> [28] 512(d) Information Location Tools. - A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the provider referring or linking users to an online location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link, if the service provider - (1)(A) does not have actual knowledge that the material or activity is infringing; (B) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or (C) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material; (2) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and (3) upon notification of claimed infringement as described in subsection (c)(3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity, except that, for purposes of this paragraph, the information described in subsection (c)(3)(A)(iii) shall be identification of the reference or link, to material or activity claimed to be infringing, that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate that reference or link.

[29] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004 (9th Cir. 2001).

[30] A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004 (9th Cir. 2001).

[31] <http://www.Napster.com> [32] Which was formally called Aimster.

[33] MGM v Grokster et al 269 F. Supp. 2d 1213 (U.S. Dist, 2003)

[34] Keith Beverly, 'Peer-to-Peer systems architecture' Technology Solutions <http://www.technosol.com/publications/p2p.htm> [35] For convenience, I will refer to the defendants collectively as Sharman, and the network created by users of the Kazaa (and other) software as the Kazaa network.

[36] MGM v Grokster et al, (2003) Complaint for damages and Injunctive relief for Copyright infringement Paragraph 52. <www.findlaw.com>

[37] MGM v Grokster et al, (U.S. Dist, 2003) 243 F. Supp. 2d 1073, 1093-4.

[38] See <http://www.altnet.com> [39] MGM v Grokster et al, (U.S. Dist, 2003) 243 F. Supp. 2d 1073, Since this case was originally filed, the operation of the "Kazaa system" has passed from Kazaa BV to Defendant Sharman Networks. In addition, Kazaa BV has apparently ceased defending this action. Because Kazaa BV has failed to defend this action, the Court entered default against Defendant Kazaa BV.

[40] Ronald Arculli and Grace Chan 'P2P Music in Hong Kong & Australia' (2001) Arculli and Associates, <http://www.arcullilaw.com> [41] Copyright Act (1968) 101 Infringement by doing acts comprised in copyright: (1) Subject to this Act, a copyright subsisting by virtue of this Part is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorises the doing in Australia of, any act comprised in the copyright. (1A) In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in a copyright subsisting by virtue of this Part without the licence of the owner of the copyright, the matters that must be taken into account include the following: (a) the extent (if any) of the person's power to prevent the doing of the act concerned; (b) the nature of any relationship existing between the person and the person who did the act concerned; (c) whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

[42] (1975) 133 CLR 1.

[43] University of New South Wales v Moorhouse (1975) 133 CLR 1, 21.

[44] Falcon v. Famous Players Film Co. (1926) 2 KB 474, 491.Adelaide Corporation v. Australasian Performing Right Association Ltd [1928] HCA 10; (1928) 40 CLR 481.

[45] Adelaide Corporation v. Australasian Performing Right Association Ltd. [1928] HCA 10; (1928) 40 CLR 481.

[46] Ibid

[47] Adelaide Corporation v. Australasian Performing Right Association Ltd. [1928] HCA 10; (1928) 40 CLR 481for Knox CJ and Isaacs differing opinions on whether the test is likelihood or possibility.

[48] Knox C.J. and Isaacs J. referred to this mental element in their dissenting judgments in Adelaide Corporation v. Australasian Performing Right Association(1928) [1928] HCA 10; 40 CLR 481

[49] University of New South Wales v Moorhouse (1975) 133 CLR 1, 21.

[50] Justice Gibbs states that Cases such as Mellor v. Australian Broadcasting Commission (1940) AC 491 and Winstone v. Wurlitzer Automatic Phonograph Company of Australia Pty. Ltd. [1946] VicLawRp 53; (1946) VLR 338 are consistent with this view

[51] Raani Costelloe 'The New Digital Copyright Law in the Media, Entertainment and Communications Industries' 12 Australian Intellectual Property Law Journal 19 at.26.

[52] [1946] VicLawRp 53; (1946) VLR 338 .

[53] University of New South Wales v Moorhouse (1975) 133 CLR 1, 21-22.

[54] Copyright Act (1968) section 112E.

[55] Explanatory Memorandum to Copyright Amendment (Digital Agenda) Bill 1999

[56] The Copyright Act refers to the Telecommunications Act for the definition, which states that a carrier is a person who owns a telecommunications network, and that a carriage service provider is a person who provides a service by means of communication over a telecommunications network. A 'telecommunications network' is defined as "a system, or series of systems, that carries, or is capable of carrying, communications by means of guided and/or unguided electromagnetic energy." It could be argued that a P2P network is a 'telecommunications network' and that the P2P network provider is therefore a carrier or a carriage service provider. However, since the P2P network provider arguably does not own the network, but merely provides facilities for creating the network, it is more likely that it is not a carrier. Against the P2P provider being a carriage service provider is the argument that they do not provide the service of communication, but merely the tools. This applies in particular to true P2P networks such as Gnutella and Kazaa, as they do not provide the search and index facilities in a centralised way, as was done in Napster.

[57] The Koursk [1924] P 140, 155 (CA), Scrutton LJ. Laws of Australia, <http://Lawbookco.com.au> [58] [1933] HCA 39; (1933) 49 CLR 643.

[59] (1982) FSR 241.

[60] But see recent litigation against schoolgirls by the music industry. "Music industry settles first case - with 12-year-old" Los Angeles September 10, 2003. The Age. <http://www.theage.com.au/articles/2003/09/10/1062902092627.html> [61] See, for example, A&M Records, Inc. v. Napster, Inc., [2001] USCA9 92; 239 F.3d 1004 (9th Cir. 2001). UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349.

[62] Peter K. Yu, 'Why the Entertainment Industry's Copyright Fight is Futile' <gigalaw.com>

[63] Doug Isenberg, 'Why the Music Industry Must Settle with Napster'. <gigalaw.com>

[64] Ibid.

[65] Yu, above n 62.

[66] Fallenbock, above n 2.

[67] Ibid, 54.

[68] Yu, above n 62.

[69] Sam Varghese 'When copy protection backfires', The Age (Melbourne). 13 May 2003 <http://www.theage.com.au> . Also, a French Court has ruled that CD protection that prevents copying means the goods are faulty and the buyer should be reimbursed. 'France rules anti-copy CDs faulty', The Australian 4 September 2003 <http://australianit.news.com.au/> [70] See generally, Jill McKeough & Andrew Stewart,. Intellectual Property in Australia (2nd Ed, 1997)

[71] [1769] EngR 44; (1769) 98 ER 201.

[72] Ibid at 218.

[73] Locke, John. Second Treatise on Civil Government (1690) Chapter V, Section 25.

[74] United Nations. <http://www.un.org/Overview/rights.html> [75] See Copyright Act 1968 Part IX-Moral rights of authors of literary, dramatic, musical or artistic works and cinematograph films The Copyright Amendment (Moral Rights) Act 2000 amended the Copyright Act by providing two new "moral rights" for individual creators: the right of attribution of authorship and the right of integrity of authorship.

[76] B Kaplan, An Unhurried View of Copyright, (1967) 2-7 extracted in Sam Ricketson & Megan Richardson, Intellectual Property: Cases, Materials and Commentary, (2nd Edition, 1998) 60.

[77] The Act of 1709 (the 'Act of Anne'), extracted in Ricketson & Richardson, above n 76,59.

[78] [1769] EngR 44; (1769) 98 ER 201.

[79] [1774] EngR 47; (1774) 98 ER 257.

[80] (1854) 4 HLC 815, 935-36.[81] See the extract directly above.

[82] Debora J Halbert ,. Intellectual Property in the information age: the politics of expanding ownership rights, (1999), 5-8.

[83] Ibid, 6.

[84] See, for example, David Becker 'New bill injects FBI into P2P battle' (2003) News.com <http://news.com.com/2100-1028_3-1019811.html> [85] Economic Council of Canada, Report on Intellectual Property and Industrial Property (1971) extracted in Ricketson & Richardson, above n 76, 8.

[86] Ruth Okedjii, 'Givers, takers, and other kinds of users: A Fair Use Doctrine for Cyberspace', Intellectual Property Law Review (2002) 565,637-38.

[87] Office of Regulation Review, An Economic Analysis of Copyright Reform, submission to the Copyright Law Review Committee's review of the Copyright Act 1968(Cth), (1995). <http://www.pc.gov.au/orr/ecoanala.pdf> [88] Ibid, 18.

[89] Ibid, 3.

[90] Colin Kruger 'Piracy not the burning issue in CD sales slide: ARIA' (2003) January 28 Sydney Morning Herald <http://www.smh.com.au/articles/2003/01/27/1043534002352.htm> .

[91] Ibid.

[92] Lynne Margolis, (2003) 'Independents' day: What record industry slump? Independent labels say business has never been better' April Christian Science Monitor <http://www.csmonitor.com/2003/0411/p13s02-almp.html> [93] See, for example, APRA Distribution: Radio. <http://www.apra.com.au/Dist/DisRad.htm> [94] A brief description of how this may operate, as a matter of technology, appears in the section below.

[95] Margolis, above n 92.

[96] See, for example, J Emmerson, 'Computer Software: Detailed Inquiry Needed Before Legislation' (1984) 58 Law Institute Journal 514, 516.

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