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The State of Digital Law

This article is excerpted from Music Law in the Digital Age, by Allen Bargfrede and Cecily Mak. published by Berklee Press, 2009. Used by permission.

 
 
  Allen Bargfrede
 
  Cecily Mak

Intellectual property law suffers, perhaps more than any other substantive area of law, from an inability to keep up with innovation. As technologies continue to develop and enter the marketplace at an exponential rate, current laws and guidelines struggle to keep up and protect rights holders while encouraging innovation. Copyright law is no exception.

Congress has tried to anticipate future delivery schemes for music and other copyrighted works, with amendments such as the Digital Millennium Copyright Act (DMCA). Updates to copyright law are commonly considered as a response to a specific technology, as seen earlier in the case of the DAT and the Audio Home Recording Act. Legislation was also introduced to address one of the first websites to serve music consumers, MP3.com. With mega-corporations controlling copyrighted works for ever-increasing copyright durations, does it make sense to continue restricting rights? On the flip side, does it spur creativity to have creative works floating around for free? These are some examples of the weighty questions that must be asked every time a change to the law is contemplated.

The DMCA, signed into law by President Bill Clinton in 1998, serves two primary purposes. First, it extends the reach of copyright law in the digital age, and second, it limits the liability of the providers of online services for copyright infringement by their users. The law, meant to bring U.S. law into compliance with the World Intellectual Property Organization (WIPO) treaties, criminalized the production and dissemination of technology, devices, or services intended to circumvent measures that control access to copyrighted works (i.e., digital rights management or DRM), as well as the act of actually circumventing an access control, such as tampering with a digital fingerprint. The law makes such activities criminal whether or not there is actual infringement of copyright itself.

To limit liability of service providers, the DMCA sets forth certain guidelines that if followed, relieve such providers of legal exposure and risk associated with their otherwise innocent delivery of infringing works.

For example, the DMCA provides a "safe harbor" for Internet service providers (ISPs), stating that those that merely provide a gateway to the Internet (e.g., AT&T or Comcast) cannot be held liable for the infringing acts of their customers/users. However, the limited liability of ISPs exists only in cases where the ISP meets certain conditions including giving the infringing end-users warnings that what they are doing is wrong and terminating repeat offenders. It was this safe harbor provision that the original Napster tried to hide behind in its losing 2000-2001 battle with record labels. [See sidebar page 24 "What Is a DMCA "Safe Harbor?"]

Under the DMCA, a safe harbor also exists for services such as YouTube that might actually store infringing material, if they meet the following requirements:

  • They do not receive a financial benefit directly attributable to the infringing activity,

  • They are not aware of the presence of infringing material or know any facts or circumstances that would make infringing material apparent, and

  • Upon receiving notice from copyright owners or their agents, they issue takedown notices to expeditiously remove the purported infringing material.

ISPs, however, have been working with the music industry to cut piracy under the DMCA, sometimes involuntarily. As part of its enforcement efforts against piracy, the Recording Industry Association of America (RIAA) began filing civil lawsuits in 2003 against individuals who illegally traded music online. In order to identify such users, the RIAA needed data from ISPs, and served the service providers with subpoenas under the DMCA demanding the identity of users tied to Internet Protocol (IP) addresses known to be used in sharing music online.

For example, the RIAA used the subpoena power in section 512(h) of the DMCA to request the identity of Verizon Internet users who were thought to be involved in piracy via P2P networks. In this case, Verizon refused to comply with the RIAA order, arguing that the Verizon network did not actually store the material but instead merely transmitted it. Verizon ultimately lost the case, and the RIAA has sued over two thousand individuals for copyright infringement. The vast majority of the cases against individual file-sharers were settled out of court.

The DMCA has remained the subject of great debate and in recent years, including high profile litigation. For example, at the time of press, we are still awaiting the outcome of the well publicized and high stakes infringement case initiated by Viacom Inc. against YouTube (Google Inc.) for the alleged unauthorized distribution of 160,000 videos on Google's YouTube site. In the ongoing case, the ability of Google to present a fair use and DMCA safe harbor defense is at question. The stakes are high. The initial claim demanded one billion dollars in statutory damages.

Separately, in IO Group Inc. vs. Veoh Networks Inc., a case with similar facts, the U.S. District Court for the Northern District of California ruled that the defendant Veoh qualified for protection under the safe harbor of the DMCA. Veoh had made it clear that it regarded copyright infringement as a serious matter by responding to DMCA takedown notices within 24 hours, registering a Copyright Agent with the Copyright Office, providing warnings to users about infringement, and terminating repeat infringers. Many believe that the DMCA can and should be credited with the concentration of highly successful online distribution companies in the United States. Regardless of what one thinks of it, the DMCA remains a powerful piece of legislation in the United States-a law that shapes much of online media distribution generally.

Though the DMCA is often criticized for making it too easy for distributors to simply remove content as a protective measure, it has served numerous other purposes fairly well and will continue to shape the way distributors and rights holders manage content online.

What the Future Holds

Copyright law will continue to be stretched to accommodate innovation, and it is sure to continue to be painful for most of the stakeholders in the industries affected. What can we expect to see in future years? Where do successful business models lie? Who will be the industry's successful players in 2014? 2030? Will conflict among licensors give way to collaboration for the greater good? These are all questions that are soon to be answered, many in surprising ways in months and years to come. Here are some ideas regarding what we should expect.

ISPs Will Be Increasingly Involved with Enforcement of Intellectual Property Laws

At long last, at least from the perspective of the copyright owners, ISPs finally appear to be playing a role in enforcement of intellectual property laws. Numerous countries, including France, Australia, and the United States, are seeing the emergence of new guidelines-both privately agreed to between trade organizations and public companies (RIAA, AT&T, Comcast) and publicly imposed via legislation (for example, France's new ISP enforcement laws, which were held unconstitutional by a French court in June 2009). Several European ISPs have agreed to a three-strikes provision with the music industry, in essence agreeing to take away Internet access from those who are caught pirating copyrighted material three times. Perhaps it is true that fear of having one's Internet service suspended is a greater concern than being caught and pursued via the legal system. It certainly can have a more immediate impact on the infringer.

Such guidelines serve to impose some responsibility on service providers to create and enforce policies with regard to infringement that takes place via their services. While ISPs are effectively free of liability if they satisfy the safe-harbor provisions of the DMCA, there are commercial reasons to cooperate with such new demands on the part of powerful rights holders (record labels, collecting societies, etc.). In some cases, content providers want to partner with ISPs to roll out new offerings, and there is potential new revenue associated with a multi-part arrangement pursuant to which ISPs collect an additional fee for the service that is used to cover certain content license fees for distribution of media via such a service. Further, cooperation could serve to befriend potential litigants. One thing seems to already be apparent: ISP customers are more likely to stop infringing activity over the threat of loss of Internet connectivity than a remote threat of arrest for copyright infringement.

WHAT IS A DMCA "SAFE HARBOR?"

Title II of the DMCA, the Online Copyright Infringement Liability Limitation Act ("OCILLA"), creates what is known as a "safe harbor" - essentially, limitations on liability for monetary relief for those service providers that qualify. To qualify, ISPs must qualify for and then adhere to certain prescribed safe harbor guidelines and promptly block access to allegedly infringing material if they receive a DMCA compliant notice. Such guidelines include:

  1. adherence to a policy for the termination of service for repeat infringers
  2. accommodation of and noninterference with technical measures used to protect against infringement
  3. designation of a Copyright Agent, and
  4. compliance with reasonably alleged takedown notices

In turn, an ISP can lose its safe harbor eligibility for the safe harbor if it (a) has actual or "red flag" knowledge of infringing activity on the service, and (b) "receive[s] 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."*

*17 U.S.C. § 512(c)(1)(B); § 512(d)(2)]

 

Access Models Are Likely to Continue to Grow in Popularity

As Internet access becomes more and more pervasive and we approach a time where unlimited and uninterrupted WiFi access is not limited to metropolitan areas, consumers are more likely to use access-based services to obtain their music than the traditional purchase model. Over-the-air downloads are now available on Apple iPhones and other devices, meaning you can download music from the iTunes store and listen on your iPhone's iPod software from anywhere you receive wireless service. Like many evolutions in industry, this one turns on technology and infrastructure. For artists and other licensors, this means that it is important to ensure that any outbound license agreements have terms that will adapt well to increased access-based distribution so as to not be left out of such revenue streams.

Blanket Licenses

Others have argued that perhaps an ISP flat fee is the best way to collect revenue lost to piracy. As of 2009, the RIAA is experimenting with blanket licenses on college campuses through a program called Choruss. Staffed by Warner Music consultants, the company hopes to implement unlimited access to music for students at colleges that are part of the program, paid for through an increased student activity fee.

The role ISPs play in the distribution of music and other media will no doubt be an interesting area to watch in coming months and years.

Creative Commons and the "Copyleft" Movement

While Congress and entertainment industry professionals argue about the best way to protect works, there are others on the other end of the spectrum who argue that the solution is to limit copyright protection. One of the leaders of this "copyleft" movement is former Stanford and Harvard law professor Lawrence Lessig.

Lessig, the founder and former CEO of Creative Commons, has become the face and name of what is known as the copyleft movement. Together with the Creative Commons organization, he has successfully managed to break ground in establishing a new approach to copyright where creative works are more available to others to build new works upon. The heart of this idea lies in the "Creative Commons licenses," innovative licenses that allow for the creator to determine and communicate what exclusive rights they preserve and what exclusive rights they waive in releasing their creations to the public.

As an example, consider the following. The band Nine Inch Nails released Ghost I-IV in 2008, a collection of thirty-six instrumental tracks licensed under a Creative Commons license that allowed users to remix and share the tracks with anyone, as long as they were not for commercial gain. Some thought this was innovative for it supported wide dissemination of the content, created buzz around the album, and actually seems to have encouraged sales. Some thought it was foolish for it supported the notion of "free" music and could subject the artist to a dramatic reduction in revenues stemming from album sales. Either way, it is an example of a new approach gaining traction in a new era of copyright.

In his commentary on piracy, Lessig points to a failed system of tracking copies on the Internet that could one day be changed with the advent of successful controlled access systems.

Sales might go up, my reputation might go up (or down), but there is no way to trace the drop in sales to this individual theft, and no way to link the rise (or fall) in fame to this subsidized distribution.... So a system that controlled access in this more fine-grained way would grant access to its resources only to another system that controlled access in the same fine-grained way. A hierarchy of systems would develop; and copyright material would be traded only within that system that controlled access properly.1

As Lessig points out in his book Code: Version 2.0, "An important point about copyright law is that, though designed in part to protect authors, the control it was designed to create was never meant to be perfect."2 Fair use exceptions, the first sale doctrine, and other limited terms mean that copyright is not an all-encompassing absolute right of an author. Consumers may also sell their copy of a book or CD, without payment of a royalty, under the first sale doctrine. (In the music industry, the sale of used CDs was a major issue for artists in the early 1990s, with Garth Brooks refusing to ship his CD In Pieces to stores dealing in used CDs until his actions were shut down as the result of an antitrust lawsuit against his label, Capitol Records.)

Lessig also made waves a few years ago when he suggested an "alternative compensation scheme," a tax be levied at the ISP level to every consumer to help the shortfall in revenue due to piracy-one of the very systems now being considered. Payments could be calculated by tracking the traffic of music on the Internet via an embedded watermark placed by copyright holders into DRM-free music files, or other tracking mechanisms.

The owner of the copyright in an audio or video recording who wished to be compensated when it was used by others would register it with the Copyright Office and would receive, in return, a unique file name, which then would be used to track its distribution, consumption, and modification. The government would raise the money necessary to compensate copyright owners through a tax most likely, a tax on the devices and services that consumers use to gain access to digital entertainment. Using techniques pioneered by television rating services and performing rights organizations, a government agency would estimate the frequency with which each song and film was listened to or watched. The tax revenues would then be distributed to copyright owners in proportion to the rates with which their registered works were being consumed.3

While the idea is interesting, implementation of such a major change in revenue structure will no doubt require years for debate, study of the impact, passage of legislation, and implementation of the technological systems. And while the copyleft movement has received a great deal of publicity, it is opposed by many creators and industry organizations alike, although some parts of its plans may indeed come to fruition.

Barriers Remain

Because of a government-sanctioned right to copyright and continual attempts by music recording copyright holders to maximize their piece of the recorded music-revenue pie, the music industry cannot simply turn on a dime. DMCA was a first step toward modernizing copyright law but also leaves room for improvement and clarity. Meanwhile, proponents and visionaries have suggested a number of new ideas, but business models are subject to legal hurdles. Without copyright reform, fundamentally new ways of monetizing music in the industry will remain difficult to launch. In the meantime, we will watch for what happens next.

Footnotes

1Lawrence Lessig, "The Law of the Horse: What Cyberlaw Might Teach," Harvard Law Review, vol. 113, 501.

2Lawrence Lessig, Code: Version 2.0. New York: Basic, 2006.

3http://lessig.org/blog/2004/10/alternative_compensation_syste.html