The most recent Supreme Court ruling on this controversial issue was in the case of MGM v. Grokster. Reversing the opinions of both the district court and the Third Circuit, the Supreme Court found that, though the software could be used for both infringing and non-infringing purposes, the companies “induced” its users to infringe copyright. Even though the software may have had substantial non-infringing uses and may thus have passed the Sony test, the court unanimously felt that the software was created with the intention of allowing users to infringe copyright for the profit of the company . While these file-sharing networks were shut down as a result of the ruling, the government did not seek prosecution of users, many of whom had shared less than $1000 dollars worth of copyrighted works and were thus not criminally liable under the current U.S. code. And while the government may have had a shot at prosecuting the creators and marketers of the software itself, as their product had been found to induce copyright infringement, with damages likely totaling thousands of dollars, a federal case was never made of it. Grokster was shut down, and numerous file-sharing networks popped up in its place, while legal digital distribution networks gained popularity as well, filling the gap left by the popular illegal networs. The war on piracy continued despite this dramatic ruling, and the complaining on behalf of the record companies has yet to cease.
Call#: Van Pelt Library KF2979 .L47 2004
In Chapter 5 of Lessig’s book, he presents both sides of the piracy argument, yet suggests that p2p sharing is unlike true piracy and that there is potential to create a way to protect artists and allow the sharing to survive. Lessig proposes that four types of sharing occur on p2p networks, only one of which is legal, though three of the four remain beneficial to society despite their technically infringing nature. Lessig posits that the benefits of these three non-harmful piracy methods may outweigh the harms of type A sharing, and cites numbers released by the RIAA itself to support his argument. In 2002, the RIAA reported that CD revenues had fallen 6.7 percent, falling from 882 million CDs sold to only 802 million. During this same time period, the RIAA estimated that 2.1 billion CDs were downloaded for free, about 2.6 times the number of CDs sold. However, Lessig points out that, if every download were a lost sale, then the industry would have had a 100 percent drop in sales, not the mere 6.7 percent drop reported. Based on this data, Lessig concludes that there is indeed a huge difference between downloading a song and stealing a CD, a fact the RIAA does not want students to know.
Lessig also criticizes the RIAA’s demand that Napster be able to filter out 100 percent of infringing content when Napster was only able to promise 99.4 percent. He suggests that the war is not on copyright infringement but on file-sharing itself, with copyright used as an excuse. Under the zero-tolerance policy demanded by the RIAA, we wouldn’t have VCRs, or Xerox machines, neither of which seem so harmful today. Lessig does not promote piracy, but suggests that its detractors allow the technology of the internet to develop before pouncing on the technology and preventing it from maturing to its potential. This means that the anti-piracy scare campaigns and pressure for swift legislation go by the wayside while the internet reaches its full potential and an efficient way to promote and distribute content is developed.
Title 18 U.S.C. 2314 provides criminal penalties for any person who “transports in interstate or foreign commerce any goods, wares, merchandise, securities or money , of the value of $5,000 or more, knowing the same to have been stolen, concerted or taken by fraud.” In this case, the federal government sought a conviction on eight counts of this offense. The counts arose from shipments of bootleg phonorecords sent from Los Angeles to Baltimore and Miami by the petitioner, Paul Edward Dowling. Dowling was also charged with copyright infringement, a conviction which he did not attempt to appeal. However, Dowling felt that the interstate transportation of stolen goods did not apply to his case, as the products that he transported were not stolen physical property, but the “wrongful appropriation of statutorily protected rights in copyright. When the Third District upheld his conviction, Dowling brought his case to the Supreme Court, who, in a six to three majority, reversed. In the opinion of the court, Justice Blackmun wrote “the Government’s theory here would make theft, conversion or fraud equivalent to wrongful appropriation of statutorily protected rights in copyright.” He points out that the Copyright Act has its own term to define someone who misappropriates copyright: a copyright infringer. This criminal title carries its own felony penalties, and while “the Government’s theory of this case presupposes a congressional decision to bring the felony provisions of 2314…to bear on the distribution of a sufficient quantity of infringing goods simply because of the presence here of a factor- interstate transportation- not otherwise thought relevant to copyright law…the discrepancy between the two approaches convinces us that Congress had no intention to reach copyright infringement when it enacted 2314.” Blackmun suggests that this case “demonstrates anew the wisdom of leaving it to the legislature to define crime and prescribe penalties.” And while current music piracy can be (if amounting to over $1000 as designated by the NET act) a felony offense, this is not always the case, a point which the RIAA continuously ignores to further its anti-piracy scare agenda.
Call#: Van Pelt Library HV6773 .H56 2006
Though this book is biased against internet file sharing, it provides a good background on some of the issues that arise when dealing with the topic. Hinduja provides a difference between file sharing and CD stealing that neither the detractors nor supporters of file sharing had thought to mention, perhaps because it is so obvious. Theft of digital property over the Internet is much easier and quicker than physical theft. He goes on to attempt to liken the two, claiming that the desire to innovate and develop creative works can be stifled if the rewards are less than anticipated, but there is a clear argument against this. That is, most artists struggle for years making absolutely no money before “making it,” and even then there is no guarantee of survival. These artists cannot anticipate that the returns will be high, because the likelihood of this to be the case is so low. It is in fact, these artists who struggle for years for no money who benefit from file sharing, as it enables them to share their work and develop a fan base without the stifling influence of a giant record label. Thus, for these artists, the same harmful peer-to-peer network that supposedly squelches the desire to innovate actually stimulates it. It provides the possibility that their work will be heard, which would otherwise be unlikely.
Though the author is against file sharing, he admits that digital intellectual property is characterized as a public good. Its utility is not decreased when the property is shared. It is also an “information good,” with a marginal cost of production of about zero. Though the author describes these factors as augmenting the attractiveness of the commodity, he informs the reader that because of the attractiveness, the music industry refused for years to embrace the format changes and introduce it into their business model. This seems at first to make little to no sense, until we consider the historical resistance to change in this industry.
Hinduja further describes the government’s general resistance to legislate on the matter of punishment for copyright infringement, suggesting that a reason for this is that most individuals lacked the capacity to violate the laws. This is no longer true, and perhaps the government should step in and make their position on the matter known. This potentially contradicts Lessig’s argument that the technology must develop before rules are made concerning its use.
This article, from the International Journal of Operations and Production Management, discusses the impact that the Internet has had on the distribution of music. It provides a description of the historical supply model, a static music industry, which has not had much chance for change in the past hundred years, despite the obvious technological advances in the end product. In concluding its analysis of how the supply chain for music has changed as a result of the Internet and piracy, the paper states that, while piracy may have a lasting negative impact on record labels, it could have an offsetting positive impact on artists and consumers, two major players necessary for a successful industry.
The first implication of the Internet is the dissolution of a need for a physical distribution chain. This should make it easier for smaller firms to enter the market, undermining the dominance of the Big Five record companies who previously held control of the market.
The article further suggests that the internet provides a direct link between artists and consumers, allowing both increased bargaining power, though record executives interviewed as part of the study believed that the record company would remain a powerful player in the industry. The authors propose that artists could make the same revenues as they did through the record companies (where 85-90 percent of revenue goes to the label) by selling their songs themselves, while consumers can demand lower prices. The former effect does not seem to have happened yet, but time will tell if the music industry faces more changes than we can currently imagine, though the continued bullying by the record labels could provide the push that artists and consumers need to disown them forever.
Call#: Van Pelt Library HM851 .G65 2006
In Chapter 7 of Jack Goldsmith and Tim Wu’s book, entitled “The File sharing Movement,” the authors detail the “movement” from the creation of CDs to the Grokster decision. They introduce the idea of the “Internet surplus,” the difference in music distribution prices before and after Internet file sharing became a possibility, and suggest that the file sharing battle is merely a battle over this. The Grokster case, described in detail in this chapter, is an important element to study in determining the challenges the music industry faces and its first response to grand-scale piracy. While the Electronic Frontier Foundation argued that copyright law had been flexible in the past in permitting the development of new technologies, and should continue to be so in the face of the Internet, the RIAA remained stubborn, firing additional litigation at its own customers, an act supported by management and some artists, but denounced by consumers and the EFF.
This chapter also includes a quote from Frances W. Preston, president of BMI: “Illegal downloading is theft, pure and simple, we must end the destructive cycle now.” This is reflective of the misguided attitudes that the recording industry took in response to the proliferation of file sharing.The chapter finishes by describing the newer advancements in online distribution of music, suggesting that iTunes will be collecting some of the enviable Internet surplus created by the new easier distribution technologies. The iTunes model is, for the time being, the most accessible to the consumer who wishes to use music both on the computer and on the go. As more companies catch on and the music industry agrees to grant more online distribution licenses, this is likely to be the wave of the future, and the answer to the online piracy dilemma.