Case 545 U.S. 913 (2005)

This is a United States Supreme Court decision in which the Court unanimously held that the defendants, Grokster and Streamcast (P2P file sharing companies), could be sued for inducing copyright infringement via their marketing revenue from their respective file sharing software. The plaintiffs consisted over two dozen of the largest entertainment companies (led by Metro-Goldwyn-Mayer studios). The case is arguably one of the most important copyright infringement cases in the past 20 years. Justice Souter's decision is of particular importance : "We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."

While the Court unanimously concurred that Grokster could be liable for inducing copyright infringement, there was considerable disagreement over whether the case is substantially different from the Sony Betamax case, and whether the precedent established by Sony should be modified. The majority of the Justices would have either expanded or contracted the Sony Betamax doctrine, however the Court as a whole did not chose to reexamine the Betamax precedent in the decision, given they were split into three equal-sized groups. Instead, a new, and perhaps more ambiguous, test has been developed to determine whether the software in question is not protected by the Sony ruling. In short, the distributors of the programs advertised and/or otherwise induced its use for copyright infringement. MGM et al. asserted that the defendants' refusal to incorporate a mechanism to filter copyrighted materials from the file-sharing network constitutes an intent to promote copyright infringement. However, Justice Souter notes that "...liability merely based on a failure to take affirmative steps to prevent infringement, if the device otherwise was capable of substantial noninfringing uses" would not be considered contributory infringement.

This case is important, because it illustrates the judicial precedence in regards to P2P as well as the extent to which large corporations disagree with the very essence of peer-to-peer sharing. It will be important to my paper because it is highly referenced in the literature and other sources.

International University in Germany 2004

In this paper Peitz and Waelbroeck run a type of global analysis (cross-country) and conclude that RIAA may be correct in its assertion that music downloads are causing a substantial decrease in music sales. Their data suggest that music downloading could have led to a 20% reduction in music sales worldwide between 1998-2002. They note that their estimate is a fairly crude estimate, but that it may be useful assessing the "exact substitution" that has taken place between CDs and MP3s. They admit, however that their analysis also reveals that other factors besides file-sharing network download are likely to be responsible for the decline in music sales in 2003.

These results seem unreliable. The study was done in  relatively short time period with very limited set of independent variables. Additionally, some question the validity of cross-country analyses in general because controlling for "unobserved heterogeneity" can be quite difficult, as other sources have noted. In addition, the authors themselves admitted to not having data on "MP3 downloads, Broadband, DMP and DVD variables for the years prior to 2002". In place of actual data they used variables in the regressions, assuming that the levels were "a good proxy" for first differences in that period for most countries, and that music downloading on file-sharing networks essentially started in 1999". This is an odd assumption, especially given that they sampled from 1998-2002.

This is an article that I will hold up as a mal-proven argument for the music industry's claim, in order to contrast with my other sources. One source actually mentions some of the flaws of this paper, pointing out that several of the regressions, including the most complete one (i.e. the one with all explanatory variables included) downloads are not even statistically significant.This paper will also allow me to expound upon some of the methodological difficulties surrounding this type of research.

University of Chicago Law Review, 2002

This law review article is sobering after pouring through mounds of articles quibbling over the how much money the giant music corporations may or may not be losing to P2P sharing. In the article, Ku reminds us of the original purposes of copyright: a tool for censorship and monopoly for the writers' guilds in response to the invention of the printing press. More modern copyright was intended to promote the progress of science and useful arts. As Ithiel de Sola Pool said, "the danger is not of an electronic nightmare,but of human error. It is not computers but policy that threatens freedom." Ku suggests we that enter the digital copyright debate mindful of the new and current, not focused on the traditions of the past.

Copyright developed as a response to the economics of Gutenberg's printing press, under which works of literature, music, and multimedia are delivered in the form of books, CDs, and videos. In the absence of legal protections against copying, this method for distribution was particularly susceptible to free riding by subsequent copiers. Today however, technology lets us to distribute and redistribute those same works as ".docs," ".mp3s," and ".mpgs" at virtually no cost. The economics of the industrial revolution are no longer needed, and with the connectivity of the Internet and technologies of the information revolution all but eliminate free-riding, in that there are no distribution costs to speak of, the public as a whole internalizes them, according to the author.

Ku believes that the new economics of digital technology should be encouraging in the creation and dissemination of human expression, not hindering. The author furthers his egalitarian stance by noting that it is not unreasonable to reach for a world in which no one is excluded from creations of the mind because they are unable or unwilling to pay. Furthermore, the same system can allow for, and stimulate, growth of a diverse group of artists, all connected directly to the public. Ku questions whether preserving copyright in cyberspace could even be considered constitutional if the underlying justifications of copyright no longer exist. Ku realizes his views are fairly radical, but remarks that just as Gutenberg's printing press threatened the dominance of scribes, so too do peer-to-peer networking and MP3s threaten the recording industry, and we must keep in mind "that the digital world will be what we want it to be... will we program it for the benefit of the few or for the good of all?"

Despite the fact that Ku is an obvious ideologue, his article brings new perspective to the discourse. It is important to maintain a certain sense of reality in trying to answer this question; it's important to stop and ponder for a moment whether in theory, however difficult in practice, Ku is correct in his assertion that reconfirming copyright in new internet technologies is not the most sensible of steps. I plan to use this article partly in the introduction of the topic and as a reality-check of the whole situation in my conclusion.

Electronic Frontier Fondation / Springer Berling, 2003

This is a paper written by by Fred von Lohmann a senior intellectual property attorney at the Electronic Frontier Foundation.Among other things, this article discusses “direct” infringement, typically at the hands of the individual who is sharing copyrighted files. As a "direct infringer" the individual has directly violated one or many of the copyright owner's exclusive rights. This is important because in the world of P2P, there is almost certainly some amount of infringing activity. The paper also covers contributory and vicarious infringement which will be less important to the particular topic at hand, but still relevant in painting a full, accurate picture. Lohmann notes that non-infringing uses of a P2P application are what allow it to be created. If a product is intended to work as a mechanism for copyright piracy, legal trouble is afoot. Almost all peer-to-peer systems can be used for many different purposes; the existence of real, substantial noninfringing uses increases the plausibility of invoking the “Betamax defense”.

Specifically the article notes that since every digital file is “fixed” for purposes of copyright law (whether on a hard drive, CD, or merely in RAM), the files being shared generally qualify as copyrighted works. The transmission of a file from one person to another results in a reproduction, a distribution, and possibly a public performance (e.g. transmitting a copyrighted work to the public)

I chose this paper because it is a good source of general information that will help me develop an introduction with some background about what peer-to-peer file sharing is and what its association copyright implications are. It is also a useful supplement to the actual court case, because it explains not only copyright law, but also how it is applied specifically to peer-to-peer file sharing.

 Journal of Political Economy, 2007 - UChicago Press

This paper further investigates Oberholzer and Strumpf's previous attempt to take account of recent literature and endeavours to obtain more robust results through more a fine-tuned methodology. Oberholzer and Strumpf, use data on downloads provided from a P2P system combined with sales data extracted from the "Billboard" music chart to look at the impact of file-sharing. They suggest that file sharing has no statistically significant effect on purchases of the average album in their sample. The data gives estimates of a modest size when compared to the drastic reduction in sales in the music industry.

At most, they project that file sharing can explain a tiny fraction of this decline. This result is plausible given that movies, software, and video games are actively downloaded, and yet these industries have continued to grow since the advent of file sharing. The scope of the article is not large enough to explore the actual cause of the recent decline in record sales, but suggests: poor macroeconomic conditions, a reduction in the number of album releases, growing competition from other forms of entertainment such as video games and DVDs, a reduction in music variety, and possibly a consumer backlash against record industry tactics. Their method involves a panel data regression of albums sales over time against estimates of downloading (noting that the simple correlation between downloading and sales yields biased estimates). Overall the impact on sales, even in the most pessimistic model, is minimal: "Focusing on the most negative point estimate, the annual industry sales loss due to file sharing is 3 million copies. This is virtually rounding error given that sales in 2002 were 803 million CD albums (RIAA, 2004)."

This paper will be useful because it is perhaps the most convincing study among my sources to argue that the effect of file sharing on record sales is not statistically significant. It is strengthen by the fact that this is a reiteration of the author's previous study, and yielded a similar, but more robust set of data.

This article primarily focuses on the music industry and the influences of file sharing on the advancement of sales. This introspective look on one particular facet of file sharing also promotes further analysis of future complications that may result from the passing of the ACTA. Author Alejandro Zentner claims that music sales have fallen substantially over the past four years. To support this theory, the author uses modeling techniques with country-level data to determine particular facets of the industry that are most heavily influenced and effected. Zentner’s studies showed that countries with higher internet usage and broadband penetration suffered the highest drops in music sales, suggesting that illegal music downloading explains the reduction in sales. Within this model, the author further extrapolates that file sharing may explain the change in the composition of music sales over the past four years. The conclusion Zentner comes to states that "strong intellectual property rights create monopoly distortions, but weak property rights may lead to low creation of artistic work. The development of faster connections and methods of accessing information more efficiently will severely impact the sales of goods." As a result, intellectual property rights are compromised over the mass dissemination of music, and other goods, through illegal downloading.

This article provides a particularly nice vantage point from which to look at the effects of file sharing on the economy. Zentner’s analysis examines these effects in a quantitative manner and links reasons for the ACTA’s birth over the past few years. Though focusing more on the drop in music sales over the past few years, this article looks at the effects of file sharing on the shape of sales, a strong influence on my argument about the future of file sharing.

STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH, 2004

This paper examines the changes in household-level spending on music in the United States, particularly in relation to emergence of Napster. By utilizing the information contained in the Consumer Expenditure Survey, three approaches are used to measure the effect of Napster. The "difference-in-difference kernel matching (DDM) method" which is intend to directly quantify the effect. Results found that the quarterly music expenditure of the average U.S. household decreased by about 3 dollars as a result of using the Internet, possibly Napster specifically. The paper asserts that this accounts for nearly 40 percent of the decline in total recording sales in 2000. The second approach estimates a demand system for entertainment goods. The estimated cross-price elasticities, (i.e., the responsiveness of the quantity demanded of a good to a change in the price of another good) imply that changes in prices of other entertainment goods could also explain the slump in recorded music sales. In 2000, approximately 37% of the decline in recording sales is due to such changes in prices. The final method involves constructing hypothetical groups to make predictions. The results indicate that transition to CDs from LPs could describe the increase in music sales during the 1990’s as well as the more recent slowdown in growth. The author asserts that these methods account for more than 80% of the sales decrease in 2000, which partially vindicates Napster. He therefore reasonably concludes given conservative estimates that Napster accounted for more than the remaining 20% of the decrease, and likely substantially less than that.

This article employes a fresh methodology of reverse calculation approach that adds diversity to the ways in which my source papers have approached the issue of the effect of peer-to-peer on the music industry. Instead of trying to survey people on their download habits, which assumes people respond honestly, or trying to calculate number of song downloads (estimates greatly vary), Hong examines areas where the data is reliable and the calculations are less obscure.

This is a publication by The Harvard Journal of Law and Technology, which explains and discusses the two theories of indirect copyright infringement liability: Contributory infringement and Vicarious infringement at the same time offering an economic perspective. Contributory infringement is when a company that produces a product or service is liable for indirect infringement as a result of a third party user committing infringement by using the product or service. Vicarious infringement has to do with an employee committing infringement and the employer is then liable for that infringement because he had "knowledge" of that infringement. Throughout the article, the authors make use of two examples illustrating two extremes: a flea market example, in which a property owner provides a service to individual sellers, and some of these seller sell copyrighted material; and a photocopier example, in which the use of the copier can have both infringing uses and legitimate ones. The article also discusses several important issues surrounding these two theories, such as the Sony v. Universal case, the napster case, and the DMCA law. It provides analysis on why the court rejected Napster's claim that it was "only a service like the VCR." Essentially, the artical says that Napster could have prevented the copyright infringement without harming the legitimate uses. Ultimately the article makes the conclusion that "every mechanism for rewarding authors inevitably introduces some form of inefficiency, and thus the only way to determine the proper scope for indirect liability is to weigh its costs and benefits against the costs and benefits associated with other plausible mechanisms for rewarding authors."

This is a very valuable source for my research paper for a number of reasons. Many site operators such as Gary Fung (owner of www.IsoHunt.com), claim that they are only providing a "service" like the "sony VCR". The article provides valuable analysis of the napster case, specifically that the court said that even though napster provided a "service" if it had "knowledge" and "could effectively prevent" copyright infringement it is liable for indirect infringement. I plan to utilize this point in favor of my argument that government, specifically the judicial branch, can shut down sites like isoHunt if it proves them to be indirectly liable for copyright infringement. The artical is also important for my research paper because it raises issues such as that "the costs in terms of unavoidable interference with legitimate products might be too high, and society would therefore be better off forcing copyright holders to rely on other mechanisms." 

This is essentially the plaintiffs' (Columbia Pictures' et. al.) memorandum of Points and Authorities in Support of Summary Judgement on Liability. Essentially it captures the main arguments of the plaintiffs in Columbia Pictures v. Gary Fung (IsoHunt), a recent development in the bittorrent context. Essentially the plaintiffs claim that the whole purpose of the "Fung websites" is to facilitate and provide users with the ability to search for ".torrent" files which link to trackers hosted on various computers and servers that contain actual content files like movies, etc. Also, plaintiffs maintain that "torrent" files in themselves have no purpose but to link to actual content files. The plaintiffs say that there had been done an "unrebutted" statistical study which showed that "95%" of all the torrents on the "other fung sites", which work hand-in-hand with the main IsoHunt site, are links to copyrighted material. Also important, is the plaintiffs counter to the defendant's (Gary Fung) claim that the Grokster case doesn't apply because unlike in the Groster case IsoHunt does not distribute any product. The plaintiffs' argument is that this claim is invalid because the Grokster case had nothing to do with it being a product as opposed to a service, but rather the fact that the Grokster "induced and promoted" active infringement which thus made Grokster liable for contributory infringement. 

This document is crucial to my research paper. It is the only recent legal document, and at the same time a primary source, directly related to my research thesis of whether government can/should shut down sites like www.IsoHunt.com. I plan to use virtually all of the arguments presented by the plaintiffs in my research paper. By weighing these arguments with various other sources (copyright law, DMCA, Grokster case, Fung's Affidavit) I'll be able to reach some kind of a conclusion in regards to my thesis.

This is a news article reporting on the recent developments in the campaign against copyright infringement. Specifically it reports on the recent development surrounding isoHunt. Essentially it makes it known that IsoHunt is using the claim that it's "only a search engine" as a defense against copyright infringement. It also makes reference to how the IsoHunt website functions as claimed by Gary Fung, the owner and developer of the website technology (see Affidavit no. 1). The article also exposes the MPAA's strategy in accusing IsoHunt and the like in copyright infringement. According to the artical the MPAA is heavily relying on the MGM v Grokster case. Lastly the artical also provides some significant issues raised by the on-going case. One is that it will probably be difficult for IsoHunt to prove to the judge that the IsoHunt website behaves like Google or Yahoo or any other search engine. It also raises an important point in regards that once settled this case could affect the fate of the whole internet structure specifically for search engines and the filesharing community.

The article is important for my research paper because it is the only article out of those that I looked at that covers the developments of the MPAA v. IsoHunt case in an unbiased way. Furthermore, since there is no official court transcript available as the case is still in progress any recent developments are important for my research paper. Further it provides one significant insight that IsoHunt does not behave in the same way as any other search engine in the sense that google and the like is data-agnostic but isoHunt links to specific type of content. I plan to quote this directly in my paper.

This is a publication by the Virginia Law Review. The section focused upon for the purpose of my research paper is section C: The Kazaa era: 2001 - present. The article provides some unbiased description of the two technologies FastTrack and Gnutella. It focuses on some of the key developments in the filesharing domain after napster specifically the kazaa network. It explains how the technology descriminates between fast connections and slow connections. The article also addresses the issue how lately there appeared an effort by filesharing technology developers to write code that would reflect the copyright law. In the sense that the technology worked in such away as it is hard to place the blame on the developers. It also raises the point that the more files there being shared the better it is for the network performance and in essence for the developer. The other part of the article addresses how the music industries made every effort to stress the similarity between napster and kazaa and the other FastTrack networks. The article goes on to make reference to the Mgm v. Grokster case. Specifically it provides insight to how these technologies may have won out against the recording industries. The article quotes Judge Wilson, who presided over the Grokster case in the ninth district appeals court. The judge said essentially that if the companies were shut down, the users of the network(s) would still be able to do what they were doing.

This article is important for my research paper because it provides basis for an important analysis. For example, it was later seen that the movie industry in fact did win in the supreme court (see Mgm v. Grokster source). So although Judge Wilson ruled in favor of Grokster by saying that the technology was not similar to napster and that even if the company was shut down the users of the software would still be able to do what they were doing, it was later seen in the supreme court that Grokster actually lost. Today it is known that IsoHunt and the like are being sued and so if it is somehow possible to establish the similarity between IsoHunt and Grokster the same strategy may be applied to get IsoHunt shut down. The article also raises a few other important points such as that these networks continue to operate as long as there is more and more content being shared.

This is a publication by the Ifo Institute for Economic Research located in Munich. The authors are Martin Peitz and Patrick Waelbroeck. Essentially this is a detailed economic analysis of various models concerning the effects of digital copying and secifically pirated digital copies. The paper specifically looks at filesharing networks and analyzes the economic impact. The authors analyze the common claim by record industries and "affected" industries, that unauthorized copying leads to lost profits. The authors present various articles by other reputable sources, and provide analyses of them. In some situations firms do indeed lose profits either directly attributable to piracy or indirectly. However, the publication also cites situations under which digital copies actually increase firms' profits and social benefit all together. Among other things, the paper also provides specific examples of types of goods and state whether producers of these goods benefit from digital copies. 

This source is very important to my research in a number of ways. It provides a third party outlook on the impact of unauthorized digital copies. While some of the issues raised by this publication complicate my research paper, the publication does provide some analyses which provide support for my thesis that government should suspend sites that host/index unauthorized copies of copyrighted content. For example, it mentions that in a certain setup firms do suffer from the existence of copies. Also it talks about how copies limit the monopoly-power of the firm, which in the long run detracts both from the producer surplus and the social surplus as a whole. Careful consideration and analysis of this source will help address my thesis question more fully.

"The law book is still open in the BitTorrent context. The Supreme Court hasn't even come close to deciding the question, and Grokser (.pdf) and Napster aren't on point."

This is the Supreme Court Opinion regarding the MGM et al v. Grokster et al case. The opinion of the court was delivered by Justice Sutter. Essentially what happened was that the decision made by the United States Court of Appeals for the Ninth Circuit was reversed. The question raised before the court was "under what circumstances the distributor of a product capable of both lawful and unlawful use is liable for acts of copyright infringement by third parties using the product." According to the court, there was an error made by the Ninth Circuit Court, in its interpretation of Sony v. Universal City Studios. "The Ninth Circuit has read Sony’s limitation to mean that whenever a product is capable of substantial lawful use, the producer can never be held contributorily liable for third parties’ infringing use of it..." This document includes a description, gathered in the process of litigation, of how the Grokster and StreamCast products worked what technologies they used (Gnutella and FastTrack) and more importantly how the products were used by their users. It is made known that although the products have legitimate uses "90%" are copyright infringement uses. Another important point made by the document is that both Grokster and StreamCast profitted from advertisements that users would see while using the product. Furthermore, it is made known that "the business models employed by Grokster and StreamCast confirm that their principal object was use of their software to download copyrighted works." The decision of MGM v. Grokster essentially made the precedent that the Sony v. Universal decision doesn't leave service providers such as Grokster and StreamCast unliable for copyright infringement made by third parties using their product.

This source is very valuable for my research paper because it is one of the only cases dealing directly with the issue of p2p filesharing. Furthermore it provides support for my contention that government can and should shut down websites involved with/enabling copyright infringement. Many of such service providers use the Sony v. Universal case as defense against being liable for copyright infringement stemming from the use of their service by third party users. This case set a precedent to how future cases involving filesharing and copyright infringement cases are going to be handled in the future. Also, many of the current websites being targeted by the MPAA and RIAA and other agencies, whether in the U.S. or elsewhere, including www.IsoHunt.com among others, function in similar ways as Grokster and StreamCast did. Therefore if Grokster and StreamCast were found liable by the Supreme Court in this case, some of the strategies/analyses from this case can be used to shut down other sites such as IsoHunt.

This is a legal document, specifically an affidavit, filed by Gary Fung, owner of the IsoHunt Website (www.isohunt.com), in the Supreme Court of British Columbia in Canada, on September 5, 2008. After receiving a letter from the Canadian equivalent of RIAA, the CRIA, stating that the IsoHunt website is responsible for copyright infringement and furthermore that Gary Fung must take appropriate action to make sure that the site is deactivated, in other words a cease and desist request. In response Gary Fung filed this document for the purpose of having his rights clarified by the Supreme Court of British Columbia, which will in effect make it easier for Fung in later legal proceedings in regards to CRIA claims. In the document, Fung essentially reveals the nature and purpose of the IsoHunt Website. He explains why it exists, how it operates, and the content that it hosts. He makes it known that the site is essentially a search engine "similar to Google, Yahoo, Windows Live, etc." which exists for the purpose of making the search for dot-torrent files easier for users. He also explains that a user can essentially use Google and obtain similar results that can be obtained on the IsoHunt Website. Furthermore he makes it clear that no "content" is actually hosted by the website but just links to the torrent files are indexed. He also explains what are torrents and the BitTorrent p2p protocol that allow them to operate. He also makes it known that the Website is in no way affiliated with the BitTorrent protocol, the torrents, or the various software needed to download/create the said torrents.Lastly, Fung included eight supporting documents with his Affidavit one of which is a copy of the letter that he recieved from CRIA.

This source is important to my research project in many ways. First, it is a primary source from the owner of the IsoHunt website, the legality of which is in question by my research. Also it is a very recent source, which is very important in addressing the issue of copyright infringement by filesharing websites. It will be crucial in establishing the key differences and/or similarities between the technology this site uses and previous shut down sites such as Grokster and Napster. Further, the document also raises a complicating issue, that Google search engine technology functions in a similar fashion which implies that if one is not allowed to exist than how can the other be allowed to. The document also illustrates the DMCA Takedown provision in action, which in a way complicate my argument further, since Gary Fung does have all the necessary provisions of the DMCA addressed. Another reason why this is a valueable source for my research is that one of the attached documents is a copy of the letter from CRIA Fung recieved, which will be helpful since it exposes the vew shared by CRIA. Over all this is a valuable primary source that will prove to be valuable in my research.

Though peer-to-peer file sharing has yet to be legislated, the courts have provided us with some guidance on how to deal with the new technology.  The most recent revision to copyright law dates back to December of 1997, a year and a half before the release of Napster, the first mass file-sharing network.  The No Electronic Theft Act (the NET Act) was designed to close a loophole in criminal law that prohibited prosecution of people who distributed copyrighted software over the Internet without making a profit.  The NET amendments included a new provision that made "reproduction or distribution, including by electronic means, during any 180-day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000" a criminal offense, punishable under United States code by imprisonment of up to one year or fines.  Under this new law, reproduction and distribution of copyrighted material with total retail value under one thousand dollars remained a non-criminal offense unless the copyright was infringed for the purposes of commercial or financial gain. Importantly, this amended law does not allow for criminal prosecution of downloaders who do not distribute copyrighted works, but merely download them.  Obviously, without people distributing the works, there would be nothing for these non-sharers to download, and while it seems that cutting off the supply chain could effectively stop these people from downloading, this has yet to occur.  The closest parallels to a possession of unlicensed copyrighted material are laws prohibiting the possession of stolen goods (not intellectual property.)  However, Dowling shows us that property law cannot be used to prosecute offenders that copyright law does not apply to (e.g. transportation of “stolen” intellectual property over state lines).  This means that the targets of RIAA scare campaigns are actually often not committing a felony by downloading music, a fact that the RIAA is negligent to admit.

In the later chapters of the book, Hinduja utilizes crime theories in effort to discover why people participate in illegal file sharing. While much of his analysis is similar to the suggestions of other piracy studies, he makes one interesting proposal that is worth noting: “Even if [the students] do view downloading and shoplifting in a similar light, it is also possible that the former is considered a “smarter” and more admirable crime, and therefore attracts much more participation.” He does not provide further inquiry into the suggestion, but it still provides an interesting perspective on the issue.

Hinduja also proposes that a new business model must be developed that takes advantage of the digital dissemination of music. He also suggests, as many supporters of a new business model would contend, that if a new model had been created and implemented immediately following the explosion of the MP3 phenomenon, the industry may have grown tremendously during this period (not to mention the negative reputation that their anti-piracy campaigning has bought them).

Hinduja also provides anecdotal evidence supporting the success of online music distribution in establishing loyal fans and further sales. He mentions Tom Petty’s distribution of free full-length MP3 tracks from his 1999 album prior to its release in exchange for access to email addresses of fans. This produced a database of Tom Petty fans that was easily accessible for marketing uses.

Perhaps the most important suggestion in this section of the book is that a “more harmonious relationship with the consumer population should result as the industry demonstrates that they are willing to work with the public to satisfy their music needs…rather than opposing any change to the status quo.” This statement is exactly what my thesis is all about, a new less-brash response to file sharing by record companies who have a lot to gain from acceptance of the new technology.

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.

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. 

 

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.

It is no secret that the biggest threat to today's music industry is peer to peer file-sharing, labeled piracy by its detractors. It is also indisputable that most of the activity on such networks is an infringement of the copyrights held, for the most part, by the record companies that seek to stop such sharing. The Recording Industry Association of America (RIAA) is at the forefront of the anti-piracy campaign. While campaign material threatens college students and other infringers with criminal convictions and hefty government fines, the reality is that most piracy litigation has been civil, not criminal. Moreover, according to copyright legislation, it is the distribution of the copyrighted material, not the possession of it, which is punishable by Federal Laws. File-sharing is not, as the record companies would lead us to believe, always and indiscriminately, stealing. While it would be difficult to argue that file-sharing is legal, it is worth noting that the RIAA itself has engaged in unethical and dishonest campaigning in its own effort to maintain its current business model in the face of inevitable change at the hands of the new technology. It may in fact be in the recording industry's best interest to embrace file-sharing, as recent studies have suggested that the new technology may provide a better predictor of record sales than other previously popular methods, including radio airplay. In order to make the most out of the innovations that the Internet and the proliferation of MP3 technology have provided, the recording industry should shift its focus away from stopping illegal file-sharing and towards providing and taking advantage of the benefits of a legal file distribution method.