Music Industry v. File-Sharing Why We Need a New Approach to Copyright Protection In the Digital Era
By
Coralie Hélène Pasche
A thesis submitted in conformity with the requirements for the degree of Master of Laws Graduate Department of the Faculty of Law University of Toronto
© Copyright by Coralie Hélène Pasche 2009
Music Industry v. File-Sharing Why We Need a New Approach to Copyright Protection In the Digital Era
Coralie Hélène Pasche Master of Laws 2009 Graduate Department of the Faculty of Law University of Toronto Abstract
This thesis examines the evolution of digital copyright protection in response to the digital challenges, specifically unauthorized file-sharing, in the context of the music industry. It reviews the different strategies used to fight the peer-to-peer technology and its users so as to assess whether the direction which has been taken is in agreement with the ultimate goal of copyright and with other fundamental values of our modern society. It posits that the effort to strengthen the rights of copyright holders and thus maintain an old system of distribution in the face of new technology not only runs afoul the expectations of the public but also prevents the artists and the public from fully taking advantage of the new opportunities of the digital era. This thesis ultimately suggests that policy makers tackling the digital copyright reform should seriously consider legitimizing the use of file-sharing services as a possible way to better achieve the goals of copyright.
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Table of Contents
Introduction……………………………………………………………………………………...1
Chapter 1 Internet and the Digital Threat to Copyright…………………………………8
Chapter 2 Copyright’s Purposes and Underpinning Theories………………………...11
2.1. Justifications for Copyright……………………………………………………...... 11
2.2. Necessary Distinction between the Different Interests………………………...16
Chapter 3 International Response to the Digital Threat: The WIPO Treaties……….21
3.1. Underlying Policies of WIPO Treaties……………………………………………21
3.2. New Legal Framework for Copyright in Digital Environment……………….....22
Chapter 4 American and European Implementations of the WCT
TPMS and Anti-Circumvention Measures…………………………………..25
Chapter 5 Combat against File-Sharing…………………………………………………33
5.1. The Fight against P2P Services………………………………………………….33
5.2. The Fight against Individuals……………………………………………………..39
5.3. ISPs as Copyright Police………………………………………………………….42
Chapter 6 Challenges to the Copyright Paradigm……………………………………...47
Chapter 7 Framework for a New Approach……………………………………………..53
7.1. Networked Information Society, Decentralization and Missed Opportunities..53
7.2. Necessary Shift in the Approach towards Piracy……………………………….57
7.3. Cultural Trend towards Piracy: The Combination of Factors………………….59
7.4. Crucial Elements for a Better System……………………………………………65
Conclusion……………………………………………………………………………………..70
Bibliography
iii 1
Introduction
The music recording industry has spent a great deal of time in the past two decades attempting to educate its consumers about ‘piracy’ and the notion that copying and sharing copyrighted music files on the Internet is indeed ‘piracy’. Unauthorized file- sharing has been blamed as the primarily cause for the decline in the music sales and has been described as a major threat to creativity.1 Each year the International
Federation of the Phonographic Industry (IFPI), which represents the music recording industry worldwide, publishes the annual results of each national music industry.2 In
June 2008, The Times Newspaper ran the headline, “Music Sales Fall to their Lowest
Level in over Twenty Years.”3 With an 8% annual loss, global music sales were thus reported to have declined to the tune of $19.4 billion despite the drastic increase in digital distribution.4 In fact, the presentation of annual results by the music recording
1 John Kennedy, Chairman& Ceo of the IFPI declared “[o]ur industry is fighting piracy to protect creativity in music”, see IFPI, Piracy Report 2006, online: IFPI
2 industry is misleading. The global trade value indicated by the IFPI amounted to $US
19’587 in 2006 and to $US 19’405 in 2007.5 This is actually a decline of less than 1%.
The 8% decline indicated by the IFPI in its 2007 report represented the global average variation in the annual sales of the different countries.6 Given the varying size of different national markets, this percentage cannot simply be translated into the same percentage of global losses. Since the late 90s however the music industry has experienced a decline in sales and the industry has essentially attributed this loss to the
7 unauthorized sharing of music files on Peer-to-Peer (P2P) networks.
This paper looks at the evolution of digital copyright protection in response to digital challenges, specifically unauthorized file-sharing, undertaken under the impetus of the entertainment industries -foremost the major music recording companies,8 and questions whether the direction which has been taken is in agreement with the ultimate goal of copyright and with other fundamental values of our modern society.
Back in the early 90s, considering that the current legal framework was insufficient to fully protect copyright in the digital environment created by the advent of
5 IFPI, “Recorded Music Reports 2000-2008”, supra note 2. 6 Ibid. The figures published by the IFPI are challenged in many instances. I further discuss this aspect below, in Chapter 6. 7 Peer-to-peer technology is defined “… as a communication structure in which individuals interact directly, without necessarily going through a centralised system or hierarchy. Users can share information, make files available, contribute to shared projects or transfer files (OECD, 2002; Minar and Hedlund, 2001)”, OECD, Working Party on the Information Economy, Digital Broadband Content: Music, Doc. No. DSTI/ICCP/IE(2004)12/FINAL, (13 December 2005), online: OECD
3 the Internet and the MP3 format, the entertainment industry, in particular the music recording industry, lobbied the government in an effort to extend the protection of copyright. At the international level these lobbying efforts have led to the adoption in
1996 of two Internet WIPO treaties; the WIPO Copyright Treaty (WCT) and the WIPO
Performance and Phonograms Treaty (WPPT).9 The American and European implementation of these treaties, particularly their provisions regarding the protection of the technical measures, have been extensively criticized for having strengthened copyright’s protection beyond what the treaties required, pushing the copyright balance even more in favour of the owners while not reducing the level of infringements.10
These treaties and their implementations intended to respond to the lack of protection of copyright in the digital form, 11but were not particularly designed however to respond to the P2P threat which was soon going to shake the giant entertainment industry, hitting the music recording industry the hardest.
Napster, the first P2P service, was launched exactly 10 years ago, in June
1999.12 Six months later more than 2 million people had downloaded the software.13 In
9WIPO Copyright Treaty of December 20, 1996, online: WIPO
4 hindsight, it appears that at that time neither the music recording industry14 nor even
Napster’s creator15 had foreseen the extent of the public craze for this new technology.
When an American Court found Napster guilty of contributory and vicarious copyright infringement in 2001,16 the service had already reached 60 million daily users worldwide.17 The closing down of Napster by the Court did not stop the file-sharing however. Napster was immediately followed by many similar services including Aimster,
KaZaA, Grokster and Morpheus to name but a few.18The music recording industry multiplied the lawsuits for copyright infringements against the P2P companies but soon redirected its attention to individual consumers.19 In the US, the Recording Industry
Association of America (RIAA) initiated legal pursuits against 30’000 alleged individual infringers, creating an enormous public outrage.20
Despite massive public “educational” campaigns, a new legal framework at the international level designed to address the new challenges of the digital era21 and, admittedly, some important legal successes in courts,22 it appears that the music recording industry has still not managed to end the massive copyright infringements
14 Ibid. Interview of Mr. Cary Sherman, President of the RIAA, by the Globe and Mail: he explains that the use of this technology by consumers was way ahead what the industry could respond to. 15 Ibid. Interview of Shawn Fanning by the Globe and Mail. 16 A&M Records, Inc. v. Napster, Inc., 239 F 3d 1004 (9th Cir. 2001). 17 OECD, Working Party on the Information Economy, Digital Broadband Content: Music, Doc. No. DSTI/ICCP/IE(2004)12/FINAL, (13 December 2005), online: OECD
5 associated with internet file sharing.23 To the contrary, according to the IFPI, copyright infringements are continuing to grow.24For many this result demonstrates the failure of the provisions implementing the Internet WIPO treaties, specifically those relative to the protection of the technical measures. Considering that it is neither desirable nor possible to stop the proliferation of P2P networks,25 a growing number of scholars argue that it is time for legislatures to find an alternative to strengthening the rights of the copyright owners, a solution which would benefit society as a whole.26From the perspective of the music recording industry, this result simply demonstrates the necessity to pursue its lobbying efforts so as to increase and enforce even more the protection of copyright in the online environment. As a strategy of last resort, the music recording industry is now lobbying the governments to increase the liability of Internet
Service Providers (ISPs), forcing the latter to become the gatekeepers or ‘police’ of the
23 IFPI, “Recorded Music Reports 2000-2008”, supra note 2; IFPI, “Piracy Report 2006”, supra note 1. 24 Ibid. 25 see Yagan Sam, (President MetaMachine, Inc.; developer of eDonkey and Overnet), Testimony before the Senate Committee on the Judiciary (28 September 2005), online: United States Senate
6
Internet in filtering and monitoring their customer’s communication.27 Meanwhile, millions of daily users of P2P technology worldwide are maintained in illegality.
Initiated in the US, this combat against “theft” and “piracy” has now gained tremendous traction in all parts of the world. Digital copyright reform is on the agenda of many governments. Understanding the mistakes of the past is paramount for policy makers to design a better answer for the digital challenges which will adequately consider the various stakeholders involved. This paper analyses the great features of last two decades of development in copyright protection for the digital era. Considering the specific context of the music industry, it intends to examine whether the responses brought by the recent evolution of copyright protection are capable to address the problem that they are purported to overcome, proportionate in the view of the interests at stake and consistent with the ultimate goals of copyright. It posits that the dominant approach among policy makers to digital copyright and to file-sharing in particular is misguided as it essentially focuses on an attempt to strengthen copyright by opposing rather than accompanying the fundamental social and technological transformations brought about by the digital era. Finally, it argues that the new digital environment offers new opportunity for a greater fulfilment of copyright’s purposes and that a new approach is urgently needed for the sustainability of copyright itself. It suggests that government should in particular investigate the possibilities of including new intermediaries in the copyright scheme.28 This paper does not intend, however, to resolve the debate concerning whether this last conclusion should be implemented by means of a collective
27 Edwards, “Copyright Cops”, supra note 24. 28 The new intermediaries are the Internet the Services Providers (ISPs), the search engines (Google), the aggregators, the price comparison websites, the blogs and peer to peer (P2P) sites, see Edwards Lilian, “The Changing Shape of Cyberlaw” (September 2004) 1:3 SCRIPT-ed. 363 [Edwards, “Cyberlaw”] at 364.
7 licensing system, a private copying scheme with a levy or any other solution. Rather it seeks to highlight the crucial elements of a better future in providing the policy makers with a clear demonstration that any attempt to oppose the social and technological revolution is not only bound to fail but liable to prevent society from taking full advantage of the social and economical benefits of the digital era.
After reviewing the new challenges that the Internet and the advent of new technologies have posed to copyright (Chapter 1), this paper briefly exposes the rationale and underpinning theories of copyright so as to phrase the question which should guide policy makers when tackling the topic of digital copyright reform (Chapter
2). The next two chapters examine the international response to the digital challenges faced by copyright, i.e. the 1996 WIPO Copyright Treaty (Chapter 3) and its American and European implementations (Chapter 4). Particular attention is given to the pernicious effects of the anti-circumvention provisions. The following chapter reviews and exemplifies the different strategies used by the music industry over the last decade to fight file-sharing (Chapter 5), i.e. litigations against P2P services (5.1), lawsuits against music fans (5.2) and actions against ISPs (5.3). To complete the picture, this paper intends to highlight the existence of important controversies pertaining to the exact role of file-sharing in the decline of CD sales and the supposedly harmful nature of this (Chapter 6). The final chapter sets the grounds for a new approach to copyright in the digital era (Chapter 7). Stressing the necessity for copyright to regain its normative force (7.2), this chapter explores the underlying reason for the public attitude toward unauthorized downloading and uploading on the Internet (7.3), and ultimately singles out the crucial elements for a better future (7.4).
8
Chapter 1 Internet and the Digital Threat to Copyright
Since the earlier time of the Internet, the cyberspace has gone through important changes. Essentially we have assisted to a change in the nature and the number of players with an increasing importance on intermediaries such as Internet Services
Providers (ISPs), search engines (like Google), aggregators, price comparison websites, blogs and peer to peer (P2P) services.29 Yochai Benkler convincingly argues that our society has been shifting from an old economy of industrial information based on centralized controlled of State or capital corporate companies to a decentralized
“networked information economy” based on “information, knowledge and culture”.30 The latter is characterized by the importance of the nonmarket enterprises and decentralized production and distribution. He explains that the former methods of production are not replaced by the new one but enriched by these new possibilities to conceive products and consume them.31 He defines the Internet as the “first modern communications medium that expands its reach by decentralizing the distribution function”.32 The
Internet plays now an essential role in the everyday life of a vast majority of individuals in developed countries. It affects how people interact, communicate, do business, express themselves and access information. Surfing the World Wide Web, exchanging emails, googling information about people, products and places, purchasing and selling
29 Ibid. at 364. 30 Benkler Yochai, “Freedom in the common: Towards a Political Economy of Information” (2003) 52:1245 Duke L. J. [Benkler] at 1251: the author describes the “industrial information economy” with reference to the Big Five –either accounting firms or recording companies- whose businesses were build around maintaining control over the use and the distributions networks of their products. 31 Ibid. at 1246-1247, 1261: the author argues that the shift to the networked information economy entails the potentiality for a political transformation allowing advances in democratic discourse, people’s autonomy and social justice. In particular, the great variety of communications tools, the wider access to ever greater number and types of information make it easier for individuals and groups to form an opinion and make more informed choices. 32 Ibid. at 1250.
9 goods via online websites such as eBay, participating in social and professional networking such as Facebook or LinkedIn, paying one’s bills via e-banking, creating blogs and sharing information about one’s interests and telecommunicating over the
Internet thanks to VoIP such as Skype are now common practice. Aside from being a mere consumer, each individual on the Internet has the potential to become an author, a content provider and a publisher. The Internet has become the inescapable tool for the enjoyment of basic liberties such as freedom of expression, freedom of association, education, culture and employment in developed western countries.33
The arrival of a new technology, the MP3 format, a digital audio encoding format using a form of lossy data compression,34has rendered possible the fabrication of perfectly identical copies of copyrighted works at virtually no cost. Subsequently, the advent of Peer-to-Peer (P2P) software combined with Broadband Internet access has enabled their widespread distribution in a second to millions of users all around the world. Thanks to these digital technologies and the new distribution networks, the mass of information has never been greater and so easily accessible. However, these new capabilities have brought with them an increased risk of piracy and thus threatened many long-standing business models based on creation of intellectual property that is protected by copyright.35 The ability of creators to obtain revenue from their creation has been seriously challenged.36Copyright law typically entitles the right holder to prevent others from copying and distributing their work. Copyright initially emerged in
33 Edwards, “Copyright Cops”, supra note 24. 34 MP3 definition Wikipedia, online Wikipedia:
10 response to the advent of the printing industry. At this time however a potential infringer needed an important industrial infrastructure in order to make copies. This is no longer the case in the digital era. Subsequently, the advent of new technologies – such as the photocopier, home audio and video recording, the CD, and ultimately the computer - posed new challenges to the copyright holders. The law however has always evolved to respond to these technological changes.37 Due to the wide availability of audio compressed formats, portable MP3 players and CD burners, the music industry has been most strongly affected by the advent of P2P technology. For the music recording industry in particular, whose empire has been built on the sales of physical records through controlled paths of distribution, the challenges have never been greater.38 The
IFPI indicated in 2008 that 95% of all songs downloaded on the Internet that year were illegal downloads and that globally illegal music downloads cost $12.8 billion in sales.39
The new digital technologies have not only transformed information and the way we interact with it, but they have also changed the marketplace.40Yochai Benkler has predicted that the profound technological, economic and organizational transformations that our society is experiencing “will lead to substantial redistribution of power and money from the twentieth- century, industrial producers of information, culture, and
37 see Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) [Sony Betamax], Stevens J ( “From its beginning, the law of copyright has developed in response to significant changes in technology” at 430); see also MacQueen Hector, Waelde Charlotte & Graeme Laure, Contemporary Intellectual Property, Law and Policy (Oxford: Oxford University Press, June 2007) [MacQueen, Waelde & Graeme] ; MacKenzie John, “Control and Exploitation of Copyright Materiel Online” (5 June 2009) OUT-LAW Magazine, online: OUT-LAW Magazine
11 communications—like Hollywood, the recording industry, and the telecommunications giants—to a widely diffuse population around the globe.”41 Without minimizing the genuine threat that new technologies have posed to copyright, this paper suggests further below that the music industry has essentially focused its efforts to fight against this redistribution of power and money with little thought given to copyright purposes. In this respect Lilian Edwards has stated that the debate surrounding P2P networks poses the fundamental question of “whether new types of technology –and the new types of intermediaries which utilise it- should be encouraged by law in the interest of innovation, or restrained by law to preserve existing business models and social norms.”42 Before examining how the copyright protection has evolved in response to these digital challenges, I will briefly go back to the rationale of copyright.
Chapter 2 Copyright’s Purposes and Underpinning Theories
2.1. Justification for Copyright
The purpose of this chapter is to provide an overview of the rationale and of the underlying framework of copyright in order to assess whether the evolution of its protection that will be examined in the next chapters is justified with respect to the ultimate goal that copyright is deemed to achieve.
Different underpinning theories have been advanced to justify intellectual property in general,43however two main justifications have generally prevailed with
41 Benkler, supra note 30 at 1249. 42 Edwards, “Cyberlaw”, supra note 28 at 364. 43 See Hettinger Edwin C., “Justifying Intellectual Property” (1989) 18 No 1 Philosophy and Public Affairs 31 [Hettinger]: the author examines different arguments which have been put forward as a justification for intellectual property such as the labour, sovereignty, security, privacy and utilitarian perspectives. After
12 respect to copyright.44 The natural right theory is based on the idea that copyright is
“justified as a reward for authors for the labor they have invested to create their works”.45 John Locke’s version of the natural right theory derives property rights in the products of labour from prior property rights in one’s body.46 Hegel and Kant’s versions of the natural right theory derive property rights from an emanation of the author’s personality.47 On the other hand, the utilitarian theory articulates copyright as a “balance more directly aimed at promoting social utility by providing limited monopoly rights to creators”.48 The utilitarian justification is thus based on the notion that it is important to provide incentives to creators for the ultimate benefit of the society.49
At the international level the 1886 Bern Convention for the protection of literary and artistic works (Bern Convention) was the first multilateral instrument in the field of copyright.50 It has designed the main features of international copyright in setting the
having examined the different flaws of each justification for intellectual property, Hettinger came to the conclusion that this issue should be apprehended from a “social utility” perspective. 44 Scassa, supra note 36 at 43. 45 Scassa, supra note 36 at 43, she indicates that this approach has fallen into disfavour among many academics. 46 Hettinger, supra note 43 at 37. 47 Kretschmer Martin & Friedemann Kawohl, “The History and Philosophy of Copyright” in Simon Frith & Lee Marshall, ed., Music and Copyright (Edinburgh: University Press, 2004) 21. 48 Scassa, supra note 36 at 43, she indicates that this approach seems to dominate among academics; see also Hettinger, supra note 43 at 47 ff. 49 Ibid. The US Constitution for instance contains a utilitarian copyright clause stating that “Congress shall have Power […]To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries; […].”,U.S. Const. art. I, § 8, cl. 8; in Canada, until the 2002 Théberge case there was no clear definition of the purpose underlying Canadian Copyright and the views of scholars and Courts have always varied over time. Since this landmark decision considered to have embraced the utilitarian view, the Copyright Act is now usually presented “as a balance between promoting the public interest in the encouragement and dissemination of works of the arts and intellect and obtaining a just reward for the creator (or, more accurately, to prevent someone other than the creator from appropriating whatever benefits may be generated), Théberge v. Galerie d’art du Petit Champlain Inc., 2002 SCC 34, [2002] S.C.R. 336 [Théberge] Binnie J. at para 30 and Scassa, supra note 36 at 43 note 11 and 45. 50 The Bern Convention for the Protection of Literary and Artistic Works of September 9, 1886, online: WIPO
13 minimum standards for national copyright legislations and international cooperation. It focuses on the protection of the authors’ rights and authorship.51As a result of technological developments, mostly in the phonogram industry, the continental Europe developed another type of protection for media works, also called the “neighbouring rights”, which culminated in 1961 with the creation of the Rome Convention on the
Protection of Performers, Producers of Phonograms and Broadcasting Organisations
(Rome Convention).52 In 1996 these two conventions were updated and completed by the two Internet WIPO treaties.53 Despite the harmonising efforts of these international conventions, two main concepts of copyright’s function can still be identified.54 On the one hand, the Anglo-American tradition focuses on the economic role of copyright. It is centred on the entrepreneur, i.e. on the investment. This explains why for instance this tradition generally vests the first ownership of copyright in the employer for the work made by an employee in the course of employment.55 In other words, in this tradition the authorship of copyright is not limited to or does not only focus on the author defined
14 as the natural person who commits the initial act of creation. Ultimately this perspective rests on the interest of the general public in having more information and work available to them.56 On the other hand, the Continental European approach originally perceives copyright as an emanation of the personality rights of the creator.57It goes beyond the economic aspects of copyright so as to protect moral rights including the right to be identified as the creator of a work and the right to have the integrity of one’s work preserved.58These differences to the primary function of copyright make global harmonization more difficult to achieve.59 The importance of the differences should not be overstated however.60 It could be said that the two schools of thought may accord different weight to the elements of the copyright balance which in turn affects discussions and compromises at the international level.61This paper plans to demonstrate that copyright protection has evolved with little regard to its rationale whatever theory one chooses to consider and that the interests of the creators (by opposition to those of the investors, see below 2.2.) and those of the public have not been adequately served thus far. Considering the utilitarian perspective, Hettinger argues that “[i]f the goal of private intellectual property institutions is to maximize the dissemination and use of information, to the extent that they do not achieve this result,
56 Ibid. 57 Ibid. at 42. 58 Ibid. at 42. 59 Ibid. at 43 60 Ibid. at 43 note 2.21 61 Ibid. at 42-43 n. 2.21: specifying that the differences between these two approaches should not be overstated, they expose for instance, that the Anglo-American tradition provides copyright protection to media works such as sound recordings, whereas the Continental tradition uses a different category of rights named “neighbouring rights” for these non-author works. Another interesting distinction they mention is that the Anglo-American tradition has traditionally allowed “fair use” or “fair dealing” of copyrighted works for free, whereas the Continental tradition has generally allowed private copying of works for a levy imposed on the sale of the devices enabling the copying.
15 these institutions should be modified”.62 He indicates that the question of whether copyrights, patents, and trade secrets provide incentives for the creation of new works, inventions and innovative business techniques is of no help as the answer is always affirmative.63 Instead, he indicates that the question should be whether “…copyrights, patents, and trade secrets increase the availability and use of intellectual products more than they restrict this availability and use? If they do, we must ask whether they increase the availability and use of intellectual products more than any alternative mechanism would”.64 Hettinger seems to consider any system that would promote the widest dissemination of intellectual products including systems that would work outside the free market principles (government’s supports, public ownership of the works produced). Elaborating on Hettinger’s formulation, I would rephrase the question with respect to copyright to include the protection of creators per se as opposed to other copyright holders. Considering the creation and the dissemination of works exclusively in the context of a free market, I find indeed necessary to restate the primordial importance of the creator, i.e. the person who performs the initial act of creation without which no new work and no dissemination would ever occur, by opposition to other intermediaries in the reproduction and the dissemination process, whose roles may in some circumstances such as a technological revolution either increase or restrict the dissemination of new works and whose role must therefore be under constant scrutiny.
The creator must receive a just reward not only as an incentive to initially create or to further create, but also in recognition of his work as the fruits of his labour or as an
62 Hettinger, supra note 43 at 49. 63 Ibid. 64 Ibid.
16 emanation of his personality. The reward to the author must be “just” in the sense that a too strong or a too weak reward may either reduce the incentive to create. Thus, in assessing a proposed reform of copyright, policy makers should in my opinion ask whether the protection granted to each of the different stakeholders by the copyright system increases the availability and use of intellectual products more than they restrict this availability and use while ensuring a just reward for the creators. If the system does not achieve this result, then it should be modified. If it does achieve this ideal, policy makers should then assess whether it increases the availability and use of intellectual products more than any alternative mechanism would while ensuring a just reward for the creator. As this paper will show, it seems that these are precisely the kind of questions that legislatures have failed to ask thus far when tackling the issue of the digital copyright. The next section suggests that in order to enable policy makers to adequately answer these questions they shall start by distinguishing and defining the different interests in the copyright balance.
2.2. Necessary Distinction between the Different Interests
Reviewing the evolution of Canadian copyright cases, Teresa Scassa indicates that Supreme Court of Canada seems to conflate the interests of creators with those of the copyright owners as well as the interests of the users with those of the public.65
Indeed, if the Supreme Court referred to the Copyright Act in the Théberge case as a balance between the “public interest” and the rights of the “creators”,66 in successive cases the copyright balance has been phrased slightly differently. In the SOCAN case
65 Scassa, supra note 36 at 41 ff. 66 Théberge, supra note 49. This approach has not only been considered as a utilitarian view of copyright but also as giving priority to the economic rights of authors, see Scassa, ibid. at 43.
17 for instance, the Copyright law has been formulated in terms of balance between the
“interests of creators” and those of the “users of the work”.67 In the CCH case, the
Supreme Court referred to the balance between the “owners’ rights” and the “interest of the public” and when discussing the fair dealing exception, to the balance between the
“owner’s rights” and the “interests of the users”.68 This Canadian jurisprudence is a great example of the confusion which prevails in most countries. Teresa Scassa notes that the terms “users”, “creators”, “owners”, “public interest” have never been really defined and so there is no consensus as to what they are and who they represent.69
Teresa Scassa further states that one can find many instances where these categories of interests do not intersect.70 Given that copyright is essentially about striking the appropriate balance between the different interests at stake, it seems quite ironic that the substance of the interests involved has never been clearly defined either in Canada or elsewhere. This distinction appears to be particularly necessary, as mentioned by
Teresa Scassa “[a]t a time in history when the technologies by which works are created, reproduced, disseminated and accessed have so rapidly transformed the relationship of people to copyright works (whether as creators, users or both)… ”.71 This is particularly true in the context of the music industry. William Fisher indicates that the large revenues of recording companies do not necessarily translate into the same revenues for the
67 Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers, 2004 SCC 45, [2004] 2 S.C.R. 427 [SOCAN] at para. 132. 68 CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, [2004] S.C.R. 339 [CCH] at paras 24 and 70. 69 Scassa, supra note 36 at 46. 70 For examples of distinction between these different interests, see Scassa, ibid. at 41 ff. 71 Ibid. at 65, she argues that “…it is crucially important that our understanding of concepts such as “creators,” “owners,” and “users” do not unduly limit the ways in which we conceive of the copyright balance in our society.”
18 creator.72 Martin Kretschmer describes the main distinction between the interests of the creators and those of the investors, most of them the rights owners in the entertainment industry.73 He explains that the investors seek to obtain exclusive and transferable property rights so as to collect maximum returns from their investments.74On the other hand, creators have four main interests : “to see their work widely reproduced and distributed”, “to receive credit for it”, “to earn a financial reward relative to the commercial value of the work” and “to be able to engage creatively with other works (in adaptation, comment, sampling, etc)”.75 He concludes that the authors have therefore little to win from exclusivity (which prevents widest distribution) and from transferability, but more to gain from the protection of moral rights including the right to the paternity and to the integrity of the works.76 He suggests that in the past a creator’s aspirations could only be met under important economic efforts and that digital technology now offers new perspectives.77 Indeed, in the past the artists have essentially relied on the music recording industry, i.e on the “major labels”, for the production of their recorded musical works, the marketing and the promotion of the albums and their distribution through the wide channels of distribution. In this way their respective interests could, to a large extent, be conflated with one another. Conversely however, the Internet, the
MP3 format and the P2P networks have allowed artists to make copies of their works at almost no costs and to reach a worldwide audience without using the distribution
72 Fisher, supra note 26 at 54–59; for more on this issue, see below chapter 6. 73 Kretschmer Martin, “Digital Copyright: The End of an Era” [2003] E.I.P.R. 333 [Kretschmer, “End of an Era”] at 339. 74 Ibid. 75 Ibid. at 338 76 Ibid. 77 Ibid.
19 networks of the big records companies. This makes the major parts of the former structure optional.78 The fact that the role of the music recording industry is no longer as important as it used to be should be duly considered in discussions pertaining to the reform of copyright in the digital era. First, it should be recognized that the interests of the artists and those of the record companies can no longer be equated with one another, except perhaps for the very small number of star creators who have benefited disproportionably from the current system.79 In the UK, 10% of authors received 90% of the total distribution in 1994.80 In Germany 5% of the members of the German music copyright society received 60% of the total distribution of royalties in 1996.81 This explains why the artists are generally split when they are asked about what they think of file-sharing services.82For established musicians who have been known to the public and have made their success through a system built on record sales and radio broadcast, file sharing services threaten the very foundations of their living.83Yet, for almost 90% of the authors however, the copyright system does not provide sufficient revenue for a decent living.84The logical consequence is that the promotion of creativity in our society has always been supported by other means.85Indeed, many consider that
78 See Litman, “Digital Copyright”, supra note 26 at 168 ff.; see also Fisher, supra note 26 at 18-24; for a description of the changes brought by the new era see Ginsburg Jane C., “The Exclusive Right to their Writings: Copyright and Control in the Digital Age” (2002) 54 Me.L.Rev.195 at 215; Scassa, supra note 36. 79 Kretschmer, “End of an Era”, supra note 73 at 339. 80 Ibid. 81 Ibid. 82 Hartley, supra note 12; Blackburn David, “On-line Piracy and Recorded Music Sales” (Draft: December 2004) Harvard University Working Paper, online:
20 composers and musicians have been ill-served by the current system,86and that the music recording industry business model may indeed limit the diversity of creation and the dissemination of works.87 The new networked society offers greater opportunities for new artists to get known and potentially to make a living from their music, provided that an adequate compensation system is established. An artist has explained that if the major labels receive less money from the CD sales because of unauthorized file sharing, this situation forces the artist to make up the difference through other means such as touring or merchandise sales. He believes that for emerging and underground artists Napster was the greatest opportunity to find their audience and to make a living.88 The problem however is that an artist cannot simply tour all the time and the current system has not yet enabled him to sell his music online without running the risk of unauthorized copies being freely distributed worldwide without compensation. In order to design an adequate response to the challenges of the digital era, policy makers should start by distinguishing the interests of the artists from those of the investors. Only this exercise will allow them to fully apprehend the role and the ability of each stakeholder to promote a better and wider dissemination of information and works while ensuring a just reward for the author. The next chapter explores how the international community has decided to address these new challenges and examines whether the different interests with respect to the copyright balance have been clarified at the international level.
86 Litman, “Sharing and Stealing”, supra note 26 at 43; for more details on the contracts signed by the artists with the records companies, see below chapter 6. 87 Fisher, supra note 26 at 80 -81. 88 See the interview of Mr. Gregg Gillis, Hartley, supra note 12; see also Oberholzer-Gee Felix & Strumpf Koleman, “File-Sharing and Copyright” (15 May 2009), Working paper 09-132, Harvard Business School, online: HBS
21
Chapter 3 International Response to the Digital Threat: The WIPO Treaties
3.1. Underlying Policies of WIPO Treaties
Important developments within international protection of copyright occurred in the 1990s.89 The first expansion of copyright in response to the digital threat genuinely started within the WIPO.90 The impact of technological advances on copyright pushed the strong copyright industries to seek solutions in order to maintain control over their copyrighted works in digital form. As a result of the combined lobbying efforts of the entertainment industries, two Internet WIPO treaties, the WCT and WPPT, were adopted in 1996.91 They were also the expression of an international consensus that traditional territorial protection for copyright was no longer going to be sufficient to protect copyright in the digital environment.92Essentially, they were designed to complement and update the two existing international treaties on copyright and related rights, i.e. the Bern and the Rome Conventions, and to deal with the problems not addressed by the 1994 TRIPS Agreement.93 These treaties were broadly crafted so as
89 Member States of the WTO for instance were required to comply with the TRIPS Agreement 1994 which contains several provisions on copyright; see in particular articles 9 (1), 10, 11 and 12 and section 7 of the objectives of the TRIPS which provides: “[t]he protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.” [emphasis added], Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) of 15 April 1994, online: WTO
22 to leave the Member States free to implement the provisions in their own ways.94 With respect to the purpose of copyright, the wording of the WCT focuses on the “author”, not on the right holders, and notes the importance of copyright protection as an incentive to create.95 Unfortunately it does not clarify the different notions of owners, authors, public interest and users.
3.2. New Legal Framework for Copyright in the Digital Environment
The main innovations within the WCT have consisted in the introduction of new rights of control for the copyright owners and of new obligations for Contracting States to provide adequate legal measures for the protection of technological protection measures (TPMs)96 and the rights management information (RMI)97 used by copyright owners to control their rights in the digital environment. The WCT clarifies in particular the reproduction right provided for in the Bern Convention indicating that copyright owners should have an exclusive right to control the reproduction of their works in digital
94 Pamela Samuelson, “Intellectual Property and the Digital Economy: Why the Anti-Circumvention Regulations Need to Be Revised” (1999) 14 Berkeley Tech. L.J. 519 [Samuelson] at 563. 95 The Preamble of the WCT states the desire of Contracting States “to develop and maintain the protection of the rights of authors in their literary and artistic works in a manner as effective and uniform as possible, […]” (Preamble WCT § 1). It emphasizes on the “outstanding significance of copyright protection as an incentive for literary and artistic creation” (Preamble WCT § 4). Furthermore, it indicates that the Contracting Parties recognize “the need to maintain a balance between the rights of authors and the larger public interest, particularly education, research and access to information, as reflected in the Berne Convention, » (Preamble WCT § 5) [emphasises added], see WCT, supra note 9. 96 TPMs include both “access control measures” such as encryption, and “copy control measures” such as anticopy devices for example, see Kim, supra note 92 at 97. 97 Article 12 (2) WCT defines “rights management information” as “information which identifies the work, the author of the work, the owner of any right in the work, or information about the terms and conditions of use of the work, and any numbers or codes that represent such information, when any of these items of information is attached to a copy of a work or appears in connection with the communication of a work to the public.”, WCT, supra note 9; for example, RMI is currently used to track the number of times a work is opened or printed and even whether excerpts are copied from it, see Lai S., "Digital Copyright and Watermarking", [1999] E.I.P.R. 171 at 174.
23 form.98The exclusive right to control the communication of works to the public, also called the right of “making available to the public” provided by article 8 WCT is an innovation of this treaty.99 Once implemented into national law, this new communication right could ensure that solely the copyright owner or a person authorized by him could make works available on the Internet, including on P2P networks.100 It is worthwhile to note however that the WCT has not been specifically designed to respond to the P2P threat which was soon going to shake the music industry.101The WCT also provides that
Member States can extend into the digital environment the exceptions and limitations already contained in their national laws which have been considered acceptable under the Berne Convention.102 They are also free to create new exceptions and limitations that are appropriate in the digital network environment.103 With respect to the use of
98 Article 1(4) WCT provides that Member States shall comply with Articles 1 to 21 and the Appendix of the Berne Convention. The Agreed statement concerning Article 1(4) of the WCT provides that the reproduction right, as set out in Article 9 of the Berne Convention, and the exceptions permitted there under, fully apply in the digital environment, in particular to the use of works in digital form. It is understood that the storage of a protected work in digital form in an electronic medium constitutes a reproduction within the meaning of Article 9 of the Berne Convention, see WCT, supra note 9 and Bern Convention, supra note 50. 99 Article 8 WCT states that “[w]ithout prejudice to the provisions of Articles 11(1)(ii), 11bis(1)(i) and (ii), 11ter(1)(ii), 14(1)(ii) and 14bis(1) of the Berne Convention, authors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.” The Agreed statement concerning Article 8 indicates that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention, see WCT, supra note 9. 100 Hagen Gregory R. & Engfield Nyall, “Canadian Copyright Reform: P2P Sharing, Making Available and the Three-Step Test” (2006) 3 U. Ottawa L. & Tech. J 477 [Hagen & Engfield] at 493; in the US, there is no specific right of communication but a “public performance” and a “distribution” rights which are considered equivalent to this right, see Samuelson, supra note 94 at 528, note 47. 101 Napster, the first P2P service, was launched in June 1999, see Hartley, supra note 12. 102 Article 10 WCT affirms the use of the Berne three-step test for the development of limitations and exceptions to the rights of copyright owners; article 9(2) of the Bern Convention states that “It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author.”; see also Agreed statement concerning Article 10 WCT, WCT, supra note 9. 103 See Agreed statement concerning Article 10 WCT, WCT, supra note 9.
24 technological measures, article 11 WCT requires that Member States provide adequate legal protection and effective legal remedies against the circumvention of TPMs used by authors in connection with their rights under the treaty to protect their works against acts that they do not authorized or that are not permitted by law. It is also worthwhile to note that the treaty only requires the protection of TPMs which prevent acts that would constitute copyright infringement.104 Article 12 WCT requires that Member States provide adequate and effective legal remedies against any person performing any act with respect to RMIs that would facilitate or conceal an infringement of any right covered by the WCT or the Berne Convention.105These provisions have been considered to provide a “predictable, minimalist, consistent and simple legal environment” for the promotion of global electronic commerce and information.106 I will examine in the next chapter how they have been implemented in the American and European legislations.
104 Article 11 WCT provides that “[c]ontracting Parties shall provide adequate legal protection and effective legal remedies against the circumvention of effective technological measures that are used by authors in connection with the exercise of their rights under this Treaty or the Berne Convention and that restrict acts, in respect of their works, which are not authorized by the authors concerned or permitted by law.” [Emphasis added], WCT, supra note 9. 105 Article 12(1) WCT provides that “[c]ontracting Parties shall provide adequate and effective legal remedies against any person knowingly performing any of the following acts knowing, or with respect to civil remedies having reasonable grounds to know, that it will induce, enable, facilitate or conceal an infringement of any right covered by this Treaty or the Berne Convention: (i) to remove or alter any electronic rights management information without authority; (ii) to distribute, import for distribution, broadcast or communicate to the public, without authority, works or copies of works knowing that electronic rights management information has been removed or altered without authority.]”, WCT, supra note 9. 106 Samuelson, supra note 94 at 562.
25
Chapter 4 American and European Implementations of the WCT
TPMS and Anti-Circumvention Measures
The 1998 American Digital Millennium Digital Act (DMCA)107 and the European
Directive 2001/29/EC on the Harmonization of Certain Aspects of Copyright and
Related Rights in the Information Society (Infosoc Directive),108particularly the anti- circumvention measures they provide for, are considered to be the most controversial examples of the WIPO treaties’ implementation.109 Required to provide “adequate protection” against the circumvention of TPMs, the DMCA and the Infosoc Directive both went far beyond110 in providing not only a general prohibition of circumventing any technological measures used by copyright owners to protect their works,111 but also by imposing a broad ban on the distribution of devices and technologies used for circumvention.112
In particular, the DMCA has been extensively criticized for its capacity to prevent users from benefiting from the fair use/dealing exceptions.113 The American Congress
107 The Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860 (1998) [DMCA]; Title I of the DMCA implements the WIPO treaties in creating two new prohibitions in the Title 17 of the U.S. Code. 108 Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society, [2001] O.J. L 167 [Infosoc Directive]; the directive is binding as to the result to be achieved, but leaves the national authorities free to decide how to implement it into their national legislation. 109 Adams & Brown, supra note 26. 110 Kim, supra note 92 at 109 and 111, she compares the different implementations of the WIPO treaty in Australia, Japon, Europe and US. She observes that all four states prohibit the manufacture and distribution of circumvention devices, but only the E.U. and U.S. go a step further and prohibit the act of circumvention as well; see also Samuelson, supra note 94 at 521; Electronic Frontier Foundation, “Unintended Consequences: Ten Years under the DMCA” Electronic Frontier Foundation (2008) online: EFF
26 has created a limited number of specific exemptions regarding the prohibition of circumvention in the DMCA allowing certain users to gain access.114These exemptions, however, have been criticized for being too narrow.115Acknowledging the existence of potential tension between the use of access control measures and fair use, a US court exposed that the Congress had struck a balance, may this balance be inadequate.116
The court explained that fair dealing defence applies only provided that the access is authorized.117 Consequently, a piece of technology may be immune from copyright infringement under the Sony’s doctrine if it presents a substantial non infringing use, but may be nevertheless subject to liability under section 1201.118 Such a result leads one inevitably to question whether the copyright legislation is really the appropriate forum to discuss the protection of TPM and whether a computer crime regulation for instance
114 These exemptions comprise law enforcement, intelligence, and other government activities, reverse engineering, security testing, good faith encryption research, certain uses non profit libraries, archives and educational institutions (see 17 U.S.C. §§ 1201 (1) (d) to (j)). 115 see EFF, “Unintended Consequences”, supra note 110 at 1 and 6, EFF indicates that despite its power to do so, the Copyright Office has persistently refused to allow exemptions for consumers’ fair use; see also Samuelson, supra note 94 at 538, 543 ff. and 555, she argued that that Congress should have adopted a provision allowing Courts to exempt acts of circumvention performed for other legitimate purposes. With respect to section 1201(c)(1) that provides that “[n]othing in this section shall affect rights, remedies, limitations, or defences to copyright infringement, including fair use, under this title”, she suggests that the apparent recognition of legitimate circumventions for non infringing purposes in this section is in fact nullified by section 1201(b)(1) which broadly bans devices and technologies used to circumvent. 116 Universal City Studio, Inc. v. Reimerdes, 111 F.Supp.2d 294 (S.D.N.Y. 2000). 117 Ibid. at 323, with respect to fair use, the District judge phrases the question as to “whether the possibility of non infringing fair use by someone who gains access to a protected copyrighted work through a circumvention technology distributed by the defendants saves the defendants from liability under section 1201”. He concludes that nothing in section 1201 suggests so; the Second District Court of Appeal affirmed the decision, see Universal City Studio, Inc. v. Reimerdes, aff’d sub nom Universal City Studio v. Corley, 273 F.3d 429 (2d Cir. 2001) [Reimerdes] : acknowledging the fact that the use of TPMs could interfere with certain fair use and that it may protect works which are no longer covered by copyright protection, the Court of Appeal nevertheless specified that “[f]air use has never been held to be a guarantee of access to copyrighted material in order to copy it by the fair user's preferred technique or in the format of the original.” 118 Ibid.
27 would not be more appropriate.119 Moreover, another relevant critique formulated against the DMCA relates to its capacity to extend the copyright protection beyond what copyright law generally provides, in affording for instance protection for work whose copyright has expired or for work that has never had a copyright.120With respect to the
Infosoc Directive, the anti-circumvention provisions it provides for seem a priori less controversial. First, the Infosoc Directive only requires Member States to protect TPMs in respect of works covered by "copyright or any right related to copyright as provided by the law or the sui generis right in databases".121 Consequently, TPMs used to protect works in the public domain would not be protected under the Directive.122 Second, article 6(4) of the Infosoc Directive provides that the rights holders must take appropriate measures to ensure that beneficiaries of the listed exceptions actually benefit from them. In the absence of adequate voluntary measures, article 6(4) requires
Member States to ensure the benefit of these exceptions.123This being specified, two important limitations must be noted. First, the list of 20 possible exceptions that Member
States can adopt according to section 5 of the Infosoc Directive is exhaustive so that the scope of the exceptions permitted under the Directive is narrower than what the WCT
119 Kim, supra note 92 at 118, she suggests the implementation of a computer crime regulation which would prohibit any unauthorized access to protected services and works, regardless of whether they are copyright-based or not. 120 See Nimmer, supra note 113 at 712 ff. and 738 -740; Kretschmer, “End of an Era”, supra note 73 at 337. 121 See Article 6(3) Infosoc Directive, supra note 108, and EC, Commission Staff Working Document, Report to the Council, the European Parliament and the Economic and Social Committee on the application of Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society (Brussels: SEC(30 November 2007) 1556, online:
28 provides for.124Second, the list of beneficiaries specified in section 6(4) of the Directive is even smaller than the list of optional exceptions in section 5, so that copyright owners can still deny access in certain circumstances including reproduction for private use, parody, criticism, and review.125Moreover, in practice, the obstacles to the proper exercise of fair use rights remain when the copyrighted work is already technologically locked as TPMs cannot take into account the flexibility of fair uses and requesting prior authorization to the copyright owner is either too cumbersome or impossible.126 Given the extensive use of TPMs to restrict access (such as digital lock) and use of works
(such as “copy control” technology) over the last decade, a broad array of fair uses by scholars, researches, news reporters and users have simply become impossible. The anti-circumvention measures have also been criticized for encouraging the use of TPMs to enable a pay-per view or pay-per use system requiring a payment before accessing any document.127 The novelty of this system is that it offers the copyright owners the possibility not only to control the reproduction and the distribution of their works, but also to monitor their consumption.128 Not only have the copyright holders never managed to fully prevent access to their works,129 copyright law has never afforded the copyright owners complete and unlimited control over their works once they have been
124 The Agreed Statement to Art.10 WCT allows new exceptions that are appropriate to the digital environment. The scope of possible exceptions allowed by this provision is indeed very narrow as these limitations must respect the Bern three step-test, see Kretschmer, “End of Era”, supra note 73 at 336, the author discusses the scope of the “fair use” exceptions in the context of the Infosoc Directive. 125 Kim, supra note 92 at 110. 126 See Kretschmer, “End of an Era”, supra note 73 at 336; Adams & Brown, supra note 26 at 5. 127 Litman, “Digital Copyright”, supra note 26 at 27. 128 Ibid. at 28; see Nimmer, supra note 113 at 712 ff. 129 Kretschmer, “End of an Era”, supra note 73 at 337.
29 published for the first time.130 These limits on the way in which consumers interact with works have thus been rightly criticized for creating an important shift in the copyright balance.131 In 1999 Pamela Samuelson warned copyright owners against the potential reaction of consumers to restricted use of works.132 Citing the works of two economists,
Shapiro and Varian, she drew the attention of the copyright owners to the fact that “the more liberal you make the terms under which customers can have access to your product, the more valuable it is to them. A product becomes more valuable if it can be shared, loaned, rented, or repeatedly accessed.”133Copy-protection CD and Digital
Right Management (DRM) for online music, for instance, are two major obstacles to fair use of music works by consumers who have legitimately bought the music.134 It has been argued that their extensive use of digital locks “may actually encourage more infringement by making “legitimate” media options less attractive”.135Indeed, it appears that TPMs have turned many honest users into “dishonest” users in encouraging them
130 Nimmer, supra note 113 at 711-729, he exposes that the first sale doctrine for instance has prevented copyright holders from controlling the use of copyrighted work by consumers once the material was sold and from demanding a royalty for the subsequent use. Moreover, he explains that the limited monopoly originally accorded to the copyright owner over his work would turn into a perpetual right by the use of these TPMs. He suggests that the implementation of private copying and levy systems in Canada and Europe are also the expression of this incapacity of the copyright holders to totally control the use of their works in private spheres. Finally, the exclusive rights of the copyright holders have been historically limited to allow others to make limited use of these works for specific and legitimate purposes described under the doctrine of fair use or fair dealing without liability for copyright infringement; see also Kretschmer, “End of an Era”, supra note 73 at 337. 131 See Kretschmer, ibid.; see also Scassa, supra note 36 at 63 ; see also Jon M., “Normative Copyright: A Conceptual Framework for Copyright Philosophy and Ethics” (2002-2003) 88 Cornell L. Rev. 1278 [Garon] at 1353 ff, he argues that the interplay of contract law and copyright blurs the distinction between idea and expression and makes the concept of faire use useless. 132 Samuelson, supra note 94. 133 Shapiro Carl & Varian Hal R., Information Rules: a Strategic Guide to the Network Economy (Boston, Mass.: Harvard Business School Press, 1999) cited in Samuelson, ibid. at 565. 134 EFF, “Unintended Consequences”, supra 110 at 6. 135 McSherry Corynne, “Comment: Project No. P094502” (presented before the Federal Trade Commission, FTC Town Hall: Digital Rights Management Technologies, 25 March 2009) Electronic Frontier Fondation, online: EFF
30 to obtain illegally unrestricted copies of copyrighted works in order to exercise their “fair use” or “fair dealing” right such as making compilations of their favourite songs or playing a copy of a CD in their car or on their portable MP3 player.136 In April 2009
Apple ceased to use burn limits and DRMs on the songs available on its iTunes digital stores.137 This is obviously great news. It means that iTunes’ customers can at last make an unlimited number of copies of the songs they have just bought on a device of their choice. It may also mean that the industry has finally come to realize that the use of DRM is not only inefficient to control piracy but counter-productive. Unfortunately, the choice of digital music offered by such legal online retailer is still limited compared to what is available on P2P networks and the pricing strategy remains comparable to the pricing applied to physical CDs and thus does not translate the reduction of costs brought about by digital reproduction of music and online distribution.
Finally, anti-circumvention provisions have been highly criticized for their negative impact on innovation.138 In 1999 Pamela Samuelson indicated that the DMCA anti-circumvention provisions were unpredictable and overbroad and she argued that the anti-device provisions were “likely to have harmful effects on competition and innovation in the high technology sector”.139 Ten years later it appears as though the anti-circumventions provisions have indeed been used to stifle many legitimate activities
136 Adams & Brown, supra note 26. 137 “Apple strips iTunes of digital rights management” The Times (7 January 2009), online: Times online
31 as opposed to stopping copyright infringements.140 EFF, a civil liberties group, has denounced numerous cases where these provision have been used to threaten or impede many public policy priorities such as fair use of works, free expression, scientific research (in particular computer security research), competition and innovation.141
In conclusion, it appears that the implementation of TPMs combined with broad anti-circumvention and anti-trafficking provisions have been justifiably criticized for leading to the disappearance of fair use or fair dealing. The extensive use of TPMs does not only upset the existing copyright balance between owner’s rights and users’ rights but allows copyright owners to exit the limited copyright protection scheme for an unlimited pay-per click protection system. The detrimental effect of TPMs on innovation seems unarguable as well. As to its efficiency against the problem they are purported to overcome, it appears that TPMs have simply not succeeded in impeding the level of infringement.142 Bruce Lehman, head of the US Patent and trademark Office under the
Clinton Administration, acknowledged in 2007 during a conference that “our Clinton administration policies didn’t work out very well” and “our attempts at copyright control have not been successful”.143 Some argue that TPMs are simply futile as they just need to be cracked down once by hackers and then files can be distributed with one click of a
140 EFF, “Unintended Consequences”, supra note 110. 141 See the description of the different cases, EFF, “Unintended Consequences”, supra note 110 at 1 ff., they refer to the declaration of the White House Cyber Security Chief at a conference with MIT in 2002 saying that the DMCA has been used to chill computer security research. EFF exposes the cases of numerous computer security researchers that have stopped their research, delay or refuse to publish the results or withdraw the information already posted on their websites fearing DMCA lawsuits and liability (at 2-3). They also describe the cases of many journalists and blogs that have seen their activities threatened by the spectre of DMCA actions. They explain how DRM have been used to stifle competition and innovation in the music industry sector (see at 9, dispute between RealNetwork and Apple concerning the RealNetwork’s “harmony” technology designed to allow the digital music sold from Real’store to play on Apple’s Ipod). 142 EFF, “Unintended Consequences”, supra note 110; Adams & Brown, supra note 26. 143 See Geist Michael, “DMCA Architect Acknowledges Need for a New Approach” Michael Geist (2007) online: Michael Geist
32 mouse to an unlimited number of people around the world.144 Others argue that the record companies have lost precious years waiting for effective TPMs instead of innovating in the marketplace by providing authorized downloads. In the meantimes the
P2P services have stepped up to the plate and filled the gap.145 In my view, TPMs have first and foremost provided copyright holders with an illusion of protection and kept legislatures away from searching for new solutions which would better match the public’s expectations and take full advantage of the great opportunities of the digital era so as to better achieve the ultimate goals of copyright. Pamela Samuelson reinforces this conclusion when she describes the battle in Congress over the anti-circumvention provisions of the DMCA as “a battle between Hollywood and Silicon Valley”.146 She argues that what drove the adoption of the DMCA anti-circumventions measures was not the needs and the interests of the digital economy, but the “high rhetoric, exaggerated claims, and power politics from representatives of certain established but frightened copyright industries” which have succeeded in convincing the Congress to adopt a legal framework which best accommodates their own interests.147
144 Edwards, “Cyberlaw”, supra note 28; Adams & Brown, supra note 26. 145 Adams & Brown, supra note 26. 146 Samuelson, supra note 94 at 522. 147 Ibid. at 523, 527 and 534.
33
Chapter 5 Combat against File-Sharing
Parallel to lobbying governments at the legislative level so as to strengthen the rights of control for copyright holders, the music industry has been virulently fighting unauthorized file-sharing before the courts with recourse to ordinary copyright lawsuits.
As we will see, this strategy has worked quite well against commercial and institutional players, but has been far less effective against individuals. The purpose of the following sub-sections is not to provide a complete picture of all past and present litigations but rather to present an overview of the scale of this ongoing war and a better understanding of the interests at stake.
5.1. The Fight against P2P Services
In July 1999 the RIAA brought copyright infringement action against the first file- sharing service, Napster, for allowing its users to search an index and download MP3 music files stored on the computers of other users.148 In 2002 the Court of Appeal of the
Ninth Circuit found Napster liable for secondary infringement under two doctrines: contributory copyright infringement and vicarious copyright infringement.149Shutting down Napster however did not stop the proliferation of other P2P services. A new phenomenon was born revolutionizing the way music would be henceforth accessed, consumed and distributed. Soon after this ruling new generations of P2P software appeared including Aimster, eDonkey, FastTrack (used by KaZaA and Grokster),
148 Akester, supra note 7. 149A&M Records, Inc. v. Napster, Inc., 284 F.3d 1091 (9th Cir. 2002) [Napster]; Napster was found secondarily liable for the direct infringement of its users who were considered to infringe the rights of reproduction and distribution of the copyright holders; for a discussion of the defence arguments of Napster, see Akester, supra note 7.
34
Gnutella (used by Bearshare, LimeWire and Morpheus) and later BitTorrent.150 It is generally argued that the new decentralized generations of P2P software was a result of the lawsuit against Napster. The first generation of P2P software, such as the one proposed by Napster, centralized the file-searching protocol. It required users to search an index of the file names for the corresponding file locations. The index was kept on a central server prior to downloading.151 The subsequent generations of P2P technology such as the one used by KaZaA, Morpheus and Grokster decentralized the file- searching protocol.152The decentralized architecture allows computer users to download the files directly from the hard drive of another user’s computer without going through a centrally held index.153The attractive feature of this new generation of P2P was that shutting down the service did not prevent the search and the exchange of files, thus making the tracing of illegal activities more difficult.154 This architecture caused the music industry to experience its first set back. In the Netherlands, the Court of Appeal of
Amsterdam held that KaZaA software was not unlawful.155This was subsequently affirmed by the Supreme Court in December 2003.156It was held that due to the
150 See Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88 at 7; see also Slyck News, “P2P: Then, Now and the Future” (23 February 2004), online: Slyck.com
35 particular architecture of this new generation of P2P software, closing down KaZaA would not prevent people from exchanging files.157 The Court also noted that the illegal acts were those of the users not those of KaZaA.158 At the same time in the United
States the music industry endured another temporary setback in a case against
Grokster and Streamcast (distributor of Morpheus software). The 9th Circuit Court of
Appeal, interpreting the Sony case,159 found that the file-sharing services were not liable of copyright infringement holding that whenever a product is capable of substantial lawful use the producer can never be held contributory liable for third parties’ infringing use of it.160The Court of Appeal held that decentralized P2P networks such as Grokster could not be held liable for contributory or vicarious copyright infringement because they simply could not monitor or police the behaviours of their users as Napster could.161
The Court held that it belonged to the Congress to design new copyright laws in order to deal with new technologies. In 2005 however, the Supreme Court overturned this decision.162 It did not overrule the Sony Betamax decision, however, but created a new doctrine of contributory infringement called “inducement”.163The Supreme Court held
157 Ibid. 158 Ibid. The court also held that the activity of Kazaa, of providing the means for publication or reproduction of works, did not amount to acts of publications or reproductions per se. The fact that KaZaA was not exclusively used for copyright infringement purpose was also taken into consideration in the decision. 159 Sony Betamax, supra note 37. 160 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp.2d 1029 (C.D. Cal. 2003), at 1032- 1033; the Ninth Circuit Court of Appeal affirmed the decision of the lower court holding that control in the form of "ability to supervise" is also required for a finding of vicarious infringement, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 380 F.3d 1154 (9th Cir.2004). 161 Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd. 380 F.3d 1154 (9th Cir.2004) 162 Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) [Grokster]. 163 Ibid. The Supreme Court decision set aside the Ninth Circuit's ruling in favor of Streamcast and Grokster. It held that P2P service as Grokster did not operate a centralised file-sharing network like that of Napster, which distinguished him from the latter with respect to the contributory infringement. However, the Supreme Court declined giving the entertainment companies what they wanted however, i.e. a veto over technological innovation. The landmark Sony decision was affirmed but a new doctrine of copyright
36 that contributory infringement arises when there is an intentional inducement or encouragement of direct infringement, whereas vicarious infringement arises when one profits from the direct infringement of others but refuses to exercise control in stopping or limiting such an abuse.164 Similarly, a 2005 Australian Court found KaZaA (in fact its distributor Sharman Networks Ltd) liable of copyright infringement for authorizing the infringement of its users.165 A few times before, the U.S. District judge in Los Angeles held that Kazaa’s parent company, Sharman Network, could be sued in the United
States.166 Grokster was shut down in 2005 after having reached a settlement with the music industry.167 Similarly, Sherman Networks Ltd ultimately reached a global settlement for the Kazaa American and Australian cases for $ 115 million.168 Like
Napster, KaZaA (now Kazaa) amended its business model and became a legal
infringement called “inducement” was created. The main argument of the Supreme Court was that when a company distributes a product in advertising its use to infringe copyright (claiming to be the next Napster), it fosters infringement so that the company is liable for the resulting infringement by third parties.; see Electronic Frontier Foundation, “MGM v. Grokster” Electronic Frontier Foundation online: EFF
37 business offering licensed music.169 The users now have the opportunity to pay a monthly fee to temporarily enjoy, for as long as they renew their monthly subscription, a limited choice of music (compared to what the former P2P services offered) that they can only play on their PC and no other MP3 device.170 There is no mystery why none of these new businesses has been successful since they have become legal services.
In 2002, the BitTorrent technology emerged.171 This technology differs from other
P2P programs like Kazaa or Morpheus in that BitTorrent users do not make a library of their files available for sharing but only share the file they are individually receiving or that they have just received.172 It is faster and more efficient than traditional P2P networks as its architecture is based on reciprocity.173 Each downloader is automatically an uploader. In February 2009 commenced in Sweden a criminal action for copyright infringement against The Pirate Bay, one of the largest BitTorrent services in the world with 25 millions of users. Music and film industries also brought a civil claim for compensation to be heard with the criminal prosecution.174On April 17, 2009, the
Swedish Court sentenced the four men behind this file-sharing website to a year in jail
169 See Sharman Networks, “Content Industries and Sharman Networks Settle All Global Litigation” (2006), online: Sharman Networks
38 and ordered them to pay the equivalent of £2.5 million in damages for having helped internet users to download music, films and computer games.175 An analyst of the
Times indicates, however, that this verdict is too unrealistic for the majority of the millions of file-sharers to have any deterrent effect on them.176 The reason he provides is quite straightforward and should be kept in mind when setting the ground for a new approach to digital copyright: file-sharers are not file-sharing because they want to be criminals but simply because this “normal every day activity” is the simplest, the nicest and the most efficient way to consume music. He stressed that in the absence of common language or understanding between the Hollywood studios and the file- sharers, there is no chance that this verdict will change anything in this long copyright war.177
175 Oscarsson Marcus and Charter David, “Pirate Bay Founders Defy Year's Jail Sentence and Order to Pay £2.5 million” The Times (18 April 2009), online: Times online
39
5.2. The Fight against Individuals
Parallel to targeting the P2P companies, in 2003 the RIAA started to sue individual music fans who were uploading large amounts of music files on P2P networks.178 When questioned about the underlying reasons of this contentious tactic,
Cary Sherman, former President of the RIAA, explained that such actions were necessary because at the time -specially after the Court’s decision subsequent to
Napster found that there was nothing wrong with the decentralized architecture of new generation of P2P services- three quarters of the population really thought that it was perfectly legal to download free music files from P2P networks.179 In the US, the RIAA used the DMCA to subpoena ISPs in order to force them to hand over the names of
P2P file-sharing users they believed were infringing copyright. Numerous public interests groups and some ISPs, among which was Verizon, challenged the subpoena arguing that an Internet user’s privacy was jeopardized if anyone pretending to be a copyright owner could, without a court oversight and without providing any proof of allegations, force an ISP to disclose the names and addresses of its customers.180
Verizon lost the case before the lower court which enabled the RIAA to use the subpoena to obtain the identity of numerous alleged infringers.181 Ultimately, the federal court of appeal held that the DMCA was not drafted broadly enough to allow copyright
178 RIAA, “Collecting Evidence”, supra note 19. 179 Interview of Mr. Cary Sherman, President of the RIAA, by the Globe and Mail, see Hartley, supra note 12 ; see Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp.2d 1029 (C.D. Cal. 2003); Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 380 F.3d 1154 (9th Cir.2004). 180 EFF, “RIAA v. The People”, supra note 20. 181 Ibid.
40 owners to subpoena an ISP acting as a conduit for P2P.182Unfortunately, this decision did not mean the end of lawsuits however. It simply meant that the RIAA had to follow the same rules that apply to all civil litigants: judicial oversight and an opportunity for the alleged infringer to challenge the subpoena.183 In different parts of Europe, such as
Ireland for instance, the music industry succeeded in obtaining before the Courts the identity of one hundred people alleged to be illegally file-sharing.184 It is said however that the deterrent effect of such actions lasts only temporarily.185 In May 2005 the
Canadian Federal Court of Appeal in the case of BMG Canada Inc v. John Doe rejected, on procedural grounds, the motion of the Canadian Music Producers and
Recording Industry (CRIA) seeking to obtain from the ISPs the identities of alleged file sharer individuals using KaZaA and Imesh. The Federal Court of Appeal nevertheless indicated that “[…] in cases where plaintiffs show that they have a bona fide claim that unknown persons are infringing their copyright, they have a right to have the identity revealed for the purpose of bringing action”.186 This decision has been criticized as copyright trumping privacy.187 Since then however, no other decision has been rendered and so in practice this last decision was an important defeat for the music industry.
182 Recording Industry Association of America, Inc. v. Verizon Internet Services, Inc., 351 F.3d.1129 (D.C. Cir. 2003). 183 For details explanations on how the “John Doe” lawsuits worked, see EFF, “RIAA v. The People”, supra note 20. 184 See McIntyre TJ, “Filter or Else! Music Industry Sues Irish ISP” (3 April 2008) Society for Computers and Law Magazine, online: SCL
41
This surprising business strategy of suing music fans has created enormous public outrage and raised important concerns, notably with respect to the right to privacy and freedom of expression of Internet users. In September 2008, EFF indicated that this tactic had foremost proved to be inefficient as unauthorized file-sharing had simply increased in its popularity.188 While the vast majority of people sued in the United States are said to have settled for about $3,500 each,189 a few of the cases made it through to the courts.190 For instance, on June 18 2009 a federal jury ruled that single mother
Jammie Thomas-Rasset wilfully violated the copyrights on 24 songs posted on KaZaA for others to download and awarded recording companies $1.92 million, or $80,000 per song.191This was the second trial of a case judged in 2007 by a different federal jury which condemned this mother of four children to a fine of $222,000 or $ 9, 250 per songs.192 It is worth noting that Chief Judge Michael Davis of United States District
Court threw out this first verdict saying that he had given the jury incorrect instructions and declared that “the damages awarded in this case are wholly disproportionate to the damages suffered by Plaintiffs”. He took this opportunity to implore Congress to amend the Copyright Act to address liability and damages in peer-to-peer networks.193 A lawyer
188 EFF, “RIAA v. The People”, supra note 20. 189 see Karnowski Steve, “Jury Rules against U.S. Woman in Download Case” The Globe and Mail (19 June 2009), online: The Globe and Mail Technology
42 with the Electronic Frontier Foundation (EFF) indicated that the disproportionate size of the verdict raises constitutional questions.194
This last decision causes one to wonder whether an activity shared by tens of millions of people worldwide can be as anti-social and immoral such that it requires condemnation that a person will endure for their life time. Is file-sharing so threatening to our society that it requires to trample on a person’s constitutional rights and freedoms? Are there not any alternatives to fulfilling copyright purposes without enduring these tragic outcomes? The music industry is currently lobbying governments to increase ISP’s liability. This most recent approach will be discussed in the next section.
5.3. ISPs as Copyright Police
Recent decisions of some European Courts illustrate a new trend in the music industry’s approach where the industry is seeking to increase the liability of individual
ISPs for the copyright infringements of their customers. In 2007 a Belgium court ordered
Scarlet, a Belgium ISP, to implement a system to monitor its users’ activities in order to detect and block the attempts to share copyrighted files over peer-to-peer networks.195
In October 2008 Scarlet succeeded in overturning the injunction on the basis that Magic
Audible, the filtering system proposed by the plaintiffs, was technically
194 von Lohmann Fred, “Record Labels' $1.9 Million Win in Thomas Retrial Constitutional?” Electronic Frontier Foundation (18 June 2009) online: EFF
43 unworkable.196The proceeding is now in appeals.197 In November of 2008 the Court of
Appeal in Denmark upheld a decision which ordered an ISP, Sonofon (part of Tele2), to terminate its users’ connection to The Pirate Bay, the controversial Swedish BitTorrent services that facilitated access to music, film and other copyrighted content. It was said that the Court found that Sonofon was contributing to the infringements by allowing access to the copyright infringing site.198Some have argued that the music industry has learned little from the failure of TPMs to ascertain a full control over digital works.199In addition, any filtering system is not only an invasion of the privacy of users, but moreover it is inconsistent with the prohibition of article 15 of the European Directive on electronic commerce to impose on Internet intermediaries a general monitoring obligation to detect illegal activities.200
Another action has recently been brought against Eircom of Ireland, the largest
ISP of the country, by the four major record companies. These companies were seeking an injunction that would require Eircom to implement a filtering system to block illegal
P2P downloads.201The parties finally settled the case in January 2009 and Eircom has agreed to implement a “graduated process” according to which it will (1) inform its
196 See McIntyre TJ, “SABAM v. Scarlet: Belgian ISP Released from Obligation to Filter Network for Illegal Downloads” IT Law in Ireland (26 October 2008) online: tjmcintyre
44 subscriber that their IP addresses have been detected infringing copyright, (2) warn them that unless the infringements cease they will be disconnected and (3) in default of compliance, terminate its customers’ Internet connections.202 Yet, it is worthy to note that in September 2008 the European Parliament clearly expressed its opposition to a
‘three-strike’ type of policy indicating that any restriction to the fundamental rights and liberties of Internet users, including the right of access to information, could not be made without a court’s decision.203
In France, despite the opposition the European parliament, the French National
Assembly approved on May 13, 2009 a very contentious bill mandating a similar “three- strike” policy before the Internet access of the alleged persistent infringer is terminated without any court oversight – “guilt by accusation”.204 Fully supported by the government of Sarkozy, this bill was decided, similarly to the above mentioned agreement with Eircom, without consulting the most concerned parties: the consumers,
202 IFPI, “Ireland - P2P infringement case settled” (29 January 2009), online: IFPI website
45 the authors of works and the P2P companies.205 In June 2009 the French Constitutional
Council found this legislation unconstitutional. It held that the Internet was a part of the freedom of expression and of consumption and that the presumption of innocence prevailed in French law.206
The UK Government has launched a large consultation on legislation to address the illicit P2P-file-sharing which closes on September 15, 2009.207 In January 2009 the government indicated that none of the options proposed so far has won a widespread support and that there was a marked polarisation between the views of the right holders, the consumers and the ISPs.208 One of the possible solutions envisaged is the creation of a quasi-autonomous nongovernmental organization financed by a tax on
ISPs of £20 per year per broadband connection.209This Agency would act as an intermediary between the content entertainment industries and the ISPs in providing music and film companies with data about serial copyright infringers should they be able to obtain a court order.210 Three major problems remain with such a solution. First, it continues to criminalize an entire generation of young people.211 Second, it forces ISPs
205Champeau Guillaume, “Accords Olivennes : une vision consumériste de la culture” Le Monde Diplomatique (11 December 2007), online : Le Monde Diplomatique
46 to become the cops of the Internet.212 Third, it imposes a tax on ISPs which ultimately will be passed on to the users.213Any extension of copyright protection increases the enforcement cost either for the copyright owners or the ISPs. These costs are ultimately paid by the users.214 Since the price of the music has not been reduced in the online environment, contrary to what consumers have legitimately expected given the reduction of costs related to both the reproduction and the distribution of works induced by the advent of MP3 and of the Internet,215 the increase in the cost of music due to copyright enforcement is neither a desired nor an acceptable outcome.216
Many people feel that file-sharing is unstoppable and if this comes to be true, the fight against file-sharing will not only be costly but ineffective.217Indeed, many believe that increasing the liability of ISPs is unlikely to reduce the level of infringement as it will simply cause the P2P users to go further underground.218 From a technological point of view, "[t]here seem to be no technical impediments to darknet-based peer-to-peer file
212 Ibid. 213 Ibid. 214 Hagen & Engfield, supra note 100 at 502. 215 See Litman, “Digital Copyright”, supra note 26 at 168: the author describes how the record companies refused to invest in new business models in which individual artists and consumers could have taken advantage of the money spared by the recording companies thanks to the new technologies. She concludes that “no wonder consumers aren’t going along”; Fisher, supra note 26 at 24; see also Adams & Brown, supra note 26, they argue that music fan have often paid their music several times already (in buying physical CD for instance) and are not willing to pay same or higher price for digital downloads “with a near-zero distribution costs”. 216 For a discussion about the costs of enforcement and the solutions to reduce them, see Mark A. Lemley & R. Anthony Reese, “Reducing Digital Copyright Infringement without Restricting Innovation” (2003-2004) 56 Stan. L. Rev. 1345. 217 Yagan, Testimony, supra note 25; Lemley, supra note 25; Hagen & Engfield, supra note 100 at 505; see Adams & Brown, supra note 26 ; see Gervais, “File-Sharing”, supra note 26, he says that it to be unlikely that technological effort will be able to stop file-sharing. 218 See EFF, “RIAA v. The People”, supra note 20; see also the declaration of Jérémie Zimmermann, director of La Quadrature du Net, an Internet advocacy group based in Paris, in O’Brien, “Plan to Curb Internet Piracy”, supra note 39.
47 sharing technologies growing in convenience […]."219 As we have seen, the different lawsuits have simply forced users to shift from one file-sharing system to another. It appears that the different strategies used by the music industry to combat file-sharing are problematic in many respects. To complicate this already disturbing picture, it seems unclear if file-sharing is as socially harmful as the music industry is alleging. The next chapter will discusses this last aspect.
Chapter 6 Challenges to the Copyright Paradigm
One basic premise in copyright law is that copyright infringement harms copyright holders because it prevents them from economically benefiting from their property.
Unauthorized file-sharing is thus thought to threaten the incentives for creation and innovation. The anti-piracy campaigns of the music industry state that in killing creativity file-sharing harms the society as a whole. In recent years however, the notion that unauthorized distribution of copyrighted works harms copyright holders has been challenged by many scholars. 220
With respect to the music industry, the works of Oberholzer and Strumpf demonstrate that it is indeed very difficult to prove that file-sharing undermines the
219 Biddle Peter et al., "The Darknet and the Future of Content Distribution" (2003), online
48 incentives of authors and entertainment companies to create, market and distribute new works.221 They suggest that three conditions need to be met in order to conclude that file-sharing hurts social welfare: (1) original works and copies exchanged on P2P networks must be substitute goods, so that free file-sharing reduces the sale of copyrighted goods; (2) artists and entertainment companies must be unable to make money from complement sales (i.e otherwise than from their traditional music sales) and
(3) the reduction of income should be an element sufficiently important for artists to reduce their creative activity.222
With respect to the first condition, it is worthwhile to note that the very figures put forward by the music recording industry to justify its legal actions have been challenged in many instances.223The reports, which tend to consider that a free download equates a lost sale, have been criticized for the simple reason that most people would not buy all the music they download if they had to.224 In a 2005 report, the OECD indicated that it was very difficult to establish a causal relationship between the drop in music sales and file sharing.225 In 2007, the Financial Times reported that according to the OECD the international trade losses due to counterfeiting and piracy were at a level between 1/3 and 1/5 of the higher figures claimed by the industry in 2005.226 Furthermore, the examination of major studies pertaining to the effects of P2P on the industry profitability
221 Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88. 222 Ibid. at 7 223 See e.g. Waelde & MacQueen, “From Entertainment”, supra note 8 at 270; Gervais, “File-Sharing”, supra note 26 at 44; Adams & Brown, supra note 26. 224 Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88 at 4. 225 OECD, “Music Report 2005”, supra note 7 at 76. 226 Williamson Hugh, “Forgery trade losses ‘under $200bn’” Financial Times (7 May 2007), online: Financial Times
49 demonstrates very different results, either positive or negative or even neutral.227In a precedent study, Oberholzer and Strumpf have concluded that the file-sharing effects on sale were statistically indistinguishable from zero which was clearly inconsistent with the claim that file-sharing is the primary reason for the decline in music sales.228 On the other hand, Blackburn has concluded that the effects of file-sharing are not uniform among artists and that there are in fact two competing effects on sales that are likely to vary across artists. 229 All in all, even if the figures of the music industry were correct, one must acknowledge the fact that despite the billions of dollars allegedly lost over the last ten years due to file-sharing, this industry is still making a profit. It is logical to assume that file-sharing may be not as harmful as the music industry is striving to make the public believe. Furthermore, Oberholzer and Strumpf explain that even though file- sharing reduces the profitability of the industry, this would not necessarily imply a reduction of the incentive to create. A sale reduction is a necessary element but not sufficient to conclude that file-sharing undermines creativity.230 The two other conditions must also be realized.
With respect to the second condition, Oberholzer and Strumpf explain that the demand for concerts has increased due to file-sharing. Globally this complement source
227 Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88 at 17. 228 Oberholzer-Gee Felix & Strumpf Koleman, “The Effect of File-Sharing on Record Sales: an Empirical Analysis” (2007) 115 Journal of Political Economy 1, online: UNC
50 of revenue translates into an overall increase of income for artists.231 They state that the
“[re]cord companies may find it more difficult to profitably sell CDs, but the broader industry is in a far better position”.232In this respect it is worthwhile to note that the music industry endeavours to emphasize the negative effects of file-sharing but speaks very little, if at all, of the positive effects that downloading and free file-sharing has had on many other industries including electronics devices and communications infrastructure.233 Neither do they mention that the public’s interest in music has never been greater and that the situation for music publishers is flourishing. Canada for instance is cited by the IFPI among the 10 priority countries in the world (Brazil, China,
Greece, Indonesia, Italy, Mexico, Russia, South Korea and Spain) where urgent action is needed to adapt Copyright laws to the threat of the digital era and to efficiently combat copyright infringements.234Yet, in 2004, Canadian Collective Administrations,
CMRRA, SODRAC, CSI, SOCAN and CPCC (author/publisher share) collected about
$290 million in royalties which represented an increase from approximately $249 million in 1999.235 Moreover, in 2006 the Canadian sound recording and music publishing industries were reported to have maintained profitability for the second consecutive year, and that the music publishing was the only industry able to achieve true revenue
231 Ibid. at 20-21, they conclude that the “income from the sale of complements can more than compensate artists for any harm that file sharing might do to their primary activity”. 232 Ibid. 233 It is said that it is the desire of consumers to download entertainment and information which has provoked the growth of the broadband Internet accesses, and in turn the growth of communication infrastructure (wireless networks, Internet communications), electronic devices, video-sharing site such as YouTube or MySpace, see Hartley, supra note 12.; see also Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88 at 1. 234 IFPI, “Piracy Report 2006”, supra note 1. 235 Audley Paul & Associates Ltd. and Circum Network Inc, “A Statistical Profile of The Canadian Music Publishing Industry”, (Report prepared for the Canadian Music Publishers Association and the Professional Music Publishers Association, 13 December 2005), online: Music Publishers Association
51 growth in 2006.236 An independent report states that despite the continued difficulty in the recorded music market due to the decline of physical sales, the global music publishing market is indeed doing very well.237 Furthermore, the industry is expected to grow in value by an average of 4% annually between 2005 and 2013.238The reason for this continued growth is said to rest on the way in which the music publishing industry has managed to divert its energies from the decline in physical sale into building other revenue streams.239 It is worthwhile to note that the "big four" music groups that control about 70% of the world music market as of 2005 all have their own publishing arm as well.240 In conclusion, an approach which examines only one side of file-sharing on the music market, i.e. CDs sale, is skewed at best. Oberholzer and Strumpf argue that
“[f]ocusing exclusively on traditional streams of revenue to arrive at a sense of how new technology changes welfare will typically be misleading.”241
With respect to the third condition, Oberholzer and Strumpf state that the evidence suggests that financial incentive plays a very small role in the production of new works and so that it is very hard to say that a weaker protection of copyright due to file-sharing has had negative impact on an artist’s incentive to create.242 First, success is rare for musician.243 Second, even if one’s album is very successful it is very difficult
236 Statistics Canada, Sound Recording and Music Publishing (18 March 2008), online: Statistics Canada
52 for an artist to earn substantial money from just one album due to the particular nature of the contracts signed with the records companies.244 On an average price of $18 for the sale of a CD, the recording artist generally receives 7% of this price, 12% being the upper limit.245 Musicians are not even paid this amount until they have recouped all expenses (i.e. the advance which have been made by the record company for the recording, the marketing and the distribution of the album).246 If an earlier album did not sell well and did not cover the advance, the contract generally provides that the record company will deduct the difference from the revenue of future albums.247Third, the evidence shows that the release of new albums has more than doubled since the beginning of file-sharing.248 Oberholzer and Strumpf conclude that it is therefore unlikely that file-sharing has discouraged artistic creation. Others argue that it is indeed the music recording industry business model which may well limit the diversity of creation and the dissemination of works.249
In conclusion, there is a good case for reconsidering, or at least nuancing, the socially harmful characteristic of file-sharing which has been put forward by the music industry in an effort to justify its long lasting fight against this new technology and its
244 Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88 at 23. 245 Fisher, supra note 26 at 19-20; see also OECD, “Music Report 2005”, supra note 7, at 43 “table 5” indicates that the artist royalty rates are estimated at between 5.1-10% of total royalties, whereas recording company royalties (independently of any association which they may have to distribution and retailing) are estimated at between 28.8%-39% of total royalties. 246 Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88 at 23; Passman Donald S., All You Need to Know about the Music Industry (New York: Simon & Schuster, 1997) [Passman] at 99-100, he exposes that the recording contracts between artists and recording companies are generally one-sided in favour of the recording company; 247 Ibid. 248 Oberholzer & Strumpf, “File-Sharing and Copyright”, supra note 88 at 26. 249 Fisher, supra note 26 at 80 – 81; see also Litman, “Digital Copyright”, supra note 26 at 168 ff.
53 users. Perhaps the more useful insight that one can draw from these important controversies is a greater understanding of the potential competing forces at work.250
Chapter 7 Framework for a New Approach
7.1. Networked Information Society, Decentralization and Missed Opportunities
Reviewing the main features of last two decades in the evolution of copyright protection in response to the challenges of the digital era has shown that the different solutions proposed or implemented thus far have failed to reduce the scale of copyright infringements which continue to be in constant growth.251This exercise has also shown that these solutions lead to disproportionate results in view of the interests at stake. All the means are good to protect copyright including impinging on fundamental public policies such as the promotion of innovation and competition, many constitutional rights and freedoms of users together as fundamental principles of law in democratic societies.252 This evolution is extremely worrisome. Moreover, theses responses are even more questionable since, as it has just been exposed, the harmful characteristic of file-sharing itself is subject to important controversies.
250 For this insight as to the existence of competing forces, see Liebowitz, “Topsy-Turvy”, supra note 220 at 17, however, the author concludes that in the case of file-sharing the net impact of these competing forces is more likely to be a negative than a positive one; for an example of the competing forces, on can consider the recent declaration of Mr Sherman, President of the RIAA, to a journalist of the Globe and Mail that five years after the RIAA started suing thousands of individuals this educational strategy has eventually succeeded in constraining the growth of the P2P services which was directly following the expansion of the broadband penetration (at the time, the ISPs publicly advertised for P2P services in order to encourage individuals to subscribe to their broadband connections). Mr Sherman explained that these measures have ultimately allowed the music recording industry to put in place its own digital market which represents today 30% of its revenues, see Interview of Mr. Cary Sherman, President of the RIAA, by the Globe and Mail, Hartley, supra note 12; see also IFPI, “Digital Music Report 2009”, supra note 4. 251 IFPI, “Piracy Report 2006”, supra note 1; IFPI, “Recorded Music Reports 2000-2008”, supra note 2. 252 For an analysis of the consistency of the French solution with respect to European Convention on Human Rights and the Electronic Commerce Directive, see Edwards, “Copyright Cops”, supra note 24.; Adams & Brown, supra note 26.
54
The decentralized structure of the digital era has offered considerable opportunities for exchange and many possibilities for new comers to reach a worldwide audience. The evolution of copyright protection has counter-intuitively worked on limiting and monitoring the use of copyrighted works.253 Some have predicted that “[a]ttempts to use copyright law to preserve 20th century business models in the face of disruptive new technologies, including the personal computer and the Internet, are not sustainable in the long term”.254 Martin Kretschmer states that the legislative attempts focused on “the industry’s right to say NO in the on-line environment” are fundamentally ill-conceived and bound to fail.255 Yochai Benkler indicates that our media culture is still governed by decisions which date from the beginning of the 19th century.256 He explains that the stakeholders of the industrial information economy are using all means available to them -lobbying efforts to impact international treaties and national legislations together as litigation- to maintain and control the old production structure on which they have built their empires.257 The music recording industry is indeed a perfect example of a former industry whose business worked on concentration and control. It has exercised an historic control over reproduction, distribution and promotion of musical works in the
253 Adams & Brown, supra note 26, they explain how the interactions of new media technology capabilities and consumer and business behaviour have produced counterintuitive responses. 254 Adams & Brown, supra note 26 at 4. 255 Kretschmer, “End of an Era”, supra note 73: he argues that a small royalty percentage on content traffic revenues generated for IPSs and telecommunication firms would have been the obvious legal innovation. The author predicts that we are arriving at the end of the Copyright expansion and that “[b]y advancing the proprietary conception of copyright to its limits, the digital agenda is leading to a re- examination of the premises of copyright”. He concludes that “[w]ithin a generation, the laws of the digital agenda will be seen as a “temporary aberration.” (at 8) 256 Benkler, supra note 30 at 1266; see also Edwards, “Cyberspace”, supra note 28 at 366, she explains that our legislations have not fundamentally changed and that we assist every day in every part of the world to new attempts to regulate certain aspects of the information society; see also Litman, “Digital Copyright”, supra note 26 at 72 ff.: she indicates that our copyright law is still the result of a law designed a century ago by and for the copyright affected industry with little regard for the interests of the public. 257 Benkler, supra note 30 at 1272.
55 form of sound recordings.258 It has imposed the conditions of the consumption of music and has been deciding who was going to be the big hit. Logically, with the advent of the
Internet, MP3 format and P2P networks, this industry found its long-standing and profitable source of revenue brutally threatened.259Considering these obvious challenges, its initial combat to protect copyright in this new environment seemed a priori perfectly legitimate. From a legal point of view, copyright law typically provides the copyright holder with the right to prevent others from copying and distributing their works to others without authorization. From a business point of view, the music industry cannot be blamed for having sought to preserve its position and revenue by all available means. Private companies are primarily designed to make profit. They do not have any immediate interest in finding a balanced solution with the new stakeholders of the digital era.260 Enhancing the public welfare is not their main concern, but the concern of governments and legislatures. If it only depended on the music recording industry, it is doubtful that the MP3 format and P2P technology would ever have come to light.261 In
1999 Lessig suggested that the real issue was not whether the law could help copyright protection but whether the protection was too great.262 Some argue that the record companies and motion picture studios have essentially used this fight against P2P networks as a pretext to assert their exclusive control over works in pushing for stronger
258 Hagen & Engfield, supra note 100 at 484. 259 For the story of Napster, see Hartley, supra note 12. 260 See Litman, “Sharing and Stealing”, supra note 26 at 34. 261 See interview of Matt Mason, author of The Pirate's Dilemma by the Globe and Mail ,“ Tossell Ivor, “The Download Decade Part 3 : If Piracy Is Wrong, Why Does It Feel so Right?”, The Globe and Mail (25 May 2009), online: The Globe and Mail Technology
56 protection of copyright law at all legislative levels.263Indeed, the music industry has focused its public discourse on the threats to copyright in the digital era, but spoken very little of the great opportunities in terms of incomparable source of revenues if they succeed in asserting complete control over copyrighted works. So far the music industry has successfully asserted that every time a work is made available over the Internet, a person has: (1) reproduced the work, (2) distributed the work, and (3) publicly performed or displayed the work (or communicated the work to the public by telecommunications).264 This means that the single act of “posting a copyrighted work on the Internet” implies obtaining different licences for all these different rights (often owned by different entities)265 meaning multiple sources of revenue. This situation led
Jessica Litman to argue that the reproduction right, which is at the centre of the copyright system, is simply unsuitable in the digital era and that a new approach to copyright must be found.
Examining the evolution of copyright over the last two decades suggests that indeed legislatures have been misled by the lobbying efforts of the entertainment industries, especially the music recording industry. Our society has experienced an industrial, technological and social revolution in the way information and culture is henceforth accessed, consumed and distributed which upset the existing copyright balance and the copyright system. It belonged to the legislatures to question whether in the face of such fundamental transformations the reinforcement of the current system would fulfil the copyright purposes better than any other system or whether another
263 see Rimmer, supra note 163 at 122. 264 Litman, “Sharing and Stealing”, supra note 26. 265 Ibid.
57 solution was to be found. It seems that at no time have the legislatures approached the issue under this perspective. Instead, they have been struggling to maintain the former structure by protecting an old business model. Benkler indicates that “[a]s economic policy, letting yesterday’s winners dictate the terms of economic competition tomorrow is disastrous. As a social policy, missing an opportunity to enrich democracy, freedom, and equality in our society, while maintaining or even enhancing our productivity, is unforgivable”.266 It is about time for us to grasp the great opportunities afforded by these technological, economic and social changes and to design the rules that will shape the environment that we will be living in.267 A new model for a new age is obviously needed.268
7.2. Necessary Shift in the Approach towards Piracy :
A Cultural Trend rather than an Underground Phenomenon
It is common knowledge that legislatures should initiate their legislative reform by considering the policy underlying the legislation.269 Professor Garon has rightly suggested that “unless there is a valid conceptual basis for copyright laws there can be no fundamental immorality in refusing to be bound by them”.270 Professor Lessig exposed that both in real world and in cyberspace behaviours are regulated by four types of constraints: the law, the social norms, the markets and the architecture or the
266 Benkler, supra note 30 at 1249. 267 Ibid. at 1266. 268 See Adams & Brown, supra note 26. 269 See Scassa, supra note 36 at 41. 270 See Garon, supra note 131 at 1282-1283.
58 code of the physical world.271 Depending on the policy in question, these four constraints will work together or in competition with one another.272 To understand a policy, one needs to understand how these modalities interact.273 In the same vein,
Professor Garon argues that the future of copyright will depend on technological innovation, legal constraint and social norms and that in this context “[s]ocial acceptance of copyright’s legitimacy is as critical to its infrastructure as are the relevant laws and technology”.274 He states that the potential for the public to lose faith in copyright protection threatens copyright far more than the activity of piracy itself.275
Social adherence and moral acceptance are prerequisites for Copyright to play its role as a social and economical institution and are essential to its viability.276 Their roots lie in the concepts of justice and fairness.277 Copyright cannot simply survive if it relies simply on punishment.278 Jessica Litman indicates that “[p]eople don’t obey laws that they don’t believe in”,279 whereas John Perry Barlow states that "[n]o law can be successfully imposed on a huge population that does not morally support it and possesses easy means for its invisible evasion."280 Acknowledging that sharing has become the norm on the Internet, Daniel Gervais concludes that as long as policy
271 Lessig Lawrence, “The Law of the Horse: What Cyberlaw Might Teach” (1999) 113 Harv. L. Rev. 501 at 507. 272 Ibid. 273 Ibid. at 510. 274 Garon, supra note 131 at 1284. 275 Ibid. at 1282 -1283. 276 Ibid. at 1282-1284.; see also Stallberg Christian G, “Towards a New Paradigm in Justifying Copyright: An Universalistic-Transcendental Approach” (2007-2008) 18 Fordham. Intell. Prop. Media & Ent. L. J. 333. 277 See Garon, supra note 131 at 1282 -1283. 278 Ibid. at 1283-1284. 279 Litman, “Digital Copyright”, supra note 26 at 195. 280 Barlow John Perry, "The Next Economy of Ideas" Wired Magazine (October 2000) online: Wired
59 makers insist on making socially accepted and embraced behaviours illegal, the technology will adapt to circumvent the law or make enforcement more difficult and more costly.281
It appears therefore that in considering the underlying goal that copyright seeks to achieve, legislatures cannot be dispensed with a clear understanding of society’s needs and the public views on “creativity, property, economic efficiency, or fundamental justice”.282 The next section explores the possible reasons of this cultural trend toward piracy as this understanding is necessary for the elaboration of an adequate response.283
7.3. Cultural Trend towards Piracy: The Combination of Factors
Since the beginning of the Internet, scholars have questioned the reason why a person’s perception of what is good or bad differs in the online environment from the offline environment. The misconception of complete anonymity on the Internet together with the feeling of a lack of legal consequences due to the borderless nature of the cyberspace has long been put forward as the main reasons why so many people are illegally downloading music. It is hard to believe however that several tens of millions of people would simply turn into criminals if they were merely sure not to be caught. In addition, the history of the last decade of prosecution against file-sharing services and file-sharers has shown not only that there is not such thing as anonymity on the Internet, but that these illegal file-sharing activities could lead to serious judicial condemnations.
281 Gervais, “File-Sharing”, supra note 26 at 48 ff. 282 See Garon, supra note 131 at 1282-1283. 283 Ibid.
60
If, as it appears, a whole generation of young adults shares the moral intuition that freely downloading songs from the Internet is fine, there may be other reasons to explain the lack of adherence to the legal concept of copyright.284In this respect, reviewing major copyright cases in the North America and in Europe has shown no difference in the public stance towards copyright, and so the different concepts of copyright’s purpose seem equally incapable of explaining the underlying ethic of the public attitude towards copyright.285
The simplicity and the rapidity of digital reproduction and its world-wide distribution coupled with the intangible form of intellectual property and its nonrivalous nature286 have certainly played a major role in fuelling the misconception that there is nothing wrong with downloading and distributing copyrighted works on the Internet. For a whole generation of young adults that grew up with the Internet, this new medium is an integral part of their everyday life. No doubt they have gladly welcomed the advent of file-sharing, largely because this was an extraordinary easy way to consume a wider variety of music from the comfort of their own homes. In addition, not only can the copyrighted works be reproduced and distributed an unlimited number of times at nearly no cost,287 stealing an intellectual work does not feel the same as stealing a physical work.288Moreover, intellectual works are nonexclusive which means that they are not consumed by their use and do not preclude others from possessing or using them as
284 Fisher, supra note 26 at 3. 285 See also Garon, supra note 131 at 1304. 286 “Nonrivalvous” means that it can be shared with an unlimited number of people without diminishing its value, Garon, supra note 131 at 1288. 287 See Hettinger, supra note 43; see however, Garon, supra note 131 at 1293, Professor Garon demonstrates that the intangible nature of copyright alone does not provide significant insight with respect to copyright normative acceptance. 288 Hettinger, supra note 43 at 35.
61 well.289 Professor Garon explains that “[…], the logical assumption is that copying a nonrivalous, nonexclusive work can cause no harm since the copied work is, by definition, already fully available to every potential audience member in a manner that does not diminish the value to either the copyright holder or the consumers of the work.”290
Furthermore, the influence of the different private copying regimes should not be undermined.291 Private copying regimes in Europe and in Canada have generally come up as the solution to the impossibility of enforcing copyright in the private sphere of users.292 To compensate the copyright owners however, a small levy has been placed on the sale of physical media enabling the digital copying. Most individuals however do not know of the existence of such levy which is supported at the wholesale level. These systems may have thus forged the misconception that what happens within the walls of one’s home is simply private and does not concern anyone else, in particular the copyright holders. In addition, the private copying regimes may differ from one country to another. Some acts, legal in certain countries, are simply illegal in others. Given the borderless nature of the Internet it is increasingly difficult to determine what is right from what is wrong. Moreover, the often complex and counter-intuitive application of certain private copying regimes, such as the Canadian regime for instance,293 do little to
289 Ibid. at 34 290 Garon, supra note 131 at 1331. 291 Ibid. at 1356 ff. 292 Prof. Hugenholtz Bernt, Dr. Guibault Lucie & Mr. van Geffen Sjoerd, "The Future of Levies in Digital Environment," Final Report prepared for the Institute for Information Law (March 2003), online:
62 mitigate the public’s confusion as to what is forbidden from what is allowed with respect to private copying. Similarly Professor Garon states that the Sony Betamax case, which determined the norm for home copying, has fuelled this misconception in holding that time-shifting was not equal to property theft.294 This scholar argues that the ambiguity of the regulations further undermines the legitimacy of copyright law.295 Clarification of the policy on personal copying seems to be necessary for the public’s understanding of copyright law,296 especially in the online environment. Jessica Litman provides another convincing argument which does not contradict the precedent. She argues that the public stance towards piracy can be explained by the public belief that copyright law contains a distinction between commercial and non-commercial behaviour and that only the former would be prohibited by copyright legislation.297
This lead to the disturbing result, discussed in the context of the Cyberlaw class taught by Professor Katz in Spring 2009, that if X buys an illegal copy of a CD on the street and lends it to Y, and if Y copies it on a blank CD subject to a levy, his copy would be perfectly legal (the source of the copy being immaterial in Canadian Copyright Law). On the other hand, if Y buys a CD in an official CDs shop and makes a copy on his computer, then this copy is illegal, see art. 80 ff.Copyright Act, R.S.C. 1985, c. C-42; BMG FCA, supra note 186 at paras. 40–41; Canadian Private Copying Collective v. Canadian Storage Media Alliance (2004), 2004 FCA 424, [2005] 2 F.C.R. 654 [CPPC] (the Board was not authorized to establish a levy on the memory embedded in MP3 players as they do not fall within the definition of an “audio recording medium” of section 80 of the Copyright Act; leave to appeal against this decision to the Supreme Court has been refused). 294 See Garon, supra note 131 at 1330; Sony Betamax, supra note 37 at 450 n.33, Sony, manufacturer of the VCR, was sued for “contributory infringement” because there was evidence that this device could be, and was, used to copy broadcasts and films shown on TV. The US Supreme Court held that Sony was not liable for contributory infringement if, as in this case, the defendants made and sold equipment capable of both infringing and substantial non-infringing uses (such as recording a TV show for viewing at another time = “time shifting”).The Court held in particular that: [t]heft of a particular item of personal property of course may have commercial significance, for the thief deprives the owner of his right to sell that particular item to any individual. Time-shifting does not even remotely entail comparable consequences to the copyright owner. Moreover, the time-shifter no more steals the program by watching it once than does the live viewer, and the live viewer is no more likely to buy prerecorded videotapes than is the time-shifter. Indeed, no live viewer would buy a prerecorded videotape if he did not have access to a VTR. 295 Garon, supra note 131 at 1356. 296 Ibid. at 1357 ff. 297 Litman, “Digital Copyright”, supra note 26 at 180.
63
Another relevant argument which has been put forward is the idea that too much emphasis may have been given to the economic incentive to create. Professor Garon posits that the insistence on the main copyright’s justification may indeed have weakened the legitimacy of the copyright holders’ claim. 298 The public is easily tempted to think that as soon as a work has been minimally compensated it should fall into the public domain.299 Also, the relationship between creation and the incentive to create is not clear for a significant number of works.300 In the sector of the music industry in particular the high price paid to copyright owners does not necessarily equate with the same proportion of revenue for the artists and we have seen that it is indeed difficult to hold that file-sharing undermines the incentive to create and distribute new works.301
Finally, it has been suggested that the public stance towards copyright may stem from the use of copyright by the strong corporations.302 Professor Garon speaks of an
“accepted norm rejecting corporate greed”.303 The music fans share the feeling that the music recording industry has too long abused its relationship with both consumers and artists.304 Indeed, with respect to the situation of the artists, the contracts signed with the music industry have generally been one-sided in favour of the records companies due to the lack of bargaining power on the part of the artists in the pre-digital networked
298 Garon, supra note 131 at 1281. 299 Ibid. 300 See Scassa, supra note 36 at 41 ff., 53: the author gives inter alia the example of academics who are salaried and who write for promotion rather than for royalties; she also generally refers to any kind of works created in the course of employment. 301 Fisher, supra note 26 at 54 –59; see above chapter 6 at 47. 302 See Garon, supra note 131 at 1282. 303 Ibid. Ultimately the author proposes a system which would create a presumption in favour of free use of works published at least twenty years prior to the unauthorized use if the copying is non commercial and if the copyright did not object to it or opted out. He argues that such system would expand the public availability of works without undermining the economic interests of the copyright owners (at 1357 ff.). 304 Ibid.
64 era.305It can be argued that this situation is at odds with the primary role that the artists play in developing culture, together with the very purpose of providing incentive to the author by the means of a just reward.306Fisher suggests that the business model of the music recording industry may indeed limit the diversity of creation and the dissemination of work.307The digital era offers great new possibilities to cut down the cost of the usual system of reproduction and distribution.308This situation should have allowed either an increase in the amount allocated to the creator or a substantial reduction in the price paid by consumers.309 In practice, none of the above took place. The copyright holders, more specifically the investors, seemed unwilling to share with the artists and the public the benefits brought about by the digital era.
It can thus be argued that the combination of these different elements creates a
“normative culture”310 where theft of intellectual property is no longer perceived as something illegal or unethical. Given this conclusion, it is more than doubtful that the solution to the loss of public faith and adherence to copyright will be found in strengthening copyright’s protection at the expense of the users. On the contrary, it seems more probable that these attempts to increase copyright protection harm the cause of copyright itself in encouraging consumers to turn to alternative unauthorized mechanisms of distribution. Moreover, it is even less probable that such a system will promote creativity. The combat of a powerful industry seeking to maintain its hegemonic
305 See above chapter 2.2 and chapter 6 for more details about the economical situation of the artists; see generally Passman, supra note 246; see also; Fisher, supra note 26 at 19-20; OECD, “Music Report 2005”, supra note 7 at 43 “table 5” ; Hagen & Engfield, supra note 100 at 484 ; Litman, “Digital Copyright”, supra note 26 at 168 ff. 306 Hagen & Engfield, supra note 100 at 483-484. 307 Fisher, supra note 26 at 80 – 81. 308 Ibid. at 18-24 309 Fisher, supra note 26 at 24. 310 Garon, supra note 131.
65 position runs afoul the expectations of the public within the new architecture of the digital era.311 As we have seen, it is the divergence between the legal protection and the public expectation that drives “the worst of the modern Internet piracy rhetoric” and that widens the gap between the Internet users and the copyright owners.312
In order for creators and users to fully benefit from the digital age and for new business models to flourish, copyright must regain its normative force. Jessica Litman explains that if the public is expected to abide with copyright rules, those rules must be designed with due consideration for public interest.313She further states that “[…] instead of trying to change the minds of millions of people, instead of trying to persuade them that a long, complicated counterintuitive, and often arbitrary code written by a bunch of copyright lawyers is sensible and fair, why don’t we just replace this code with a set of new rules that more people than not think are sensible and fair?”.314
7.4. Crucial Elements for a Better System
The examination of the last two decades of evolution of copyright protection has highlighted the flaws and the problematic consequences of these ongoing attempts to strengthen the position of the copyright owners by opposing social and technological changes. It has also permitted the determination of which elements are crucial to users and, in turn, to the sustainability of copyright itself in the online environment. It is
311 Litman, “Digital Copyright”, supra note 26 at 14, the author suggests that our expectations of freedom of expression will likely collide with an enhanced copyright law but that copyright law would certainly loose this battle. 312 Garon, supra note 131 at 1339; see also Gervais, “File-Sharing”, supra note 26 at 48-50, he discusses the work of Posner showing that an increasing enforcement of tax rules by the government had the paradoxical and counterintuitive corollary of reducing social compliance. He suggests that the enforcement of such legal norm can put the rule of law at stake (at 50). 313 Litman, “Digital Copyright”, supra note 26 at 72 ff. 314 Ibid. at 116-117.
66 certainly possible to do less harm in promoting social welfare. A new legal framework enabling creators and consumers to fully take advantage of new technologies is the obvious response. As many have argued, P2P services are present and are not likely to disappear. This technology has greatly improved the dissemination of works in proving a cheaper and more efficient system of distribution. In this respect, file-sharing can potentially better achieve the purposes of copyright than the current system which works better when products are scarce and their distribution controlled.315 The biggest flaw of P2P services however is that they do not enable creators to be compensated for their works. Considering all these elements, a growing number of scholars are urging for the adoption of a new system which would legitimize file-sharing and allow artists to get paid.316 The idea is to build a system that would be inspired by the architecture that has allowed the Internet to prosper as an extraordinary rich space of information.317 If all these new alternatives aim at encouraging the widest consumer-to-consumer distribution (some making a distinction between commercial and non commercial use,318others distinguishing among musical files and other type of copyrighted material),319 the main distinction rests on the best way to compensate authors and/or other copyright owners. Essentially, two main mechanisms, currently used in most
315 See Litman, “Sharing and Stealing”, supra note 26 at 34. 316 Netanel, supra note 26; Gervais, “File-Sharing”, supra note 26; Fisher, supra note 26; Ku Raymond Shih Ray, “The Creative Destruction of Copyright: Napster and the New Economics of Digital Technology” (2002) 69 U. Chi. L. Rev. 263; Litman, “Sharing and Stealing”, supra note 26; Edwards, “Copyright Cops”, supra note 24 ; Electronic Frontier Foundation, "A Better Way Forward: Voluntary Collective Licensing of Music File Sharing," online: EFF
67 copyright systems, have been proposed with some variations in their implementation.320
Some favour a compensation system which would be financed by a tax or a levy taken on the sale of devices or services whose value would be enhanced by the use of
P2P.321 Others would opt for either a compulsory or a voluntary collective license paid by fans or intermediaries.322 The main difficulty with this last approach is the enforcement of licensing fees and the related cost of such.323In both systems it remains also to determine how the revenue collected will be distributed among artists. The music industry has not particularly welcomed these proposals invoking all kinds of reasons.324
Essentially, the industry argues that a levy would not be felt by users and thus lead to the misconception that paying copyright owners is unnecessary; it further argues that compulsory licensing regime is unacceptable because it would imply that the
government sets the price for music whereas a voluntary collective licensing is an unfair
320 Litman, “Sharing and Stealing”, supra note 26 at 34-35. 321 See especially, Fisher, supra note 26, the author suggests that copyright owners register with the Copyright Office and receive a file name that will be used to track the distribution and consumption of the works. Artists would receive compensation proportionate to the use of their works by the way of a tax on devices and services that people use to gain access to the works; Netanel, supra note 26, he suggests to allow consumers to engage in unrestricted non commercial use of works while imposing a non commercial use levy to compensate copyright owners on the sale of products and services whose value is enhanced by peer-to-peer file sharing; Edwards, “Copyright Cops”, supra note 24; see also Ku, supra note 316, at 311-324, Professor Ku believes that the current copyright law is not adapted to digital distribution. He suggests limiting the current law for analogue distribution and replacing copyright in the online environment with a new system allowing consumers to engage in non commercial online distribution. Only in a second time, he proposes to impose a levy on sales of Internet service, and other devices if the revenue from analogue sources appears to be insufficient to support the creation and distribution of music. 322 See especially, Gervais, “File-Sharing”, supra note 26, he suggests that a pay-per download model seems good but is in fact not consistent with the new social norm of sharing. He suggests that it would be better to implement a license (monthly fee) applicable to musical content, excluding other types of audiovisual content whose modes of consumption and distribution are different from those of music (at 70); EFF, “Better Way Forward”, supra note 316, the system they propose would encompass all music copyright owners voluntarily forming a licensing collective that would offer a blanket license for p2p dissemination of their works on a per-person, per-month basis and that would distribute the license fees to copyright owners. Users would have an incentive to take the license in order to avoid the legal threat of otherwise being sued for infringement and that copyright owners would continue to be able to bring enforcement actions against p2p users who do not take a license. 323 Hagen & Engfield, supra note 100 at 507. 324 See EFF, “Better Way Forward”, ibid.; see also, Litman, “Sharing and Stealing”, supra note 26 at 33.
68 solution as it would simply make some people pay for the others that would continue to freely download or upload the music.325As stated above (Chapter 7.1), the music industry has in reality no immediate interest in finding a solution that might cause it to loose control over the music market in encouraging the use of P2P. Jessica Litman proposes a statutory voluntary blanket license system in which the default rule would be sharing so as to encourage artists to share their works.326 The possibility to opt out from the system would be provided but made less attractive.327 In my view, one relevant aspect that she insists on is building a system which generates and actually distributes the revenue to the creators of music.328 Copyright reform should indeed be designed so as to avoid rewarding unnecessary intermediaries who have dominated the former distribution system and allow new innovative intermediaries to compete in offering new services.329 To achieve that end, Jessica Litman suggests assigning the right to collect the revenues of the license directly to the artist creator rather than to their intermediaries. It then belongs to the artists to redistribute their income according to the different contracts they would have signed with the intermediaries. In conclusion, this approach allows artists to be restored in their rights and presents the advantage of recognizing their primordial importance for the development of culture. This paper does not intend to further discuss the qualities and the flaws of each of these compensation systems, neither to determine which one should be adopted as this exercise would clearly exceed the scope of this thesis. This paper simply seeks to stress the existence
325 Litman, “Sharing and Stealing”, supra note 26 at 33 and 42. 326 Ibid. at 38 ff. 327 Ibid. 328 Ibid. at 39. 329 Ibid.
69 of these possible solutions as a better alternative to the current system as they all seek to encourage the widest unrestricted dissemination of works among a wider audience while allowing artists to be compensated. In choosing the new legal framework, policy makers shall thus make sure that the system they opt for will best encourage a broader dissemination of a wider variety of music, enable artists and music fans to benefit from the reduction of costs associated with the reproduction and the distribution of digital works in the era that we live (i.e. match consumers’ expectations with respect to the price of digital music with an amount that they would consider fair and reasonable and better compensate the artists in eliminating the unnecessary intermediaries),330promote an unrestricted consumer use of works and consumer-to-consumer exchanges and limit at best any invasion of privacy of users or other impingement on fundamental rights and freedoms. Finally, they shall ensure that the new system remains flexible enough to allow any new innovative intermediaries offering any added-value services to
331 economically flourish and compete in the new environment.
This is obviously a challenging task, but as we have seen there is simply no valid justification for allowing creators and the public to miss further opportunities to meet and enhance our cultural diversity any longer. It is time to take full advantage of the decentralized nature of our new environment and to grasp this chance to enhance social welfare.
330 Jessica Litman suggests the interesting idea that consumers are providing valuable services in disseminating a wider variety of works and that they should be thanked and compensated for that activity. She argues that the fees consumers will pay to use in an unrestricted manner P2P services do not need to substitute the income of the intermediaries they are replacing; see Litman, “Sharing and Stealing”, supra note 26 at 42. 331 Ibid. at 38.
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Conclusion
For many years now copyright reform has been and continues to be the hottest topic on the digital agenda of many governments. This demonstrates that the answer to the question of the appropriate level of protection of copyright in the digital environment is far from being straightforward. The examination of the last two decades of development of copyright protection in response to the digital challenges, specifically to file-sharing, in the context of the music industry has shown, however, that this debate has been skewed by a struggle for power on the part of some stakeholders of the old industrial information economy. This paper has essentially endeavoured to demonstrate that the main approach among policy makers has been misguided by the lobbying effort of the strong entertainment industries, foremost the music recording industry. These attempts to strengthen copyright in the face of new technologies were merely aimed at maintaining the hegemonic position of an old industry whose interests are no longer aligned, in the digital era, with those of the creators and of the public, not to mention with the ultimate goals of copyright. Our society has been experiencing an industrial, technological and social revolution in the way information and culture would be henceforth accessed and consumed which mandates a new approach to copyright protection. The music industry has spent considerable time and a massive amount of money in public campaigns and litigations to oppose the new technology and the social change that it brought with it. The different strategies adopted under the cover of protecting creativity332have not only proved to be a global failure, but also to be grossly disproportionate in view of the other interests at stake. They have involved unjustified
332 IFPI, “Piracy Report 2006”, supra note 1 and accompanying text.
71 encroachments on fundamental values in our modern society, such as right to privacy, freedom of expression, access to information, promotion of creativity, innovation and competition. Ten years after the first P2P service came to light, the ongoing copyright war is a loosing battle for everyone. A large part of the population is maintained in illegality, while creators are not being compensated. This paper has suggested that policy makers should have asked whether the current system best promotes the dissemination of works while ensuring a just reward for the artists or whether an alternative mechanism would achieve better results. It has argued that a new approach to copyright protection that would better match public expectations and better promotes the dissemination of works is urgently needed for the sustainability of copyright itself in the online environment. A legal framework enabling authors and consumers to legally interact by using the new technologies available while re-empowering artists with the right to be compensated for their works would meet these two requirements. In this respect, collective licensing or implementations of a levy are solutions that must be seriously considered by policy makers in order to allow creators and consumers to fully benefit from the great innovations and advantages of this new era, in particular from the worldwide Internet’s distribution networks. Solutions for a better way forward are certainly out there, but they all require weighing the different forces at work and the acceptance of a redistribution of power and revenues between the old and the new, more numerous, stakeholders.
72
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Kelly v. Arriba Soft Corp., 280 F.3d 934 (9th Cir. 2002), withdrawn 336 F.3d 811, 2003 (9th Cir. 2003) Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 259 F. Supp.2d 1029 (C.D. Cal. 2003) Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 380 F.3d 1154 (9th Cir.2004) Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) [Grokster] Recording Industry Association of America, Inc. v. Verizon Internet Services, Inc., 351 F.3d.1129 (D.C. Cir. 2003) Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) [Sony Betamax] TeeVee Toons, Inc, v. MP3.com, 134 F. Supp. 2d 546 (S.D.N.Y. 2001) UMG Recordings, Inc. v. MP3.com, Inc., 109 F. Supp. 2d 223 (S.D.N.Y. 2000) Universal City Studio, Inc. v. Reimerdes, 111 F.Supp.2d 294 (S.D.N.Y. 2000) Universal City Studio, Inc. v. Reimerdes, aff’d sub nom Universal City Studio v. Corley, 273 F.3d 429 (2d Cir. 2001) [Reimerdes]
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SECONDARY MATERIAL: MONOGRAPHS
Biederman Donald E., et al., Law and Business of the Entertainment Industries, 5th ed. (Westport, Conn. : Praeger Publishers, 2007) Ficsor Mihaly, The Law of Copyright and the Internet: The 1996 WIPO Treaties, Their Interpretation and Implementation (New York: Oxford University Press, 2002) [Ficsor] Fisher William, Promises to Keep: Technology, Law, and the Future of Entertainment (Stanford: Stanford University Press, 2004) [Fisher] Geist Michael, In the Public Interest: The Future of Canadian Copyright Law, (Toronto: Irwin Law, 2005) Litman Jessica, Digital Copyright (New York: Promotheus Books, 2001) [Litman, Digital Copyright] Kembrew McLeod, Freedom of Expression: Overzealous Copyright Bozos and Other Enemies of Creativity (New York: Doubleday, 2005) Lessig Lawrence, “Code and other Laws of Cyberspace” (New York : Basic Books, 1999) Lessig Lawrence, Free Culture (New York: Penguin Press, 2005), online: Free Culture Lawrence Lessig
SECONDARY MATERIAL: ARTICLES
Adams Andrew A. & Brown Ian, “Keep Looking: The Answer to the Machine is Elsewhere” (27 January 2009) Society for Computers and Law Magazine [Adams & Brown] Akester Patricia, “Copyright and the P2P Challenge” (2005) 27(3) E.I.P.R. 106 [Akester] Biddle Peter et al., "The Darknet and the Future of Content Distribution" (2003), online
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Benkler Yochai, “Freedom in the common: Towards a Political Economy of Information” (2003) 52:1245 Duke L. J. [Benkler] Bartow Ann, “Arresting Technology” (2001) 95 I Buff. Intell. Prop. L.J. 118 Blackburn David, “On-line Piracy and Recorded Music Sales” (Draft: December 2004) Harvard University Working Paper, online:
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Kim Selena, “The Reinforcement of International Copyright for the Digital Age” (2002) 16 I.P.J. 93 [Kim] Kerr Ian R., Maurushat Alana & Tacit Christian S., “Technical Protection Measures: Tilting at Copyright’s Windmill” (2002–2003) 34 Ottawa L.R. 73 Kretschmer Martin, “Digital Copyright: The End of an Era” [2003] E.I.P.R. 333 [Kretschmer, End of an Era] Ku Raymond Shih Ray, “The Creative Destruction of Copyright: Napster and the New Economics of Digital Technology” (2002) 69 U. Chi. L. Rev. 263 [Ku] Lai S., "Digital Copyright and Watermarking", [1999] E.I.P.R. 171 Lee Michelle, Finding middle ground: Copyright, Technology and the Canadian Music Industry (Masters of Law Thesis, Toronto University Graduate Department of the Faculty of Law, 2005) [unpublished] Lemley Mark A., “Dealing with Overlapping Copyrights on the Internet” (1997) 22 U. Dayton L. Rev. 547 Lemley Mark A. & Reese R. Anthony, “Reducing Digital Copyright Infringement without Restricting Innovation” (2003-2004) 56 Stan. L. Rev. 1345 Lessig Lawrence, “The Law of the Horse: What Cyberlaw Might Teach” (1999) 113 Harv.L.Rev. 501 [Lessig, Law of the Horse] Liebowitz Stan J., “Will MP3 downloads Annihilate the Record Industry?: The Evidence So Far” (2004) 15 Advances in the Study of Entrepreneurship, Innovation & Economic Growth 229 Liebowitz Stan J., “Economists’ Topsy-Turvy View of Piracy” (2005) 2:1 Review of Economic Research on Copyright Issues 5 [Liebowitz, Topsy-Turvy] Litman Jessica, “Sharing and Stealing” (2004-2005) 27 Hastings Comm. & Ent. L.J. 1 [Litman, Sharing and Stealing] MacKenzie John, “Control and Exploitation of Copyright Materiel Online” (5 June 2009) OUT-LAW Magazine, online: OUT-LAW Magazine
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Robertson Struan, “The War Against P2P File-Sharing” (2003) OUT-LAW Magazine, online: OUT-LAW Magazine < http://www.out-law.com > Samuelson Pamela, “Intellectual Property and the Digital Economy: Why the Anti- Circumvention Regulations Need to Be Revised” (1999) 14 Berkeley Tech. L.J. 519 [Samuelson] Scassa Teresa, “Interests in the Balance” in Michael Geist, ed., In the Public Interest: The Future of Canadian Copyright Law, (Irwin Law, Toronto: 2005) 41 [Scassa] Stallberg Christian G, “Towards a New Paradigm in Justifying Copyright: An Universalistic-Transcendental Approach” (2007-2008) 18 Fordham. Intell. Prop. Media & Ent. L. J. 333 Tussey Deborah, "Music at the Edge of Chaos: A Complex Systems Perspective on File Sharing" (2005) 37:1 Loyola U Chicago L. J. 147 Valimaki Mikko & Oksanen Ville, “DRM Interoperability and Intellectual Property Policy in Europe” (2006) 28:11 E.I.P.R. 562 Waelde Charlotte & MacQueen Hector, “From Entertainment to Education: The Scope of Copyright” (2004) 3 I.P.Q. 259 [Waelde & MacQueen, “From Entertainment”] Wu Tim, “When Code Isn't Law” (2003) 89 Va. L. Rev. 679 Yu Peter K., "P2P and the Future of Private Copying" (2005) 76:3 U Colorado L. Rev. 653
SECONDARY MATERIAL: NEWSPAPER, NEWSWIRES, AND BLOGS
"Alive and kicking" The Economist (25 September 2004) “Apple Strips ITunes of Digital Rights Management” The Times (7 January 2009), online: Times Online
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Electronic Frontier Foundation, "RIAA v. The People: Two Years Later" Electronic Frontier Foundation, online: EFF
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Intellectual Property Watch, “EU Parliament Signals against ‘Three-Strikes’ Filtering” (6 May 2009) online: Intellectual Property Watch:
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“Pirate Bay Site Sold to Swedish Game Firm” The Times (30 June 2009) online: Times online
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SECONDARY MATERIAL: OTHER RESOURCES
Allison Catherine, "The Challenges and Opportunities of Online Music: Technology Measures, Business Models, Stakeholder Impact and Emerging Trends," (Paper prepared for Canadian Heritage, 31 March 2004), online:
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IFPI, Digital Music Report, (2007), online: IFPI
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