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Music Industry V. File-Sharing Why We Need a New Approach to Copyright Protection in the Digital Era

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Music Industry V. File-Sharing Why We Need a New Approach to Copyright Protection in the Digital Era 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. ii 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 <http://www.ifpi.org/content/library/piracy-report 2006.pdf> [IFPI, “Piracy Report 2006”]. 2IFPI, Recorded Music Reports, (2000-2008), online: IFPI <http://www.ifpi.org/content/ section_statistics/index.html> [IFPI, “Recorded Music Reports 2000-2008”]. 3 Sabbagh Dan, “Music Sales Fall to their Lowest Level in Over Twenty Years” The Times (18 June 2008), online: Times Online <http://business.timesonline.co.uk/tol/business/Industry_sectors /media/article4160 553.ece> [Sabbagh, “Music Sales Fall”]; the New York Times reports the same result. John Kennedy indicates that there were 30 billions illegal downloads in 2007, with 39% of teenagers in the US using file-sharing networks, see “CD sales falling faster than digital music sales rise” International Herald Tribune (18 June 2008), online: International Herald Tribune: <http://www.iht.com/articles/2008/06/18/ technology /music.php> 4 Ibid. From 2004 to 2007, the record company revenues from digital sales have increased from $US 380 to $US 2.9 billion, which represents about 15 per cent of the global market sales; in 2008, these revenues have increased to $US 3.7 billions representing 25 per cent of the global marker, see IFPI, Digital Music Report, (2006), online: IFPI <http://www.ifpi.org/content/library/digital-music-report- 2006.pdf> [IFPI, “Digital Music Report 2006”]; IFPI, Digital Music Report, (2007), online: IFPI <http://www.ifpi.org/content/library/digital-music-report-2007.pdf> [IFPI, “Digital Music Report 2007”]; IFPI, Digital Music Report, (2008), online: IFPI <http://www.ifpi.org/content/library/dmr2008.pdf> [IFPI, “Digital Music Report 2008”]; IFPI, Digital Music Report, (2009), online: IFPI <http://www.ifpi.org/content/library/DMR2009.pdf> [IFPI, “Digital Music Report 2009”]. 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 <http://www.oecd.org/ dataoecd/13/2/34995041.pdf> [OECD, “Music Report 2005”] at 72. P2P interactions are also defined as being “… initiated when one computer asks other personal computer whether they have a certain file. Each computer to which the search request is sent either responds or, more commonly, forwards the request on to other personal computers, each of which may pass the request onto other personal computers, and so forth.”, Akester Patricia, “Copyright and the P2P Challenge” (2005) 27(3) E.I.P.R. 106 [Akester]. 8 Waelde Charlotte & MacQueen Hector, “From Entertainment to Education: The Scope of Copyright” (2004) 3 I.P.Q. 259 [Waelde & MacQueen, “From Entertainment”] at 281, the authors argue that much of the reform of copyright law of the last 20 years has been driven by the interests of the “entertainment industry”, i.e. producers of recorded music, films and software games. 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 <http://www.wipo.int/treaties/en/ip/wct/> [WCT]; WIPO Performances and Phonograms Treaty of December 20, 1996, online: WIPO <http://www.wipo.int/treaties/en/ip/wppt/> [WPPT]. The WCT treaty has been now ratified by 70 countries, see WCT treaty, contracting parties, online: WIPO <http://www.wipo.int/treaties >. 10 I further discuss the main criticisms which have been formulated against these legislations below, in Chapter 4.
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