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Beyond Napster: Using Antitrust Law to Advance and Enhance Online Music Distribution

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Beyond Napster: Using Antitrust Law to Advance and Enhance Online Music Distribution University of Maryland Francis King Carey School of Law DigitalCommons@UM Carey Law Faculty Scholarship Francis King Carey School of Law Faculty 2002 Beyond Napster: Using Antitrust Law to Advance and Enhance Online Music Distribution Matthew Fagin Frank Pasquale University of Maryland Francis King Carey School of Law, [email protected] Kim Weatherall Follow this and additional works at: https://digitalcommons.law.umaryland.edu/fac_pubs Part of the Antitrust and Trade Regulation Commons, and the Intellectual Property Law Commons Digital Commons Citation 8 Boston University Journal of Science & Technology Law 451 (2002) This Article is brought to you for free and open access by the Francis King Carey School of Law Faculty at DigitalCommons@UM Carey Law. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of DigitalCommons@UM Carey Law. For more information, please contact [email protected]. ARTICLE BEYOND NAPSTER: USING ANTITRUST LAW TO ADVANCE AND ENHANCE ONLINE MUSIC DISTRIBUTION MATrHEW FAGIN,* FRANK PASQUALE, & KIM WEATHERALL INTRODUCTION ................................................................................................ 454 1. BACKGROUND .......................................................................................... 457 A. The Nature and Significance of the Technology ......................... 457 1. A Brief Recent History of Unauthorized Online Music Distribution and Its Threat to Copyright Owner's Interests... 457 2. Music Distribution Online: The Authorized Biography ...... 464 3. Is There Something Wrong with This Picture? Non- Copyright Legal Developments ............................................. 467 B. CopyrightLaw And DigitalMusic Distribution:The Institutions ................................................................................... 468 1. Who are the Stakeholders? ............................. ...................... 469 2. Who are the institutions involved in making copyright law and policy?..............................470 a. InternationalInstitutions ............................................... 470 b. Executive andLegislature .............................................. 471 c. AdministrativeAgencies ................................................. 472 d. Courts ............................................................................ 472 e. PrivateInstitutions ......................................................... 473 C. The Existing Framework:Law, Reinforced By Code, ReinforcedBy Law ....................................................................... 474 1. Law .....................................................................................474 a. The Legislative Expansion of the Scope of Copyright ... 475 J.D., Yale Law School, 2003; B.A. summa cum laude, Amherst College, 1998. Dedicated, in loving memory, to my grandfather, Bernard Gerber. J.D., Yale Law School, 2001; M.Phil. in Politics, Oxford University, 1999, B.A. sunnia cumn laude, Harvard University, 1996. Sesqui Lecturer in Commercial Law, Faculty of Law, University of Sydney; LL.M., Yale Law School, 2001; B.C.L. with distinction, Oxford University (Magdalen College), 2000; B.A., LL.B., University of Syndey, 1997. The authors wish to thank John Pellettieri for his contributions to the paper that was ultimately developed into this article. The authors would also like to thank students and faculty at the Yale Law School who commented on earlier drafts, including Andrew Shapiro and Ernie Miller. B. U. J. SCI. & TECH. L. [Vol. 8:2 b. "Paracopyright":The Anti-Circumvention Provisionsof the DigitalMillennium Copyright Act of 1998 .................................................................................4 76 c. The Common Law Framework: Vicarious and ContributoryInfringement ............................................... 478 d. Shrinking Limits to CopyrightRights: Fair Use............ 480 e. Remaining Legal Questions ........................................... 482 2. C ode ..................................................................................... 483 D. Sunmin y ..................................................................................... 487 I. PRINCIPLES TO GUIDE REGULATION OF ONLINE MUSIC D ISTRIBUTION ...................................................................................... 488 A. To Enable Diverse Business Practicesand Wide Availability of Content .................................................................................... 490 1. The Majors' Reluctance to Make the Digital Transition ...... 490 2. The Stance of the RIAA ....................................................... 491 3. Proprietary Online Services: MusicNet and Pressplay ........ 492 4. Shifts in the Nature of Use and Consumer Expectations ..... 493 5. Music and Information Services .......................................... 495 B. To Maximize the Development of New Technologiesfor D istribution and Use................................................................... 498 1. How Copyright Law Threatens Innovation .......................... 498 a. The Technological Veto ................................................. 499 b. Technologies of (Fair) Use ............................................ 500 c. Role Conflation .............................................................. 501 2. The V alue of P2P ................................................................. 501 a. P2Pand Community ...................................................... 503 3. Innovation in Communications Technologies furthers First Amendment Principles .................................................. 504 a. Free Speech: The Blindness of the Courts ..................... 505 b. The Information Commons and the PublicDomain ...... 507 C. To PreserveSpace for Individual Use and Maximize Consum er W elfare ....................................................................... 509 1. Putting Consumers at the Bargaining Table ........................ 509 2. The Vagaries of Musical Taste ............................................ 510 3. Fair Use Doctrine: Free of Use, Not Free of Payment ......... 511 D. To Ensure the Welfare of Other Stakeholders, In Particular A rtists ........................................................................................... 5 12 1. Watching from the Sidelines ................................................ 512 2. Artists and Advocacy ........................................................... 513 3. Benefits and Losses .............................................................. 515 4. Just Compensation for Artists .............................................. 516 E. To Limit Technologies of Control in the Public Interest ............. 517 III. CREATING POLICY TO PROMOTE FAIR COMPETITION AND FAIR USE ..... 517 A . Introduction................................................................................. 517 B. FairCompetition and FairUse: The Two CentralChallenges for CopyrightPolicy in the Digital Age ....................................... 520 C. The Remedy Continuum: Balancing Comprehensiveness and P lausibility................................................................................... 52 1 D. ComprehensiveReordering of PropertyRights: The Most Comprehensive and Least PlausibleSolution .............................. 522 2002] USING ANTITRUSTLA41TO ADVANCEAND ENHANCE ONLINEMusIcDIsTRIBuTIoN 453 1. Comprehensive Reordering in the Public/Commercial Realm: The Compulsory Licensing Alternative .................... 523 2. Comprehensive Reordering in the Private/Non- commercial Realm: Mandated Code-Based Fair Use ............ 527 3. The Inplausibility of Radical Public Reordering of Copyright Policy: Copyright Capture of the Legislature ....... 529 E. Pronzotion of FairCompetition and FairUse Within Existing Legal Frameworks:Is The Least Comprehensive and Most PlausibleSolution Enough?......................................................... 531 1. Incremental Development in the Public/Commercial Realm: Allowing and Monitoring Market Developments ..... 532 2. Incremental Development in the Private/Non- commercial Realm: Allowing Market Development and Anti-Circumvention Rulemaking in Accordance with the DM CA ................................................................................... 536 F. BalancingPlausibility and Comprehensiveness in the Non- conumercial,Private Reahn: Mininmum Policy Advances............. 537 1. Minimum Standard 1: Immunizing Virtual Private N etw orks ................................................................................ 539 2. Minimum Standard 2: Disclosure of and Limits to DRM .... 541 3. Minimum Standard 3: Inclusion of Public Interest Representation on Industry Standards-Setting Bodies ........... 543 4. Other advances? ....................................... .. .. .. .. .. .. .. .. .. .. 544 G. InstitutionalMechanisms for Setting the General Terms of FairCompetition and FairUse Policy........................................ 545 1. Possible Institutional Mechanisms ....................................... 545 2. The FTC and DOJ as Antitrust Policymaking Institutions.. 549 IV. POLICY APPLICATION .............................................................................. 554 Introduction......................................................................................... 554 A. Reflections on the Relative InstitutionalCompetence of AdmninistrativeAgencies and Courts............................................ 555 1. Adjudication vs. Rulemaking ..............................................
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