ARTICLE BEYOND NAPSTER: USING ANTITRUST LAW TO ADVANCE AND ENHANCE ONLINE MUSIC DISTRIBUTION * H I MATTHEW FAGIN, FRANK PASQUALE, & KIM WEATHERALL INTRODUCTION...................................................................................................... I. BACKGROUND................................................................................................ A. The Nature and Significance of the Technology ............................... 1. A Brief Recent History of Unauthorized Online Music Distribution and Its Threat to Copyright Owner’s Interests......... 2. Music Distribution Online: The Authorized Biography ............ 3. Is There Something Wrong with This Picture? Non- Copyright Legal Developments ................................................... B. Copyright Law And Digital Music Distribution: The Institutions ......................................................................................... 1. Who are the Stakeholders?......................................................... 2. Who are the institutions involved in making copyright law and policy? ............................................................................ a. International Institutions ..................................................... b. Executive and Legislature.................................................... c. Administrative Agencies....................................................... d. Courts .................................................................................. e. Private Institutions............................................................... C. The Existing Framework: Law, Reinforced By Code, Reinforced By Law............................................................................. 1. Law ........................................................................................... a. The Legislative Expansion of the Scope of Copyright ......... * J.D., Yale Law School, 2003; B.A. summa cum laude, Amherst College, 1998. Dedicated, in loving memory, to my grandfather, Bernard Gerber. H J.D., Yale Law School, 2001; M.Phil. in Politics, Oxford University, 1999, B.A. summa cum laude, Harvard University, 1996. I 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. © 2002 Trustees of Boston University. All rights reserved. This format does not contain pagination. Please consult the print or online database versions for proper citation information. B.U. J. SCI. & TECH. L. [Vol. 8:2 b. “Paracopyright”: The Anti-Circumvention Provisions of the Digital Millennium Copyright Act of 1998 ....................................................................................... c. The Common Law Framework: Vicarious and Contributory Infringement..................................................... d. Shrinking Limits to Copyright Rights: Fair Use.................. e. Remaining Legal Questions ................................................. 2. Code........................................................................................... D. Summary........................................................................................... II. PRINCIPLES TO GUIDE REGULATION OF ONLINE MUSIC DISTRIBUTION............................................................................................ A. To Enable Diverse Business Practices and Wide Availability of Content........................................................................................... 1. The Majors’ Reluctance to Make the Digital Transition............ 2. The Stance of the RIAA............................................................. 3. Proprietary Online Services: MusicNet and Pressplay .............. 4. Shifts in the Nature of Use and Consumer Expectations ........... 5. Music and Information Services ................................................ B. To Maximize the Development of New Technologies for Distribution and Use. ........................................................................ 1. How Copyright Law Threatens Innovation................................ a. The Technological Veto ....................................................... b. Technologies of (Fair) Use .................................................. c. Role Conflation .................................................................... 2. The Value of P2P....................................................................... a. P2P and Community ............................................................ 3. Innovation in Communications Technologies furthers First Amendment Principles ........................................................ a. Free Speech: The Blindness of the Courts........................... b. The Information Commons and the Public Domain ............ C. To Preserve Space for Individual Use and Maximize Consumer Welfare ............................................................................. 1. Putting Consumers at the Bargaining Table .............................. 2. The Vagaries of Musical Taste .................................................. 3. Fair Use Doctrine: Free of Use, Not Free of Payment............... D. To Ensure the Welfare of Other Stakeholders, In Particular Artists................................................................................................. 1. Watching from the Sidelines...................................................... 2. Artists and Advocacy................................................................. 3. Benefits and Losses.................................................................... 4. Just Compensation for Artists.................................................... E. To Limit Technologies of Control in the Public Interest.................... III. CREATING POLICY TO PROMOTE FAIR COMPETITION AND FAIR USE........... A. Introduction....................................................................................... B. Fair Competition and Fair Use: The Two Central Challenges for Copyright Policy in the Digital Age............................................. C. The Remedy Continuum: Balancing Comprehensiveness and Plausibility......................................................................................... D. Comprehensive Reordering of Property Rights: The Most Comprehensive and Least Plausible Solution.................................... 1. Comprehensive Reordering in the Public/Commercial © 2002 Trustees of Boston University. All rights reserved. This format does not contain pagination. Please consult the print or online database versions for proper citation information. 2002] USING ANTITRUST LAW TO ADVANCE AND ENHANCE ONLINE MUSIC DISTRIBUTION Realm: The Compulsory Licensing Alternative .......................... 2. Comprehensive Reordering in the Private/Non- commercial Realm: Mandated Code-Based Fair Use .................. 3. The Implausibility of Radical Public Reordering of Copyright Policy: Copyright Capture of the Legislature ............. E. Promotion of Fair Competition and Fair Use Within Existing Legal Frameworks: Is The Least Comprehensive and Most Plausible Solution Enough?............................................................... 1. Incremental Development in the Public/Commercial Realm: Allowing and Monitoring Market Developments ........... 2. Incremental Development in the Private/Non- commercial Realm: Allowing Market Development and Anti-Circumvention Rulemaking in Accordance with the DMCA ......................................................................................... F. Balancing Plausibility and Comprehensiveness in the Non- commercial, Private Realm: Minimum Policy Advances................... 1. Minimum Standard 1: Immunizing Virtual Private Networks...................................................................................... 2. Minimum Standard 2: Disclosure of and Limits to DRM.......... 3. Minimum Standard 3: Inclusion of Public Interest Representation on Industry Standards-Setting Bodies................. 4. Other advances?......................................................................... G. Institutional Mechanisms for Setting the General Terms of Fair Competition and Fair Use Policy .............................................. 1. Possible Institutional Mechanisms............................................. 2. The FTC and DOJ as Antitrust Policymaking Institutions ........ IV. POLICY APPLICATION .................................................................................... Introduction............................................................................................... A. Reflections on the Relative Institutional Competence of Administrative Agencies and Courts.................................................. 1. Adjudication vs. Rulemaking..................................................... 2. General Institutional Advantages of the Courts......................... 3. General Institutional Disadvantages of the Courts..................... 4. The Advantages of Administrative Agencies ............................ 5. The Disadvantages of Administrative Agencies........................ 6. The Indeterminacy of Abstract Institutional Analysis ..............