iTunes: How Copyright, Contract, and Technology Shape the Business of Digital Media The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters Citation Fisher, William W. 2004. iTunes: How Copyright, Contract, and Technology Shape the Business of Digital Media. Berkman Klein Center for Internet & Society Research Publication. Citable link http://nrs.harvard.edu/urn-3:HUL.InstRepos:32866386 Terms of Use This article was downloaded from Harvard University’s DASH repository, and is made available under the terms and conditions applicable to Other Posted Material, as set forth at http:// nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of- use#LAA iTunes How Copyright, Contract, and Technology Shape the Business of Digital Media – A Case Study This paper provides an analysis of Apple’s iTunes Online Music Store. The exploratory case study presented in this document is research in progress. Comments and questions are encouraged. The paper analyzes relevant law to achieve deeper understanding of current shifts in the digital media landscape, but does not provide legal advice. Research Team This paper is a case study developed by the Digital Media Project team at the Berkman Center for Internet and Society at Harvard Law School. Gartner|G2 served as our research partner in this venture. Particular thanks to Mike McGuire of Gartner|G2. Digital Media Project Principal Investigator William W. Fisher, III Hale and Dorr Professor of Intellectual Property Law, Harvard Law School Researchers & Authors Urs Gasser, John Palfrey, Derek Slater, Derek Bambauer, Andrew Bragin, Jacqueline Harlow, Charles Hoffmann, Renny Hwang, Joseph Jackson, Georg Krog, Edward Locke, Stephen Mohr, Ivan Reidel, and C. Lee Wilson Communications Director Mary Bridges Release Date: June 15, 2004 (revised version) 2 Contents Contents ................................................................................................................................................. 3 Introduction ........................................................................................................................................... 6 Abstract.............................................................................................................................................................................6 A. Background .................................................................................................................................................................6 B. Objectives and Scope.................................................................................................................................................7 C. Overview of the iTunes Music Store ......................................................................................................................8 1. Pricing ......................................................................................................................................................................9 2. Song Catalog .........................................................................................................................................................10 3. Ease of Use ...........................................................................................................................................................10 4. Digital Rights Management System ..................................................................................................................11 5. Extra Features.......................................................................................................................................................12 Part I: Contract-Copyright Interplay.....................................................................................................13 A. Summary: Where Copyright Permits, Contracts May Prohibit ........................................................................13 1. Copyright...............................................................................................................................................................13 2. Contract .................................................................................................................................................................14 B. Effects of Contract versus Copyright Tension on iTunes.................................................................................15 C. Copyright versus Contract in the United States..................................................................................................16 D. Copyright versus Contract in Europe ..................................................................................................................19 1. European Union...................................................................................................................................................19 a. Copyright Regulation by the European Union...........................................................................................19 b. Contract Regulation by the European Union ............................................................................................20 c. Contractual Modification of Copyright Entitlements in the European Union.....................................23 d. Example: Copyright-Contract Interaction in Germany............................................................................23 2. Summary of Business Impact.............................................................................................................................24 E. Copyright versus Contract in Asian Countries....................................................................................................25 1. Japan.......................................................................................................................................................................25 a. Copyright in Japan...........................................................................................................................................25 b. Contract in Japan ............................................................................................................................................26 c. Contractual Modification of Copyright Entitlements in Japan................................................................28 d. Business Impact of Contract and Copyright on iTunes in Japan............................................................29 2. China ......................................................................................................................................................................29 a. Copyright in China..........................................................................................................................................29 b. Contract in China............................................................................................................................................31 c. Contractual Modification of Copyright Entitlements in China ...............................................................32 d. Business Impact of Contract and Copyright on iTunes in China...........................................................33 F. Conclusion.................................................................................................................................................................33 Part II: Digital Rights Management .....................................................................................................35 A. Introduction..............................................................................................................................................................35 B. How is DRM Protected by Law?...........................................................................................................................35 1. United States.........................................................................................................................................................36 2. European Union...................................................................................................................................................37 3. Asia-Pacific............................................................................................................................................................39 a. Japan..................................................................................................................................................................39 3 b. China.................................................................................................................................................................40 3. Future Implementers...........................................................................................................................................40 C. The Interaction Between iTunes DRM and the DMCA ...................................................................................40 1. Preventing Piracy..................................................................................................................................................41 2. Reverse Engineering and Interoperability........................................................................................................44 D. Conclusion................................................................................................................................................................48