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Press Release

Copyright Law Revisited

12/22/2003

Today¡¦s copyright law holds systematic flaws no different than a house that suddenly starts to fall apart. If we do not examine the flaws closely to find out what is wrong, we may suddenly find ourselves sitting on our couch in the rain. When it rains, it pours. In the house of copyright law, we have witnessed blurred lines between justice and abuse of the legal system after record labels have sued over 300 individuals and a handful of companies. In addition, just last week, a goldmine of content on Mp3.com ¡V over 250,000 artists and 1 million songs ¡V disappeared in no small part due to its own brazen brush with copyright law. Some good may be able to come out of its demise and the downpour of lawsuits if we ask whether the system, in particular the Digital Millenium Copyright Act (¡¥DMCA¡¦), failed us and if there are greater lessons to learn.

Without knowing much about the construction of a house, it makes sense to start with the foundation. The foundation of copyright law protects the rights of creators of intellectual property (¡¥IP¡¦), not consumers, yet it also strives to balance these rights with the principles of free commerce. Balance primarily comes from the fair use clause, or the ability to use intellectual property without receiving the right to use it first. The pillars worth examining are: Title 17 of the 1976 Copyright Act, a few relevant Supreme Court cases and social norms. For example, Title 17 sets up four prongs to test fair use: the nature (¡¥why¡¦), purpose (¡¥what for¡¦), substantiality (¡¥how much¡¦) and market impact (¡¥how bad¡¦). The Supreme Court has used these tests in cases such as Sony vs. Universal Studios and condoned products generally used for ¡@legitimate¡¨ and ¡@noninfringing¡¨ uses like the VCR. In addition, the Court stated in Harper & Roe v. Nations Enterprises that the market impact is the most ¡@important element of fair use,¡¨ and in Acuff Rose v. Campbell, that the more a work is ¡@transformative¡¨ the less important other factors weigh in like a product¡¦s commercial nature. Implied in these cases is an understanding that fair use can apply if one or two tests, in particular the ¡¥purpose¡¦ and ¡¥market impact,¡¦ pass reasonably. Moreover, we live in a society of VCRs, tapes and portable music players which copy and store intellectual property all the time. The foundation of copyright law appears strong and solid, yet for some reason has not held up in the storm of digital media.

If we look more closely at the structure, we will find that there are some holes that are disrupting the balance of the foundation. According to Professor Volokh from UCLA Law School, there are many day to day uses of copyright material that may not technically be allowed under the law. For example, in the Sony case, the Court ruled that ¡¥time shifting¡¦ is allowed. In other words, we can record a show on our VCR if our intention is to watch it later rather than watch it again. On the other hand, if we record a movie on Tivo and intend to watch it for frequent viewing, it is considered ¡¥librarying¡¦ and is not clear whether that is considered fair use. It is also unclear whether we are allowed to ¡¥space shift¡¦ CDs to a portable mp3 player from a computer hard drive although the Audio Home Recording Act exempts hard drives and the Court supported this view in the Diamond Rio v. RIAA case. Certain organizations such as digitalconsumer.org have lobbied for consumers to assert their rights of fair use. If consumers¡¦ rights to use IP in the digital world remain vague and questionable, it is hard to see a path for businesses to build products or services that also fall under fair use.

After finding some holes, we have to look at the outer walls or recent additions that might have disrupted the foundation. A good place to start is the Digital Millenium Copyright Act of 1998 (¡¥DMCA¡¦), of which Senator Hatch has said that the intentions and results have not aligned. The DMCA failed to anticipate or address the key questions that apply to new technology to deliver music over the internet. Granted, the DMCA protects Internet Service Providers (¡¥ISPs¡¦) to some extent from contributory infringement claims, but the core technology developed to deliver digital music treads in grey areas of a law that never anticipated its arrival. For example, what rights do consumers have to store intellectual property? How many people should be able to share a mp3 file before it is considered mass infringement as in the case of Napster, who tried desperately to grasp onto the argument that it was an ISP? Can a company copy IP onto commercial servers if the intention is to facilitate fair use like Mp3.com? What is the best way to track and pay the different rights holders of IP? Is there a more efficient way to deal with disputes? Can all forms of media like film and music be covered under one law? The DMCA cannot possibly be serving its purpose as a roadmap for the new millennium if there are this many unanswered questions and unforeseen consequences. It appears that we are building on top of a brick foundation with straw.

In baseball, every once and awhile, the rules committee probably needs to make sure that a strike is still a strike otherwise the umpire¡¦s job will become rather interesting. As a result of the DMCA¡¦s ambiguities, there is a web of court cases that never made it to the Supreme Court and attempt to decipher copyright law for the digital world. Not only does it appear that the courts rather than Congress are now making copyright law, but the piecemeal approach to doing so is like doing a jigsaw puzzle without its outer boundary. It is time to take a step back and ask how the basic principles and intentions of copyright law apply to digital media. We do have a good foundation that does not need to be demolished but rather built up with solid materials that can withstand the times. Importantly, we need some broader guidelines to what constitutes fair use for consumers and businesses. Without these guidelines, we risk repeating the same pattern and outcome for the next Mp3.com and encouraging further piracy as companies assume grey equates to legality. Granted, Congress has had a lot on its plate over the past two years and digital media is small relative to some of the larger global issues. However, let¡¦s hope that as Congress considers its agenda for 2004, it will decide to bring some balance back to the DMCA so that copyright law can modernize with our time.

The Supreme Court stated in the Sony case, ¡@It may well be that Congress will take a fresh look at this new technology (the VCR), just as it so often has examined other innovations in the past. But it is not our job to apply laws that have not yet been written.¡¨ When technology pushes the envelope of innovation even the Supreme Court calls on Congress. See http://www.empoweramerica.org/stories/storyReader$842 for more information on the my.mp3.com case and the below information for more technical info on the law.

Background Information

1) Title 17 ¡V the 1976 Guidelines Without delving into history or doing a 101 on the law, copyright law basically arose due to new technologies ¡V originally the printing press ¡V and has been revised over time as technology changed. See http://www.copyright.gov/title17/circ92.pdf to read the law. Fair use guidelines as defined in Title 17 of the Copyright Act of 1976 can be applied to commercial technology. Title 17 defines the four factors that define ¡¥fair use,¡¦ or the ability to use a piece of intellectual property without getting the right to that work. These include 1) the purpose and character of the use (P), 2) nature of the copyrighted work (N), 3) the amount and substantiality of the portion used in relation to the whole (A) and 4) the effect of the use on the potential market (M).

2) Relevant Supreme Court Cases on Fair Use for Commercial Purposes See http://www.findlaw.com/casecode/supreme.html for full case briefs.

Of the four tests for fair use, the purpose and market impact of the service are probably the most important tests in evaluating commercial technology. The Court remains, righteously so, cautious about copying intellectual property for commercial benefit; however there are three cases that emphasize the Court¡¦s views:

„h Sony v. Universal City Studios (1984) ¡V the Court decided in favor of Sony¡¦s sale of videotape recorders or Betamax products that copied copyright materials. The Court reasoned that the primary purpose P of the Betamax was ¡@timeshifting,¡¨ and there was no likelihood that timeshifting would cause ¡@nonminimal¡¨ harm to the potential market M for or value of the work. The Court justified its decision even though the Betamax was a commercial product by stating ¡@if the product is widely used for legitimate, unobjectionable purposes or indeed is merely capable of substantial noninfringing uses,¡¨ the sale of it does not constitute contributory infringement.

„h Harper & Row v. Nation Enterprises (1985) ¡V the Court decided that Nation magazine did not have the right to publish a portion of President Ford¡¦s account of his pardon of Nixon. Nation scooped Harper & Row, who paid for manuscript, and then published a small amount, 13%, of the manuscript before Time magazine. The Court acknowledged that the amount (A) quoted was minimal but the market opportunity for Harper was lost stating, ¡@the last factor [Effect on the Market] is undoubtably the single most important element of fair use.¡¨

„h Campell v. Acuff Rose (1994) ¡V the Court examined whether the rap group Live Crew and its record company violated Acuff-Rose¡¦s copyright by creating a parody song similar to ¡@Oh, Pretty Woman.¡¨ The Court finds that it was fair use based on the purpose (P) of the work ¡@such as criticism or comment¡Kthe more transformative the new work, the less significance of other factors like commercialism, that may weigh against a finding of fair use.¡¨ The Court returns to the purpose of the work to mitigate the concern that the work is commercial in nature.

3) Other Court Cases (non-Supreme Court) pre-Mp3.com, Napster, Aimster, etc.

„h Basic Books v. Kinkos Graphics Corporation (1991) - The court ruled that Kinkos did not have the right to copy coursebacks for a class without prior consent from the publishers.

„h Kelley v Ariba Soft (1999) - the court ruled that the Ariba Soft photo engine, which crawled the web for photos, ¡¥transformed the content¡¨ and did not hurt the potential market for photographs. It was not considered copyright infringement.

4) The Digital Millenium Copyright Act

After a year of bill mark-ups from the House and Senate, the DMCA came to being in 1998 mainly in response to IP holders and internet service providers. The DMCA¡¦s five titles include 1) implementation of the World Intellectual Property Organization (WIPO) treaties; 2) limitations on copyright infringement for online service providers like Earthlink, AT&T, etc. 3) exemptions to make a copy of computer program for maintenance and repair, 4) the grab bag of miscellaneous provisions that cover webcasters, the Copyright Office and collective bargaining for motion pictures and distance education; and 5) my personal favorite, a new form for the protection for design of vessel hulls. See http://www.loc.gov/copyright/legislation/dmca.pdf to read the DMCA and http://www.copyright.gov/docs/regstat121201.html for the report to Congress summarizing comments received by the LOC.