Copyright Protection, Piracy, Consumers, and Entrepreneurs in the Digital Age: An Overview

 

When I was eleven years old (and I don’t mean eleventy-first—this was back in the grand old 1950s), my older cousin and I developed the interesting hobby of drawing filmstrips in crayon, with pictures of various sizes and aspect ratios, and then projecting them to family audiences in our basements. In those days, for social studies, remember, the teacher would sometimes show 8 mm films, and sometimes just film strips. My cousin and I replicated the process, usually with drawings that documented some geographical area. Sometimes we told stories, and we once had a rule that “one out of every six movies is to be a horror movie.” I vaguely remember some of the titles, like “The Land of the Bible,” “Pie Face,” and “Sea Monsters.” We even had pretend “academy award” ceremonies. We would debate about the use of color in natural scenes. My cousin once proposed a movie “Color” (like the Arthur Bliss ballet) to be drawn in black and white: “Only a nitwit would do that,” he said. I still have just one of these “piano rolls” in my closet, a reel of drawings of Mt. McKinley in Alaska.

 

Then, in those days, we also had great 8mm home movies. Some of these are probably of some interest now. I imagine that a film of what Buckingham (a historic residential neighborhood in Arlington, Va.) really looked like, live, in the days of segregation might be of some real historical or commercial interest now. 

 

Today, a half century later, I, having written three controversial books and full of self-interest, network with the little indie film industry again, in Minneapolis (with the local chapter of IFP) and now soon on the East Coast as I have moved back to Virginia. 

 

You can see what I am getting at pretty quickly. All of these amateur offerings are as copyright protected, in the eyes of the law, as is New Line’s The Lord of the Rings. And all of these could have potential, sometimes unpredictable value, even those of amateurish origin.

 

The federal copyright law as a whole falls within the explicit powers given to Congress in Article I  Section 8 (libertarians, note!).  Congress is given the power and responsibility to promote and protect the arts and sciences by both protecting the incomes (and property rights) of content creators and at the same time protecting reasonable and fair access by the public and perhaps some measure of consumer protection. The most recent really large revisions occurred in 1978, as when the balanced notion of “fair use” was defined.

 

Technology, however, has always at least created the appearance of a threat to the livelihoods of the creators of intellectual property at any point in history. This goes back to the time of the printing press in Europe (and the Twelfth Century Chinese blew the chance to take over world leadership in technology because they could not deal with the challenges to the notion of property rights). Makers of piano rolls would be sued in the days of Rachmaninoff, as would the manufacturers of VCRs. But in 1984 the Betamax decision, handed down by the Supreme Court in 1984, established the principle of "substantial non-infringing uses" - if a technology (such as a VCR) can be used for legitimate copying, such as time shifting or home viewing, the fact that the technology can also be used for copyright infringement does not make the technology illegal. The Betamax principle allows technologists to create tools that can be used for good, even if they can be used in other ways.

 

Actually, the technology changes that have most affected artists have come in two areas: first, recording and playback devices, and second, the Internet. The two areas intersect in complicated ways, and still bear some historical tracing as to what has really happened.

 

I recall in my high school days being dedicated to LP record collecting, and then naively playing mono records on an old RCA Victor record player with a tone arm that tracked at ten grams. Until my last year of high school, we used sapphire needles, because we didn’t know a lot about record care. A chum during the summer after my graduation spoke of having once used wood needles himself. In fact, in my early days of piano lessons, I had gone through the “revolution” of high fidelity. The first records that I owned were 78’s of Sousa marches (that was patriotic – Sousa was by the standards of the time a visible American composer) that cost 79 cents each. Then we migrated to 45s, the smaller discs with the big spindle holes, for singles, but classics were sometimes recorded on them, too, like an album of Rossini overtures. The LP had been invented in 1948, with the 45 following a year later.

 

Early in my college years, I got a VM stereo for Christmas, with a tone arm that now tracked at 6 grams, and was shocked to find many records ruined, particularly those with piano in the inner grooves. A friend in nearby Falls Church had the turntable de jour, a Girrard that tracked at three grams. I bought a tape recorder and started backing up records, and taping some of his records. We thought this was morally OK, because we often bought records ourselves and supported the music industry, but legally this was probably an infringement. I still remember the days of $4.98 lists ($5.98 for stereo), with $3.69 a typical discount and specials of 2 for $3 at a great store called Record Sales in downtown Washington, near today’s Metro Center. And I remember the cheapie derivative labels from the major record companies, like Richmond for London and Seraphim for Angel, or Victrola for RCA.

 

In the 1980s, as individual album prices rose, the compact disc revolution would ensue. The first CD players of the early 80s were clunky and unreliable, but soon companies like Sony and JVC had the problems ironed out, and compact discs proved the perfect answer to record wear and inner groove distortion (although if mishandled they can become unplayable). For a while, many of the obscure Romantic works were unavailable on CD, and I would still order records from a company called Records International in Santa Barbara CA and then back them up on cassettes, only to find cassette players unreliable and prone to failure.

 

In the early 1980s the other revolution started – the personal computer. Remember the TRS-80, the Commodore, the Osborne? I went through a few of these, as the Microsoft model won out with Apple carving out a dedicated second place niche. Amateur writers could become more productive, although early magazines actually advised writers to buy machines only designed for them! By the early 1990s, things came together, as CD-ROM devices got added to computers, and Internet access and email became party of daily life. I was slow to pick up on this, and did not have email until the summer of 1994, when I had decided to write my book on gays in the military.

 

By the late 1990s, piracy through devices attached to computers was becoming a serious problem for the music and movie industries, denying them earned revenues. But the Internet would provide a more insidious “threat.”

 

In 1999 a freshman college student named Sean Fanning, having taught himself Unix and C and other intricate languages as a teenager, became fascinated with the idea that music could be shared among computer users and in a few days in an older home in the Boston area wrote a software package to do this.  The media has presented Mr. Fanning as someone who could have become a baseball player or maybe a pop star but chose instead to make his contributions in technology for its own sake. The engineering concept was his, and at age 18 he probably did not grasp the legal and ethical implications of what he would unleash to the public as Napster. His service still required a centralized index, but newer file sharing services (like Kaaza), some of them coded by teens in Europe and Asia, would even share files more directly. There is a certain paradox in this: young men finding an intellectual pursuit that could bring them as much satisfaction and recognition as sports or pop music, but it had a dark side.

 

During this time, I had become fascinated by a simpler use of the WWW, simply that an unknown writer like me could, with few financial resources, reach a huge audience through search engines and static text files. But I was providing my own content. Of course, I could create more subtle problems by drawing attention to myself, others connected with me, and others mentioned on my web pages, but this is not the same thing as copyright infringement. Maybe this is an ethical issue, too, but it has more to do with the idea of third party validation and publicity.

 

Nevertheless, the file sharing controversy would take off, as hundreds of millions of users started sharing songs, and ordinary music CD sales would plummet.  Napster would be the first to get sued, and eventually be forced down, although now it has been bought and has become a fee service. (Sean Fanning has made a cameo appearance in the Paramount film The Italian Job, in a comical scene where another character calls himself “the real Napster.”) 

 

Piracy of films and video would take place with the various playback devices, as would cable TV theft. Gradually, the politicians began to address the problem with legislation, as the music industry began to prepare actions against infringers. The whole picture became very complicated.

 

The first major law was the Digital Millennium Copyright Act of 1998. Critics  quickly pointed out that the DMCA compromises fair use, first sale and limited time concepts for digital works.[1] The most controversial section of this act is the “anti-circumvention provision,” which makes it a crime to break a software or content publisher’s encryption method. Arguably, this goes against the spirit of pre-Internet copyright law, because it would be a crime even for the purposes of purportedly “fair use” such as making one copy for one’s own use.  For example, it is illegal to stream video from your computer (downloaded from the Internet) to your separate television, or to circumvent the blocking mechanisms stopping you from doing this, although in 2004 there may be new technological fixes for this problem. The arrest of Dmitri Sklyarov for writing programs to circumvent software locking on Adobe product, would draw more attention to the DMCA. Sklyarov had written these in Russia for an employer, and was arrested when he came to Las Vegas to discuss his decryption technique.

 

Another troubling DMCA provision is the “safe harbor” for ISP’s that encourages them (to reduce litigation risk and expense) to take down content or remove customer sites when there has been an alleged (whether substantiated well or not) copyright infringement.  This would start to become significant was the music industry began to move aggressively against individual consumers who were infringing by making and sharing illegal copies of songs from file sharing services.

Peter Coffee weighs in on the DMCA issue with an articule in eWEEK Technology Editor (Ziff Davis) in which he maintains that the DCMA could eventually mean government licensing of computer professionals.[2]

The teenage and younger college audience has apparently grown up with the idea that music is “free” the way broadcast television is. Well, not quite. Broadcast TV is paid for by advertisers, as is much of the content or websites. However, on the web the picture has become clouded by the idea of “Open Source” and by providers (like me) who provide a lot of “free” content for public worldwide exposure, since the cost of providing the content is very low. All of this may create the impression with younger users that all content is “free” when it is not.

 

The Recording Industry Association of America (the RIAA) began suing individual consumers in 2002. Generally, these were consumers who had operated “supernodes” that facilitated large amounts of file sharing. However, sometimes consumers were identified incorrectly and subpoenaed, and stuck with the expense of defending themselves. The second time around, the RIAA sent around cease-and-desist letters in advance of subpoenas. Still, controversies abounded. Some ISP’s fought legal battles to prevent having to give contact information for alleged infringers, and still some infringers were incorrectly identified. Judge John Bates ruled that Verizon could be required to identify a customer who “illegally” transferred music files to other friends.[3] One target apparently ran a web service for others and maintained that he never downloaded songs, although it is possible he was identified because of the actions of his customers or that even hackers could have used his service for illegal downloading (in which case he could have “downstream liability”).

 

This all leaves us with the controversy over what kind of business model really works best in the new environment. There has been some success with legitimate subscription services, that charge a small fee per single (like iTunes), or a monthly fee for a selection of items (like a new service from Dell).  Users complain that these services do not offer enough selection, especially of older songs (and usually almost everything can be found on Karaoke discs, which are legal song contests and performances licensed through Karaoke in bars and restaurants). Some writers suggest that all Internet users contribute to a global license fee, but this would not be fair to customers who do not download music.

 

The movie industry also fears piracy through the proliferation of devices and file sharing services, to the point that many theaters now feature their ad before showing films, in which ordinary movie workers state that their jobs are in jeopardy from infringement.[4]

 

Why has the record industry been slow to recognize changes, for a long time offering music only in bundled CD’s?[5] This is hard to answer, other than there is a tendency for many businesses to guard older models that worked in the past in the mistaken belief that they are protecting stakeholders. For years, after the introduction of the LP, which worked so well for classical music (as did the CD even better), the record industry promoted the album concept for popular music, and it seemed to work with Broadway or West End shows, movie soundtracks and with many well known artists (why do I remember the Kingston Trio from the early 60s?) but when computers and the Internet came along younger listeners seem to have shorter attention span, and resented the idea of being expected to buy whole albums for only a few specific songs.[6]  I personally replaced almost my entire classical album collection (800 items) with compact discs (and then some), but would buy pops or movie albums that really interested me (The Talented Mr. Ripley, Queer as Folk, Smallville, The Lord of the Rings).

The movie industry is in the fray now with a measure that could threaten independent film. James Lardner provides an analysis of all this, “Holly Wood versus High-Tech” in Business 2.0, May 2002. The by-lines are “Hollywood says Silicon Valley promotes piracy. Andy Grove and others say that’s crazy. The battle over digital theft is getting ugly and the stakes are higher than you think. Disney’s Michael Eisner and others say Hollywood will defend all its intellectual property at all costs. Silicon Valley eminences like Andy Grove say those are fighting words—if it means trampling consumers rights and squashing innovation.” The article maintains that even ability of PC manufacturers to continue offering CD write and DVD write drives is threatened. “From Hollywood’s perspective, some tech people wryly observe, the ideal PC would be a souped-up TV set, with ads and programs dubed out by the same handful of media giants that control TV today, and the interactivity limited to buying things from them.” This invokes not only legitimate copyright issues, but also turf battles over the competition from new film-makers and content providers, often very low cost and not employing union help.

Then, in October 2003 the MPAA chief Jack Valenti and seven major movie studios decided to ban film studios from sending free DVD screener to voting members of the academy for Oscars. The cited reason was to reduce piracy. But one wonder, why can’t voting Academy members be trusted not to pirate their free copies?  Small films on platform theater releases depend on free samples to get academy members (especially those not in major cities) to see teir films, and investors depend on MPAA attention in deciding to invest in more specialized independent films “for adults.” Could Hollywood’s real intention be to eliminate low cost competition from independents and force everyone to play by its own “lowest common denominator” numbers-driven and earnings-driven rules to attract the “average person” at a multiplex?  Another question is, why can’t independent film makers do with their own property what they want (that is, send their own DVD screeners)? That is fine under copyright but might be viewed as “bribery.” What we wonder is if this is a first step of large media interests to stifle grassroots competition from new artists with low overhead but low capital.  An independent film organization has filed a lawsuit against the MPAA. (In late December 2003 apparently a federal judge has enjoined Valenti’s policy.)

There have also been dire prediction concerning more downstream liability for small businesses. Following up on this is the Wired News story by Michelle Delio, “Indie ISP’s Fight for Survival” in April 2003[7]. The threat is that proposed FCC regulations forcing ISP’s to take responsibility for legal violations by their customers could force many ISP’s without economic scale out of business by the end of 2003.

The politicians continue the battle. On July 25, 2002 -- U.S. Rep. Howard L. Berman (D-CA), together with Reps. Howard Coble (R-NC), Lamar Smith (R-TX), and Robert Wexler (D-FL) introduced legislation to address copyright infringement on publicly accessible peer-to-peer (P2P) networks. The bill is called the “Peer to Peer Piracy Prevention Act” (HR 5211), and gives copyright owners “safe harbor” means to enforce their rights. Critics claim that this will allow copyright owners or movie studios to harm individual home computers or even neighborhood high-speed Internet connections without proper accountability.  In 2003, individual computer users have been sued by the RIAA, which has been partially successful in the legal battle to get names of alleged anonymous infringers from ISP’s, at some cost to the ISP’s and with considerable concerns from the legal community about due process or judicial supervision. Parents could face surprisingly liability from the actions of their kids or their kids’ friends on their own home computers.

On November 4, 2003, the Federal Communications Communication approved the “first- ever requirement that some personal computers and other consumer electronic devices be equipped with technology to help block Internet piracy of digital entertainment.”[8] Critics have maintained that consumers will have to bear the expense of new equipment to continue obtaining digital entertainment, and that fair uses will be blocked, and that the media industry is driving the law for its own financial advantage, in contradiction to the original intent of copyright law. Required hardware changes might interfere with the ability of artists to create and share or publish their own content (which they own according to copyright law) inexpensively, as an indirect consequence of preventing piracy of works by those who normally make a living from their authorship, or perhaps unregulated competition.

Incidentally, even now, filmmakers have to be very careful about unauthorized use of music or likenesses even in inexpensive films offered on the web or through file sharing. Some websites that allow filmmakers to post their work, like TriggerStreet, have become very strict about filmmakers’ securing licenses.  Technology has made independent filmmaking much cheaper, but it is still far more complicated that self-publishing books.

A legally related issue is personal ownership of Smart Card technology. DirecTV has sued individuals for merely owning the technology (and sent cease-and-desist or settlement demand letters to up to 150,000 individuals), claiming that their only motive is to steal satellite signals. This is legally analogous to trying to sue someone for using file-sharing technology that may have legal uses. A federal court has ruled that DirecTV does not have standing to sue Mike Treworgy, in a ruling by Judge John Steele, and DirecTC has appealed to the Eleventh Circuit.[9]

The livelihood of artists, musicians, writers, actors, and other media persons (and computer programmers) has come under stress from many sources, including competition from new “Open Source” content models as well as piracy. Various guilds, unions and other organizations represent the interests of persons who work mostly freelance, in what seems to be an odd form of solidarity. For example, the National Writers Union has lobbied for a Freelance Writers and Artists Protection Act, which at first glance protects freelancers from anti-trust laws that restrict their efforts to bargain collectively. Writers have been especially indignant about the bundled contracts offered and enforced by media giants, that prevent separate payment for electronic republication, and this is seen again as a kind of “corporate piracy.” Of course, freedom to contract and a free market would seem to let artists bargain the way they want, and would let new artists and writers enter the market more easily, perhaps. Will we come to the say when one writer’s ability to offer his work freely or at very low prices will be seen as encouraging infringement or as threatening the professionalism or income-earning of an entire freelance group? It can get complicated. Remember, too, Justice Blackmun once said that copyright infringement is not the same as criminal theft.

There has suddenly arisen a new wrinkle, the possibility of extending copyright-like protections to collections of facts as in scientific or economic databases. This is the proposed Database and Collections of Information Misappropriation Act (DCIMA, H. R. 3261). Conceivably this could threaten anyone with a bibliographic reference and quoted “fact” to litigation, although in theory I suppose I could claim “infringement” for my political concepts database under development. (Don’t worry, I wouldn’t, out of self interest.) This is dangerous departure from the tested notion that facts and ideas cannot be copyrighted. Perhaps some of the pressure for this comes from the movement towards Open Source.[10]

California has also proposed a law (Assembly 2735 Senate 1506) to require anyone transmitting commercially recorded media material over the Internet (by web posting or file sharing) to identify himself by name and address, even when making fair use comment. It is not clear if this would apply when transmitting material that the sender had authored. This has various security and privacy concerns as well as conflicts with other federal laws (COPPA).[11]

Congress is now considering new criminal penalties for piracy, or even recklessly facilitating piracy by storing a large volume of unsecured works (music and movies) on a server or computer open to file sharing without proper security, as well as new provisions against photocopying movies in theaters. The bill is called the Piracy Deterrence and Education Act of 2004[12] (HR 4077).

In July 2004, Electronic Frontier Foundation provided the following advisory: “The Senate Judiciary Committee has taken the Inducing Infringement of Copyrights Act (Induce Act, S.2560) off the fast track, scheduling a hearing on the bill next Thursday.  This is good news for the public, but the recording industry is going on the offensive, turning up its rhetoric in an effort to scare common sense out of the debate.  In a letter sent to the Judiciary Committee and all 100 senators, RIAA president Mitch Bainwol
insists that critics of the bill are missing the point, and that the Induce Act is a "moral behavioral test that targets the bad guys.”[13]

But the wording of the legislation itself doesn't support Bainwol's claims.  “By making it illegal to ‘aid, abet, or induce copyright infringement,’ the Induce Act[14] could make companies liable for violations committed by their customers.  This extends liability so far that it threatens both current and future technologies.  Under the Induce Act, creators of the next iPod or VCR would be forced to subject themselves to approval from every major copyright holder before even getting to market.  That's too high a price to pay to satisfy the recording industry in its witch-hunt for peer-to-peer file sharing.”[15]

The act, given its ambiguity, could target not only file-sharing software providers and users, but persons who do their own domain hosting because of bandwidth restrictions with most ISPs, and well as ISPs themselves, depending on how the downstream liability concept is interpreted in court. As noted above, artists who wish to provide their own films to an audience without a normal commercial distributor or even other self-publishers could be affected, and again we wonder if part of the incentive for the law is to protect the “establishment” of artists’ unions and agents from “Wal-Mart” style competition by upstart individuals.

I am very concerned about legislation that could make an ISP responsible or liable for violations of its customers. That could chill ISP’s out of business. Furthermore legislation like this may considerably increase the cost of hardware and software in the future to small independent filmmakers and artists who want to use their computers to publish their own work but are force to pay for “protection” of large companies this way. Large companies may also have an incentive to make it harder for small filmmakers, artists and individuals to enter the market and compete with lower costs in presenting their own work. I have encountered problems myself in burning DVD’s of my own study videos, and this could be related to bugs in anti-piracy software associated with the DMCA. http://action.eff.org/action/index.asp?step=2&item=2918

However: 8/19/2004: Pasedena, CA – (From EFF): Today the Ninth Circuit Court of Appeals made a crucial decision in support of technology innovators by declaring that distributors of the peer-to-peer software Grokster and Morpheus cannot be held liable for the infringing activities of their users.[16] The Electronic Frontier Foundation argued on behalf of Streamcast, the creators of the Morpheus software, in a case that pitted dozens of entertainment conglomerates against two small software companies.[17]

The Ninth Circuit decision is based in part on the fact that P2P networks have significant non-infringing uses, and that they can help artists earn money. The ruling is similar to the Supreme Court's decision in the 1984 Betamax case, which determined that Sony was not liable for copyright violations by users of the Betamax VCR.

"Today's ruling will ultimately be viewed as a victory for copyright owners. As the court recognized today, the entertainment industry has been fighting new technologies for a century, only to learn again and again that these new technologies create new markets and opportunities," said EFF Senior Intellectual Property Attorney Fred von Lohmann. "There is no reason to think that file sharing will be any different."

A significant part of the piracy problem, of course, is the manufacture of counterfeit CDs and DVDs overseas, especially in China. China’s communist history has prevented the population from developing an appreciation of private property, especially an abstract kind of property like intellectual property.[18] But I can remember that in the early 1960s there were problems with counterfeit phonograph records, and counterfeit videos in the 1980s (which of course created the contingent liability litigation issue for VCR manufacturers, as mentioned above).

The House of Representatives also has a Resolution HR 4077, the Piracy Deterrence and Education Act of 2004, which understandably prohibits smuggling camcorders into movie theaters but also has a provision to allow editing of material for adult content (violating what filmmakers consider artistic freedom) but possibly prohibiting deletion of commercials (ClearPlay or TiVo technology).[19]

 

 

ãCopyright 2003 by Bill Boushka, subject to fair use.

Special essay on movie piracy

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