Digital technology has brought about tremendous changes in the way music is distributed and enjoyed. It has made possible methods of distribution such as peer-to-peer (P2P) file sharing, online music sales, podcasting and webcasting. Musicians no longer have to rely solely on physical record sales or radio stations to have their music heard by the public. Musicians who cannot or do not want to sign a contract with a record label can record their own music and reach their audience through the Internet. These changes have led to new business models and created exciting new possibilities both for musicians and their audience.
At the same time, major copyright owners, like the major record labels are becoming increasingly nervous about how digital technologies limit their control over the music production and distribution process. They fear that digital technology will increase home taping, spawn illegal file sharing networks, reduce sales of CDs, and free artists to produce and distribute their music themselves. These fears have led them to sue file sharing networks, support legislation like the DMCA which is designed to lock digital content, and seek to reduce consumer rights. Although a law called the Audio Home Recording Act was passed in 1992 to protect consumer home recording rights, record labels are demanding further changes to the law that would render AHRA’s protections of little significance to consumers.
Peer-to-peer file sharing networks like Napster and Grokster became tremendously popular and were widely used to share music. While record companies and some artists saw these networks as tools for copyright infringement, others used them to sell their songs. These networks worked by allowing individuals who downloaded peer-to-peer software to connect their computers directly to others who had done the same. As a result, these individuals could share none, some or all of the files on each others’ computer hard drives. The technology used by the two networks — Napster and Grokster was slightly different. Napster maintained servers containing an index of music files available on the system. Grokster maintained no such centralized index.
The major record labels filed separate lawsuits against Napster and Grokster accusing these networks of allowing their consumers to illegally share copyrighted music. Both lawsuits tested the well-established principle of copyright law that an equipment manufacturer is not liable for copyright infringements of its consumers if the technology it provides is “merely capable of substantial non-infringing uses”. The Supreme Court enunciated this principle in its landmark fair use decision, in Sony Corp. of America v. Universal City Studios. In that case the court held that using a VCR to record television programs to watch them later was fair use.
Yet in both the Napster and Grokster cases, courts held the equipment manufacturers, i.e. the suppliers of the software liable for their customer’s infringements. In the Napster case, the court said that Napster had actual knowledge of infringement and had a duty to police its servers. In the Grokster case, the court found that Grokster had taken “active steps to encourage infringement”. The court saw Grokster’s advertisements targeted at former Napster users, newsletters discussing uses of the Grokster software, and Grokster’s response to customer queries about how to use the software as evidence of these “active steps to encourage infringement”.
In both cases, the courts side stepped the issue of the technology being capable of substantial non-infringing uses. As a result of these decisions, both the Napster and Grokster services went out of business. However, even in the wake of these decisions, other P2P services continue to flourish.
The Audio Home Recording Act (AHRA) was enacted in 1992. Although the legislation was a response to fears of record labels that digital technology would make near perfect copying possible, it was beneficial to consumers because it affirmed the consumers right to make a recording of music for personal use.
The AHRA requires digital audio recording devices, such as the XM inno, made or imported into the US to be designed to prevent serial copying. Manufacturers and importers of digital audio recording devices and media such as blank CDs are required to pay royalties to a fund. Fees collected in the fund will be distributed among record companies, performers and owners of copyright in the music. Royalties are based on a percentage of the transfer price of the device. Copyright owners are required to appoint agents to collect royalties and distribute them among their members. In exchange for these payments, the Act exempts consumers and device manufacturers from copyright infringement liability.
The AHRA might not cover all kinds of home recordings of music. The Act seems to target only those recording devices whose primary purpose is to record music. Thus copying from computers is outside the ambit of the Act.
The Digital Millennium Copyright Act (DMCA) seeks to prevent copying by 1) prohibiting individuals from breaking digital locks used to protect copyrighted works; and 2) prohibiting anybody from manufacturing or selling any device or service that would permit the breaking of digital locks. These sections of the DMCA are called the “anti-circumvention” provisions. It also contains provisions that exempt Internet Service Providers (ISPs) from being held liable for their customers’ infringement if they satisfy certain conditions.
These provisions prohibit circumvention of technological protection measures (TPM’s) such as encryption technology used by copyright owners to control access to their digital works. Only devices authorized to read these TPMs will be able to access the content. For example, I will not be able to play a DVD designed to work on a Windows platform on a Linux platform. Although the law allows circumvention of TPMs that prevent copying of digital works, it prohibits trafficking in technology that can circumvent any TPMs whether employed to control access or to prevent copying.
The anti-circumvention provisions make no distinction based on whether the use is lawful or not. Therefore, one cannot break a TPM for fair use or to access a work in the public domain. The DMCA contains very narrow exceptions to its anti-circumvention provisions. These include exemptions for law enforcement, browsing by libraries, archives and schools to make purchasing decisions, and reverse engineering for achieving interoperability.
The DMCA eliminates ISP liability for infringement by customers if the ISP removes the allegedly infringing material. The ISP must provide the copyright owner with contact information of the alleged infringers. The Act sets forth a relatively simple way for copyright owners to notify the ISP that it is hosting a site containing infringing content. The ISP has five days to remove the infringed material and may replace it if the accused infringer claims it does not infringe and provides its address and other information, so the accuser can deal directly with the accused.
Major record labels are urging Congress to pass legislation that would protect their interests over artists interests and limit the way consumers enjoy your music. Often, these attempts come in the form of provisions inserted into bills that are otherwise beneficial to the music industry and seek to reform various practices in the music industry. Two such bills are the Section 115 Reform Act or the SIRA and the Perform Act.
SIRA was introduced in the September 2006. While most of SIRA’s provisions were aimed at improving the process by which online music providers obtain mechanical licenses, it also contained provisions that were bad for consumers and small artists. The bill, if enacted, would have:
prevented consumers from recording music transmitted digitally;
increased royalties for many Internet radio services;
allowed record companies to divert publishing royalties from the musicians to the record companies in order to repay the advances.
SIRA did not pass into law in the last Congress. But a similar bill is likely to be introduced in future.
The Perform Act was introduced in the Senate in January 2007. The purpose of the bill is to eliminate discrimination between existing subscription and satellite radio services and new services in setting rates for the digital performance license. But the bill also contains provisions that would prevent consumers from enjoying music the way they want to. For example, provisions in the bill would only allow consumers to record music from digital radio broadcasts in the sequence in which the program was transmitted. They could not record digital transmissions based on the artist, or album or sound recording. They could not burn the recording to a CD or other portable device. They could not change the sequence of the recording.
The one positive attempt at change in this environment is to require over- the-air broadcasters to pay performance royalties. As we discussed in the sections above, free over-the-air broadcaster are exempted from paying royalties to performers while satellite radio services and Internet radio services have to pay such a royalty. Although many believe that this disparity should be eliminated and over-the-air broadcasters should be required to pay such a royalty, there is considerable opposition from the broadcasters. No concrete legislative proposal has emerged to solve this issue.