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| Opportunities & Exposures: Law |
The Digerati's Defense
Peter Brown
10/01/2004
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Illegal digital downloads are going to be responsible for the slow and
painful death of music labels, movie theaters, DVD markets and many other
sectors, at least according to the leaders of these industries. The music
business has claimed for some time that downloads and file sharing are gutting
its revenues. Over the past three years, while sales have slipped, industry
executives have spent enormous amounts of money fighting this trend. We have
seen a flourish of litigation against entities such as Napster, Aimster and
Grokster, which provide the software used to share digital files. Recording
companies also have started to bring legal claims against individual users;
while these suits have probably deterred some from sharing, the practice
actually increased by 40 percent last year.
Whether we support or oppose it,
downloading is here to stay. Musicians as diverse as the Grateful Dead’s Bob
Weir, rapper Chuck D and instrumentalist DJ Moby have said that file sharing
will continue, no matter how many lawsuits are filed or how quickly copyright
laws are changed. It is high time to switch tactics.
Property Rights
Copyright owners should now channel their energy toward
preventing infringement rather than penalizing it. This could very well lead to
new revenue streams for these industries. One piece of ammunition is the Digital
Millennium Copyright Act (DMCA), which went into effect in 2000 but is still
highly controversial. The DMCA protects and controls original works in the
digital environment. The law prohibits the proliferation of certain copyright
circumvention technologies, and is directed at both those who create these tools
and those who merely make the technology available to others.
The DMCA
also encourages the creation of new markets by extending copyright protection to
the physical devices used to distribute and reproduce digital technology, such
as DVDs and CDs. From their inception, DVDs have been equipped with security
measures, including content scrambling, content protection technology, playback
controls, audio and video watermarking technology, transmission content
protection and more. Major movie studios insisted on this formal security
architecture before they would enter the DVD marketplace. The same technology
could help software manufacturers and music labels fight the negative effects of
sharing.
We are now seeing the development of new technology such as secured
burning, which prevents consumers from making unlimited copies of CDs. This past
June, for the first time, a copy-protected CD became the best-selling music
album in the United States: Velvet Revolver’s aptly named Contraband. The music
industry is hoping to expand this technology to applications such as digital
music downloads, laying the groundwork for a future when content owners can not
only better secure their property, but market and sell it in innovative
ways.
For example, consumer marketers might soon offer various playback
options at different price points. A DVD of The Godfather (or any film) could be
packaged as a single-view movie for a relatively low price, such as $5.99; a
five-view DVD might sell for $7.99; while the standard unlimited-view DVD would
go for $19.99. Owners of intellectual property can control the pricing and
packaging, and consumers can have access to works they previously could not
afford, thereby reducing the temptation to download free versions of their
favorite titles.
The DMCA, of course, has been lambasted loudly. Basement DJs
who download music abhor it, but, surprisingly, so do some scientists,
technologists and academics who find it imperious. Content users claim the DMCA
could, in essence, eviscerate copyright laws in the future; it has already
stripped the fair-use doctrine of its value. By effectively locking intellectual
property, society no longer has public goods, and without them, there may be no
need for copyright law. Opponents claim that by using anticircumvention
technology, copyright owners can infinitely protect works that have long passed
into the public domain. The courts have yet to address this issue, but copyright
owners should watch carefully. Because of the strong legal rationale in favor of
diminishing the breadth of the DMCA, copyright owners should protect themselves
in the event that the law changes.
 | Peter Brown is a partner in the firm of Brown Raysman Millstein Felder & Steiner in New York. |
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