[wordup] KaZaA to U.S. Senate: RIAA's Hilary Rosen lied to you
Adam Shand
adam at personaltelco.net
Sat Mar 2 14:27:28 EST 2002
This is actually pretty interesting (but long). I didn't follow the
Napster case particularly closely but it seems that KaZaA is taking a
similar but better thought out stance. I'm not sure anyone will buy it
but I hope that they do. -- Adam.
Via: politech at politechbot.com
KaZaA is one of the post-Napster breed of file-sharing applications.
Since we haven't covered its legal battles on Politech, here are two
Slashdot threads with background:
"RIAA Looks To Stop KaZaA, Morpheus & Grokster"
http://slashdot.org/article.pl?sid=01/10/03/125243&mode=thread
"KaZaA Resumes Downloads, Company Sold?"
http://slashdot.org/article.pl?sid=02/01/21/1621223&mode=thread
The witness list for Sen. Biden's carefully-balanced hearing last month:
http://foreign.senate.gov/hearings/hrg021202b.html
-Declan
---
http://www.politechbot.com/docs/biden.kazaa.letter.030202.html
February 26, 2002
Senator Joseph R. Biden, Jr.
221 Russell Senate Office Building
Washington, DC 20510
Dear Senator Biden:
I am writing to you in your capacity as Chairman of the Senate Foreign
Relations Committee. We represent Sharman Networks, which last month
acquired certain assets of KaZaA BV, including the KaZaA.com website
and the KaZaA Media Desktop Software, as well as the license for the
FastTrack P2P Stack. Sharman believes that the utilization of
peer-to-peer (P2P) software applications is essential to generating
the consumer demand for broadband connectivity that is required if the
U.S. is to successfully make the next great digital leap forward.
We are compelled to express our great distress at the one-sided and
unsubstantiated attacks on KaZaA that took place at the Committees
February 12 hearing, coinciding with the release of its Report titled
"Theft of American Intellectual Property: Fighting Crime Abroad and at
Home". We are deeply offended by the gratuitous accusations made
against KaZaA by witnesses before the Committee, including ludicrous
attempts to associate an extremely beneficial, next-generation
software program with organized criminal gangs and even terrorist
organizations. We believe, as outlined below, that U.S. Courts will
find the KaZaA software to be legal under current copyright law, and
that our client is devoid of any civil, much less criminal, liability.
We also wish the Committee to be aware that:
* There is no convincing evidence that audio file-sharing has had
any negative impact on sales of recorded music. In fact, CD sales
increased in 2001 notwithstanding the economic recession.
* P2P software such as that provided by KaZaA has the capability for
numerous, substantial noninfringing uses. These include potential
benefits to musicians and their audiences through new, independent
promotion and distribution mechanisms.
* The recording industrys own "legitimate" online music offerings
appear to be operating in violation of recording artist contracts
and to be structured in a manner that leaves the vast majority of
potential profits in the pockets of largely foreign media
conglomerates, with little if any compensation going to U.S.
artists.
* P2P appears to be the only viable technology for stimulating
near-term consumer demand for broadband sufficient to drive the
next leap forward for the U.S. information technology and service
sectors.
* KaZaA is ready and willing to join with all other parties who
benefit from the availability of digital content in a discussion
of how to best compensate rights holders and creators. It is our
view that a combination of a new compulsory license with a
broad-based Intellectual Property Use Fee (IPUF) would be the best
means of generating substantial new revenues that help preserve
the incentive goals of copyright law.
The Committee Report
At the outset, we must comment on the ironic incongruity of permitting
the Recording Industry Association of America to testify at a hearing
focused on the "Theft of American Intellectual Property". After a
decade of rampant consolidation, five major labels that collectively
control nearly ninety percent of the industrys output dominate the
recording industry. Four of the five members of this recording
industry oligopoly are not U.S. companies but subsidiaries of
foreign-based multimedia conglomerates. These companies, which
dominate the RIAAs policy-making process, routinely strip U.S
recording artists of all copyrights in their creative output as a
standard aspect of the industry contract. Indeed, the industry
recently succeeded in persuading Congress to strip even solo artists
of the right to regain control of those copyrights, after the 35 year
wait mandated under current law, by altering copyright law to classify
all sound recordings! as "works for hire". Congress subsequently
reversed this action and rest ored the status quo ante when vigorous
artist protests brought the realization that this was hardly the mere
"technical" clarification the RIAA had claimed it to be.
The Committees Report asserts that "The music industry has also been
victimized by piracy.user-friendly, piracy-enabling websites likeKaZaA
in the Netherlands, allow users all over the world to download music
illegally at no expense". It continues: "Certainly, the pervasiveness
of Napsters successorsindicates the extent to which the music industry
has already been victimized by online piracy; indeed, illegal
downloading of songs is now at its highest level ever, despite any
chilling effect brought about by the industrys suit against Napster
and, as noted earlier, is becoming more difficult to prosecute because
of decentralization." The only citation providing any documentation
for these allegations is contained in footnote 38 of the Report,
citing a "Judiciary Staff Briefing with the Recording Industry
Association of America, January 14, 2002". We are frankly shocked that
the Committee would issue a Report suggesting c! oncl usions on
matters that are currently in litigation in the U.S. District Court
for the Central District of California, in which the court has yet to
issue a single substantive ruling, based solely upon the assertions of
the trade association representative of parties on one side of that
dispute.
Contrary to recording industry allegations that this alleged "piracy"
is hurting sales of compact discs (CDs) and other recorded media, the
industrys problems are almost entirely self-inflicted. Billboard
magazine, the industrys leading trade publication, recently reported:
Many attribute the album sales decline to the growing popularity of CD
burning, but no hard data exists to back up that claim. Others
attribute the decline to the label-led deliberate annihilation of
the singles configuration.retailers argue that singles are an
essential tool for encouraging young consumers to buy music, and
since the labels mostly refuse to release hit songs on the format,
that group is turning to the Internet to download pirated copies
of those tunes or asking friends to burn the more costly albums
that contain them.In looking at album sales by configuration, CD
album sales increased last year.On the other hand, the cassettes
decline appears to be a reason why overall album sales declined
last year, as titles released in the format experienced a
precipitous drop to 49.4 million units. (emphasis added)
This article makes clear certain facts that were probably not shared
with Committee staff when they received the RIAA briefing:
* CD sales increased in 2001 despite the recession. There is no
documented evidence that music file-sharing has had any negative
impact on record sales. Indeed, many experts believe that the song
sampling facilitated by this activity actually stimulates such
sales.
* Overall recording industry sales would probably have been
substantially higher if the industry had not unilaterally decided
to severely curtail its own release of CD singles and audio
cassettes. Indeed, the article cites file-sharing as a probable
consequence of the industrys singles cutback, rather than a cause
of any decline in sales.
* The only technology cited as possibly displacing record sales is
that of CD-R burners, which are now routinely packaged with new
computers as well as sold as separate peripherals. Combined annual
sales of these devices now number in the millions, while those of
the blank CDs used by consumers as recording media are
geometrically higher. These hardware devices allow the creation in
minutes of an exact, full-quality copy of an entire record album,
whereas file-sharing generally involves individual songs in the
radically compressed and therefore somewhat lower audio quality
MP3 format. Yet the recording industry continues to litigate
against file-sharing software companies and attempt to scapegoat
them for its current difficulties (which are largely a result of
its growing inefficiencies), as they apparently find small,
underfunded technology startups more tempting litigation targets
than the large information technology hardware and software firms
that pro! duce and actively market CD-R burners and related
programs.
Copyright Law Framework
As you are aware from your prior service as Chairman of, and continued
service on, the Judiciary Committee, copyright law is extremely
complex and its application to digital technologies is still in a
state of uncertainty and judicial flux. Nonetheless, we are confident
that self-organizing and -generating P2P file-sharing software
applications such as that provided by KaZaA will be found by U.S.
courts to be in conformity with all applicable law. When a consumer
downloads the free KaZaA software that user subsequently decides
whether and to what extent he wishes to share any files, of any type,
from his own computers hard drive. All subsequent contacts and
exchanges between KaZaA users take place on a direct basis, with no
intervention or facilitation by KaZaA. KaZaA does not provide a
centralized file index. Moreover, notwithstanding the recording and
motion picture industries repeated assertions to the contrary, KaZaA
has no ability to monitor, much! les s control, file exchanges between
individual users. Indeed, even if KaZaA the company were to cease
operations at this instant, the KaZaA software would continue to
function and propagate.
The applicable legal standard for judging the copyright compliance of
new mass-market technology for a variety of uses ("staple articles of
commerce") was articulated by the Supreme Court in the 1984 Betamax
case. In that landmark case, the movie industry attempted to block the
distribution and sale of videocassette recorders (VCRs). Fortunately
for both the movie industry and the American consumer, the Supreme
Court stated:
[T]he sale of copying equipment, like the sale of other articles of
commerce, does not constitute contributory infringement if the
product is widely used for legitimate, unobjectionable purposes.
Indeed, it need merely be capable of substantial noninfringing
uses. The question is thus whether the Betamax is capable of
commercially significant noninfringing uses. (emphasis added)
There can be no doubt that P2P software is capable of myriad
noninfringing uses. Moores Law, which postulates that computing speed
and capabilities will double every 18 months, is being proven again as
the typical personal computer acquires the attributes of traditional
network servers in terms of processing speed and hard drive storage.
This new capability allows individual PC users to move beyond being
mere passive recipients of information and content from central
servers; it is the essence of the true interactivity possible in this
new era of the distributed network environment. As a ubiquitous
broadband network connects these powerful computing and storage
devices, P2P software applications are emerging as the next step in
the natural and inexorable evolution of the Internet. Indeed, just
three months ago RIAA President and CEO Hilary Rosen conceded that P2P
technologies have this substantially noninfringing capability,
stating:
The multiple exciting applications of P to P that are being discussed
over these few days show the limitless potential of the technology
in multiple ways. The ability to achieve cost savings on storage
and bandwidth, the web tools, the meeting applications, the
communications applications, the customer service applications are
all extremely exciting.
Indeed, among the many exciting and substantially noninfringing uses
for which
P2P software is being utilized are the compilation and distribution
of:
* more than 4,500 public domain books and documents for Project
Gutenberg,
* government publications,
* authorized media content, and
* public domain software.
Moving from the Betamax case to the Napster decision, there is little
wonder that the record industry is unable to capitalize on that latter
ruling to halt the use of P2P software because the decision makes
clear that the distribution of such software, in and of itself, is
noninfringing. In its ruling, the 9th Circuit first referenced the
Supreme Courts holding in the Betamax case, stating:
The Sony Court refused to hold the manufacturers and retailers of
video tape recorders liable for contributory infringement despite
evidence that such machines could be and were used to infringe
plaintiffs copyrighted television shows.The Sony Court declined to
impute the requisite level of knowledge where the defendants made
and sold equipment capable of both infringing and "substantial
noninfringing uses".
We are bound to follow Sony, and will not impute the requisite
level of knowledge to Napster merely because peer-to-peer file
sharing technology may be used to infringe plaintiffs copyrights.
We depart from the reasoning of the district court that Napster
failed to demonstrate that its system is capable of commercially
significant noninfringing uses.The district court improperly
confined the use analysis to current uses, ignoring the systems
capabilities.Consequently, the district court placed undue weight
on the proportion of current infringing uses as compared to
current and future noninfringing uses.To enjoin simply because a
computer network allows for infringing use would, in our opinion,
violate Sony and potentially restrict activity unrelated to
infringing use.
As this excerpt makes clear, Napsters P2P architecture, as opposed to
the service that Napster operated, was found to pass muster under the
Betamax standard. Indeed, this standard is critical if new information
processing, storage, and transmission technologies are to avoid being
crippled or killed at birth by the content industrys pervasive
protectionism.
Napster ran afoul of the law due to its operation of a central
file-indexing service that provided it with specific knowledge of
specific infringements by specific users of its service. The Appeals
Court stated:
Napsters actual, specific knowledge of direct infringement renders
Sonys holding of limited assistance to Napster. We are compelled
to make a clear distinction between the architecture of the
Napster system and Napsters conduct in relation to the operational
capacity of the system. (emphasis added)
In stark contrast to Napster, KaZaA does not operate a network or a
file-indexing service, and does not monitor data or provide a
data-sharing service. KaZaA merely provides self-generating and
organizing P2P software and has neither direct knowledge of how it is
being used nor any ability to curb that use. KaZaAs software does not
create copies, but merely allows for the sharing of files created
through other software programs. No central server is involved in the
systems operation, and all file information resides on the computers
of individual users. Thus, under the 9th Circuits Napster decision,
KaZaAs architecture clearly deserves Sony case protection. Indeed, if
KaZaA were to permanently cease all business operations at this very
moment users of the software could continue to enjoy its full
functionality in perpetuity the only way to halt such activity would
be to permanently shut down the Internet, a step so drastic and r!
eact ionary that not even the RIAA and MPAA have (yet) dared to
suggest it.
Were the courts to hold KaZaA guilty of contributory infringement the
results could be devastating for the entire technology sector, as any
and all could be the next victims of the content industrys ongoing
litigation witch hunt. P2P software is but one of the essential tools
that can facilitate copyright infringement, and KaZaA has no more
direct knowledge of such uses than the manufacturers and providers of
these other technologies. They include:
* Telecommunications firms providing broadband connections.
* Providers of Internet browser, server, media player, e-mail,
instant messaging (IM), newsgroup, and File Transfer Protocol
(FTP) software.
* Internet relay chat servers.
* Manufacturers of large capacity storage devices, including hard
drives, CD-ROM and DVD-ROM burners, and ZIP drives.
* The hypertext transfer protocol (HTTP), which is the basis for all
web browsers, as well as e-mail protocols; both of which, like
KaZaA and similar P2P software, cannot distinguish between
copyrighted and non-copyrighted materials as they perform their
search and transmission functions.
The P2P data-sharing technology provided by KaZaA has substantial
advantages
over previous Internet architectures, including major cost savings on
bandwidth and storage, stability and protection from denial of service
attacks, and efficient search capabilities, all of which combine to
provide far better utilization of computing and network resources.
Summing up, P2P software of the type distributed by KaZaA has myriad
substantial non-infringing uses that advance Internet technology and
the public interest. We are confident that KaZaA will be found to be
operating within the law. Any attempt by the content industries to
alter the law to prevent the continued utilization of this
breakthrough technology would be a grave disservice to the U.S.
technology sector and to the millions of your constituents now
utilizing the exciting applications made possible by P2P.
The Online Music Marketplace
The testimony presented to the Committee by RIAA head Hilary Rosen
clearly attempted to blame the recording industrys failure to create a
viable online music marketplace on P2P software. She stated, "with
Internet piracy, the lack of real protection is actually stifling the
development of a new marketplace.We must be vigilant in ensuring that
standards of protection are not outdated by technology, and that
financial rewards remain a realizable goal for American creators of
copyrighted materials. These rewards are put at risk by commercial
enterprises that allow for the unauthorized use of recorded music."
To the contrary, many observers of the online music marketplace
believe that no one has done more to stifle its development than the
major record labels, and that if the labels were granted but one wish
it would be to make the Internet go away. The major labels appear to
have one overriding goal, which is to transfer the market control they
have enjoyed in the distribution of physical goods to the virtual
digital realm, and their anti-competitive conduct has become the new
focus of the ongoing Napster litigation. They have either sued and/or
refused to license their copyrights on reasonable terms to any
innovative online music venture they do not control. The major labels
only interaction with KaZaA has been to litigate, and to inform us
that they will not enter into any constructive discussions as to how
we might work together until the networks created by the KaZaA
file-sharing software are shut down (an event that, as we have
indicated, we are powerl! ess to effect). We find this intransigent
aggression to be remarkable, and lamentable, given the size of KaZaAs
user base and the many ways in which the labels could derive
substantial benefit from P2P distribution utilizing a variety of
available technical and economic solutions.
The major labels litigation has resulted in the loss of independence
of the two most exciting and innovative U.S.-based online music
companies, MP3.com and Napster, and the transfer of control over them
to, respectively, Frances Universal Vivendi and Germanys Bertelsmann
media conglomerates. The major labels have also stifled the
development of the online webcasting market, a goal that Congress
intended to facilitate by its inclusion of a compulsory license for
non-interactive webcasts in the Digital Millennium Copyright Act of
1998. More than three years after enactment of that law, the
applicable royalty rate has just been determined through a Copyright
Arbitration Panel (CARP) proceeding. In that proceeding, the RIAA
proposed a royalty rate that was 30 times higher than the one put
forward by a coalition of webcasters and broadcasters -- a rate that
would instantly bankrupt this entire emergent sector.
The major labels own recently unveiled online services almost appear
to be designed to fail from the start. None of them offers selections
from all of the major labels due to refusals to cross-license. Even
within the label groups that are offered by a particular service, many
recent offerings by major artists are unavailable. These services
merely rent song downloads to consumers rather than providing
permanent ownership. They also bar or severely restrict the features
that consumers find most desirable, including the ability to transfer
song files to portable digital players or to burn them onto a CD.
Press reviews of these new services have ranged from severely negative
to lukewarm, with most advising consumers to save their money until
the services show substantial improvement. It is unseemly for the RIAA
to blame the failure of these services to capture customers on KaZaA
and similar software when they are so clearly lacking the basic
attributes ! that should make for a compelling online music
experience. Even within the major labels, voices are now being heard
that an excessive focus on security is counterproductive to consumer
acceptance.
Finally, notwithstanding RIAA rhetoric regarding concern for music
creators, we remind you that they represent record companies and not
recording artists. The recording industry has a long and
well-documented history of artist exploitation., including creative
accounting practices that would do Enron proud. The standard recording
artist contract has been characterized as the worst personal service
agreement in the United States, with provisions that range from
archaic deductions for "breakage" that date back to the days of
shellac 78 RPM records to modern abuses such as clauses that deny
artists the ability to own their name, or any variation of them, as a
website URL in perpetuity (long after the contractual relationship
between artist and label is likely to have expired). The major labels
also appear to be using sound recordings on their own proprietary
websites in violation of recording artist contracts, and to have
structured any payments t! o ar tists derived from these services as
licensing fees rather than far more substantial standard royalties.
These abuses have prompted one well known artist manager to declare
"Its becoming very obvious to me and my peers that were becoming
victims of what is a huge conspiracy", and a leading music attorney to
state, "from our perspective, if the technology is going to be out
there and the artist isnt really going to make money, wed prefer that
our fans just get it for free." (emphasis added) We have also already
noted the RIAAs failed attempt to have Congress enact a "technical"
copyright amendment that would have characterized all sound recordings
as "works for hire" and thereby deprived artists of the ability to
regain their copyrights after a 35 year wait.
But that is hardly their sole anti-artist legislative initiative. At
this very moment, the RIAA is waging a vigorous lobbying battle
against such groups as the Recording Artists Coalition, the American
Federation of Television and Radio Artists (AFTRA), the American
Federation of Musicians (AFM), and other artist representatives in the
California legislature. These groups are seeking to repeal a provision
of California law that exempts recording artists alone from statutory
protections that ban the enforcement of personal service contracts of
more than seven years duration. The RIAA is no doubt aware that a
landmark 1945 court case brought by actress Olivia DeHavilland under
similar law marked the beginning of the end for the old Hollywood
movie studio system and its pervasive control over actors careers.
Some observers of the online music marketplace have opined that one of
the chief motivations for the record industrys litigation crusade
against indepe! nden t music upstarts is that they might provide
recording artists with a promotion and distribution system beyond the
control of the major labels. The current distribution and promotional
system has erected such high barriers to entry that it is difficult
for less well known artists who are not signed to a major label to
realize their audience potential; musicians remain hopeful that such
direct relationships can be facilitated through independent Internet
models.
P2P As The Driver of Broadband Demand
It is well recognized that the rollout and mass adoption of broadband
connections throughout the United States is the necessary precedent
for the success of enhanced online services and the continued further
growth of the telecommunications, computer hardware, and related
critical industries. It is also increasingly acknowledged that lack of
demand due to an absence of compelling content is the chief factor
underlying the growing gap between the availability of broadband
connections and consumer uptake. While KaZaA and similar P2P software
is no threat to the content industries, the refusal of the content
providers to offer attractive online services is a clear and present
danger to the technological future of this Nation.
FCC Chairman Michael Powell recently took note of this problem:
I discussed earlier the chicken and egg problem of broadband content
and distribution. Much of what is holding broadband content back
is caused by copyright holders trying to protect their goods in a
digitized environment (in other words, a perfect reproduction
world). Stimulating content creation might involve a reexamination
of the copyright laws. Arguably, VCRs would not be widely
available today if Universal Studios had won its infringement case
against Sony in 1984. They won in the Supreme Court by a vote of
5-4. (emphasis added)
The recalcitrance of the copyright industries and its direct
relationship to the lag in broadband uptake has also been noted in the
mainstream press:
A while back, there was a compelling reason to get a broadband
connection. It was called Napster. And it was crippled by
recording industry lawsuits. If cable and telecom companies want
someone to blame for broadbands lackluster growth, how about the
record companies, which still arent giving consumers what they
want.
Another commentator recently observed:
Still, the broadband market isnt operating as freely as it should.
There are roadblocks that stop consumers from getting what they
want. And its a legitimate function of government to remove those
roadblocks especially when government creates them.
Nearly all the obstacles are on the demand side. Federal
Communications Chairman Michael Powell has observed that
"broadband intensive content is in the hands of the major content
holders" especially music and movie companies that may
appropriately fear Internet piracy but are inappropriately
delaying economic progress in the process. These entertainment
moguls have formed a frightened, retrograde cartel thats been
withholding content from the Internet.
Part of the problem is the cowardice and stupidity of Hollywood,
but another part of it is law that needs to be brought up to date.
In a recent article in the Washington Post, Stanford law professor
Lawrence Lessig advocated a review of current copyright laws to
assure that they do not "become a tool for dinosaurs to protect
themselves against evolution". Heres a worthy project for the Bush
Administration that would do far more to disseminate broadband
than fooling with the 1996 Telecom Act.
When it comes to driving consumer demand for broadband connectivity,
P2P services are the best hope for near-term success, and the music
and movie industries are public enemy number one. If the movie
industry truly intends to withhold its offerings until it can be
assured of the "seamless protection" that MPAA Chairman Jack Valenti
spoke of before the Committee, then that day will never arrive. This
quixotic quest for absolute protection simply cannot be realized in
the distribution over an open communications system of a consumer good
meant to be seen and heard by millions; nor can it be reconciled with
the reliability and ease-of-use demanded by consumers. Knowing that,
the MPAA apparently intends to seek Congressional intervention to
mandate so-called protection standards on the manufacturers of
computer and consumer electronics hardware. This misguided mission,
which is broadly opposed by a wide array of industry and citizen
interests, wou! ld i nevitably result in products with inflated price
tags and diminished functionality.
A just-released and highly praised study by the Computer Science and
Telecommunications Board of the National Research Council emphasizes
the critical relationship between content availability and broadband
demand:
Notably, today's demand level has been based mainly on a limited set
of applications (e-mail, Web browsing, file sharing, and limited
audio and video streaming). Indeed, there is a significant gap
between the capabilities of current broadband services and some of
the cutting-edge applications that have been touted but are not
generally available to the public. Continued growth in demand for
higher-speed services can be foreseen based on applications being
used or tested by early adopters in enterprise and campus
networks, experimental initiatives in both industry and academia,
and the possibilities afforded by increasingly cheap home networks
and specialized consumer electronics. With new applications, wider
penetration, and broadband's use as a convergent platform for
multimedia content delivery, much wider demand and use can occur.
The study also makes clear that a wide variety of content types beyond
those offered by the entertainment establishment will be facilitated
(and these substantially noninfringing content types are ideally
suited for P2P distribution):
More diverse content and applications--beyond mass entertainment and
more commercially oriented content--could create new sources of
demand and help attract individuals and communities to make
further investments in broadband. Examples of such content include
information of local interest; enhanced access to government
information and services; and materials related to education,
health, and culture. Not all such services require broadband
(narrowband may be sufficient, and a way of reaching a wider
audience in the short term), but broadband supports much richer
content.
The study further stresses the tremendous benefits that broadband
provides to media download applications such as those facilitated by
P2P software:
It is important not to underestimate the impact of fast
file-downloading capability on a very wide range of applications,
including audio and video. Streaming is complicated compared with
file downloading, and the main reasons that people do it, other
than for real-time delivery, is because the files are so large
that users do not want to wait while the files download; the files
are too big to store locally conveniently (although storage space
is rapidly becoming very inexpensive); and/or there are
intellectual property protection concerns (but application of
digital rights management technologies to stored files can provide
protection comparable to that of encrypted streams). If one can
move music files in a few seconds, videos in a minute or two, or
an entire newspaper or book in a minute, many applications become
practical. In addition, the economics are becoming more appealing
with the spread of very large, cheap storage units. Downloading is
of part! icul ar value when one wants the content for portable
appliances--such as e-book readers or music players
Finally ,and perhaps most importantly, the study elaborates on the
large customer
base required to successfully drive the broadband marketplace numbers
far in excess of even the most optimistic projections for the music
and movie industrys proprietary services, but that are fully
consistent with current usage of P2P file-sharing applications:
In addition to technical obstacles, the familiar chicken-and-egg
phenomenon comes into play. Without a mass market of consumers
with broadband access, it is hard to develop a business model that
justifies investment in new content (or translating old content).
One new media businessperson, Andrew Sharpless, addressed the
committee from his vantage at that time of developing new online
services for Discovery Communications. He suggested that at least
10 million households would need to use broadband before
meaningful content would emerge, and he noted that cable
experience shows that serving 50 million customers is key to
lining up advertisers. (emphasis added)
Summing up, there is no escaping the conclusion that the current
practices and attitudes of major copyright owners constitute the most
serious obstacle to mass demand for broadband, while the utilization
of P2P file-sharing offers the best near-term means to drive that
demand.
Compensating the Creators Through a Legislated IPUF
KaZaA is fully aware of and sensitive to the need to respect
applicable copyright law. The KaZaA P2P distribution software is fully
compatible with digital rights management (DRM) technologies that can
be used by content owners to protect their copyrighted works. KaZaAs
web page contains the following conspicuous notice to users of the
software:
COPYRIGHT - KaZaA does not condone activities and actions that
breach the copyright of artists and copyright owners - as a KaZaA
user you are bound by the KaZaA Terms of Use and laws governing
copyright in each country.
As previously explained in this letter, KaZaA has no means to monitor,
much less control, any activities by software users that may infringe
copyright.
While we disagree with the assertions and litigation practices of the
major corporate copyright owners, we are not insensitive to the need
to maintain the incentives for creators that are fostered by copyright
law; and to provide those creators with fair compensation for the
content that enriches the lives, and advances the business plans, of
millions.
We suggest that it is time for Congress to step in and halt the
"whack-a-mole" litigation excesses of the music and movie industries
through new legislative initiatives that compel content availability,
while establishing a compensation scheme that requires a contribution
from all the many industry sectors beyond P2P software that benefit
from content availability. These players who form the links of this
long and interdependent media file value chain clearly include:
+ Computer hardware manufacturers.
+ Consumer electronics manufacturers.
+ Storage device and media manufacturers.
+ Cable, telephone, and wireless telecommunications firms.
+ Providers of "ripping" and media player software.
These industry participants provide the software that creates full or
compressed files of digital media, the hard drives and optical storage
media that provide for their storage, the connectivity that provides
for their transfer, and the portable playback devices that allow for
use away from the computer. Many of their marketing materials
implicitly promote the duplication of copyrighted materials as an
incentive for purchase of their products or services.
The Audio Home Recording Act provides a model for the undertaking that
needs to be considered. That 1992 statute mandates a small royalty on
digital audio recorders and recording media, with the proceeds of that
levy redistributed to content creators. A similar levy an Intellectual
Property Use Fee (IPUF) -- applied to a much broader base of parties,
could provide a significant new revenue stream to copyright owners to
compensate them for the inevitable "leakage" resulting from Internet
distribution. We do not minimize the difficulty in arriving at a
reasonable royalty rate or designating the parties or products it
should be levied on, nor of devising a means for equitable
distribution of the proceeds (however, most media players already
possess the ability to monitor and report on content usage, a task
that can be performed in the aggregate to alleviate privacy concerns,
and future media compression formats are being designed to tag and
track th! e individual elements of a creative work). Yet there is
already ample precedent, es pecially in the music realm, for the need
for and workability of such compulsory license and royalty schemes. We
also realize that some would prefer a market solution negotiated by
private parties, yet the content marketplace is already a landscape
littered with content and broadcasting oligopolies, performance rights
organizations operating under antitrust decrees, and myriad compulsory
licenses facilitated by complex royalty collection and distribution
schemes. Whatever the difficulties may be in pursuing this concept,
they are nothing compared to the present practices of the content
industries that are stifling innovation, retarding the necessary
rollout of broadband, and threatening the innovative freedom of the
information technology industry.
This type of policy initiative would also be fully consistent with one
of the seminal recommendations of the National Research Councils
groundbreaking "Digital Dilemma" report:
Recommendation: The committee suggests exploring whether or not the
notion of copy is an appropriate foundation for copyright law, and
whether a new foundation can be constructed for copyright, based
on the goal set forth in the Constitution ("promote the progress
of science and the useful arts") and a tactic by which it is
achieved, namely, providing incentive to authors and publishers.
In this framework, the question would not be whether a copy had
been made, but whether a use of a work was consistent with the
goal and tactic (i.e., did it contribute to the desired "progress"
and was it destructive, when taken alone or aggregated with other
similar copies, of an author's incentive?). This concept is
similar to fair use but broader in scope, as it requires
considering the range of factors by which to measure the impact of
the activity on authors, publishers, and others.
Our notion of an IPUF is consistent with this recommendation, in that
it moves away from the notion of copy while providing a new means to
provide the necessary incentive for the continued creation of video,
audio, and print content that entertains and enlightens millions and
sustains thousands of different businesses. It also recognizes the
reality that notions of security and control that may have been
exercisable in the non-networked, analog world cannot be effectively
transferred to a realm where even a single digital copy can propagate
millions of perfect clones, world-wide, almost instantaneously, and
where control over the quantity and destiny of the bits that comprise
digital media will be imperfect at best.
Conclusion
As we have outlined, the attempts by the music and movie industries to
mislead your Committee with the false notion that our clients software
is criminal in nature, and that P2P software is a major threat to
their interests and a rationale for their withholding of content from
the Internet, have no basis in fact or law. These content industries
have a long history of opposing new reproduction and distribution
technologies, and in every instance their dire predictions have not
only been proven wrong but they have been substantially enriched by
the very developments they sought to stifle. Self-generating and
organizing P2P software is the natural and inevitable next step in the
development of the Internet and offers a dizzying array of potential
benefits to society. It is also the only means at hand for driving the
mass adoption of broadband that is critical to the advancement of the
U.S. technology sector and the myriad new services it can support. !
We certainly hope that any future Committee inquiries into
intellectual property matters provide for a more balanced
consideration of this complex subject. We stand ready to assist the
Committee and the Congress in understanding the many benefits provided
by P2P file-sharing technology and in developing a new means of
providing creator incentives that is not antithetical to technological
progress. Congressional intervention driven only by the self-serving
and incomplete testimony of the content industries could have the
unintended effect of seriously thwarting U.S. economic and technical
progress while subverting the very goals that copyright law is meant
to serve.
Thank you for your consideration of our views.
Sincerely,
Philip S. Corwin
Cc: Members, Senate Foreign Relations Committee
Chairman Patrick Leahy and Ranking Member Orrin Hatch, Senate
Judiciary Committee
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