Class 5

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Recap from last week:

-everybody but one person has downloaded stuff online. Reasons why it’s OK: -no obligation of fairness to record companies -not like taking an actual thing/ “information wants to be free” -necessity-type arguments (needed it for class, artists I like don’t get wide distribution)

Perfect DRM/ good pricing: a good thing? Copyright underenforcement in some areas, like animations involving video games – free advertising for them. “Permissive use”/ “implied license.” Could be casualty of perfect control/good pricing.

Possible future scenario: Fisher Ch.3 – perfectly enforced “fairness.” Utopian or dystopian scenario?

Issue of tangible ownership of IP. -“first sale” doctrine. Tangible stuff you can sell (i.e. @ secondhand bookstores). In digital world, no “first sale” doctrine, because subject not to outright sale, but a contractual license. Terms can be absurd, like not being allowed to read Lessig’s book aloud.

“Web difference” – technologically, sharing easier in digital media (because of compression technology, i.e. mp3 format), but legally almost impossible. Also, digital media is “non-rivalrous” – if I have mp3, I can “give it” to you and still have my own identical copy. iTunes enforces an imperfect scarcity on this via ITMS (share with a limited number of people) – negotiated solution between music companies (licensor), Apple (licensee) – listener, by the way, is the sublicensee.

Q: do you look at it from perspective of artist, for whom any licensors you might have is the market, or from perspective of users, from which non-rivalrous element is the part that matters?

Another “web difference” – reduced cost of production. “Breakage” concept – LPs that break when they’re shipping. This is an example of a cost of recording media which record companies passed on to consumers.

Pandora – much cheaper way of doing music publicity. Audacity – much cheaper way of making music. Both mitigate against record companies’ usefulness.

Apple doesn’t make that much on the sales of iTunes songs, they make the money on peripherals (hardware, software, services). Would like music prices to be low, but not trying to squeeze out max on per-song basis.

JP can’t say how much Apple gets per-song. Independent web searching says it’s about 10 cents, of which credit card companies take a big chunk. Very small margins, again make most of their $ off of iPods, other peripherals.

Q: can you argue that there’s no copyright violation when you download a song you have no other rights to on LimeWire? -Nobody will make this argument.

“Secondary” copyright violation. Key doctrines: -Sony (US 1984): if you’re selling a product that’s capable of substantial non-infringing use, not liable for infringing use of users. -Napster (9th Circuit 2001): found to be liable for copyright infringement of users. Basic gist: Sony doesn’t apply because almost all use is infringing. Napster knew what users were doing – central index system. Statements by Fanning that showed he knew what was going on. -Aimster (7th Circuit 2003) -Grokster (9th Circuit 2004): unlike Napster, was decentralized. Able to initially avoid liability because knew less of what was going on.

Various parties asked Supreme Court to modify Sony standard: -Petitioners: Sony shouldn’t apply “when the primary or principal use of a product is infringing,” even if capable of substantial non-infringing use. -Solicitor-general: liability if overwhelmingly used for infringing use, defendant’s business depends on infringing use. -Lichtman & Landes: secondary liability should be imposed if the defendant could eliminate or greatly reduce level of infringement without significantly reducing quantity & quality of lawful use. -Arrow (didn’t get that, see slide)

Response: Sony should be preserved because: -innovations depend on it (e.g. TiVo, iPod, CD burners) -chilling effects of more stringent, unclear standard -variety of new business modes reduce need to modify the law to protect entertainment industry -better ways to reform (streamlined civil enforcement systems, alternative compensation systems)

Grokster end result: -leaves Sony basically intact. -modified “inducement” theory – you’re liable for 3rd parties’ infringement when you promote & sell your product marketing the infringing uses of it.

Even if you pass Sony, you can get nailed on inducement theory.

Q: what is “inducement”? “Purposeful, culpable expression and conduct.” Not pertinent: knowledge of infringing uses, product support. Pertinent: advertising illegal uses; targeting customers known to engage in illegal uses; failure to adopt infringement-reducing technologies (insufficient on its own); “commercial sense” of the enterprise depends on illegal uses (insufficient on its own).

Ambiguity: meaning of distributor intending/encouraging infringement.

Likely effects of Grokster: -Grokster and Streamcast are finished. -technologies whose developers have consistently adopted neutral postures towards the uses to which they are put will survive (e.g. BitTorrent) -lawyers will advise clients never to acknowledge purpose of fostering illegal uses -NOT a big impediment to technological innovation -P2P will continue to grow (? – debated)

Would Sony have passed inducement? Sold cabinets custom-made for “librarying.”

Class comment: movie industry eventually made a lot of money on VHS & successor DVD – to what degree do these “disruptive” technologies create opportunities for the established players

2 kinds of copyright infringement: vicarious, contributory (see slides for more detail).

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Should we adopt an alternative system to copyright for digital media?

Class comments: -good idea but implementing it is practically impossible. Resistance to tax. -too backward-looking: preserves old numbers for size of pie. -music companies’ resistance to this? -increases # of people who will have access, will incentivise more innovation -more efficient market: eliminates distribution problems -doesn’t take into account peoples’ differing enjoyment of media in general (TF: charge subscribers to broadband or some other proxy for use) -what’s in the system? Effect on other economic arrangements, like ad-supported ones (e.g. Television) -would this make advertising less a part of culture generally? Big shift in all media if that’s the case. -Private sector can do it better. Coop should be the primary method, government the fallback? Also, to what extent has regulation shaped the market as it is? Private players now completely dependent on government-granted copyright protection. -To work, would have to be on a very large scale – this mitigates against a bunch of little coops starting up. -Distortion of price information. -The web makes possible much more nuanced price discrimination. Amazon has experimented with selling books at different prices to different people at different times.

Sum up: Social norms on web Clear primary liability for copyright violation. Secondary limit unclear. Do we try to refine current law, or new alternative?