(entry last updated: 2003-07-02 15:33:29)
For years, Hormel Foods Corp. has watched as the name of its famous product has come to mean junk e-mail, a source of heartburn for computer users.
Now Hormel is asserting its trademark rights, filing complaints against Spam Arrest LLC, a Seattle technology company that provides spam-blocking software.
Terry: The relationship between law and the internet distribution of digital entertainment. About 2/3’s of the time will be focused on music, but there will also be the analogous treatment of the coming wave of movie distribution.
Potential Benefits – Three forms for music distribution – downloading; interactive streaming; and noninteractive streaming. Why should we seek to encourage or enable these forms for distribution? There are opportunities and harms, potential or otherwise.
Cost savings is the first benefit – 38% to the retailer; 8% to the distributor; 14% to rc overhead; 5% artist and repertoire rc; 8% to rc marketing; 8% to rc manufacture; 1% is record co profit; 12% to the artist; and 4% to the publisher. Opportunities to save – no retailing, no physical CD to manufacture. Other savings are harder, based on what record companies do – ID artists, produce, promote, distribute and spread risk (recall that most artists don’t make money). Internet distribution affords cost savings in these record company actions – studio costs are falling; promotion costs can drop with internet promotion; distribution costs are vastly reduced; and potentially a reduced need for risk spreading because the risks are smaller.
Net out that somewhere between 1/2 and 2/3 of the retail price of a CD disappears.
Another advantage – over and under production is avoided because of JIT production, as well as increased convenience and precision. Moreover, we could potentially achieve the "celestial jukebox". With the reduction in risk, the barriers to entry are lowered, so many more musicians can make a living and the variety would increase. Finally, there is this opportunity for semiotic demoncracy, taking real form in this context – a spreading of the opportunities, and democratizing the “vehicles of meaning-making.”
Harms also arise – The revenues of creators are threatened if the companies are not paid (as well as the incentives to create are lost). There also is a threat to moral rights, the notion that there is an entitlement to an artist to protect the integrity of his work. (In Europe, an artist can sell a painting, but he retains the right to ensure that the painting is not defaced.) An extension of this could lead to a loss of stable reference points in culture – version 1 is immediately changed into v1.1, etc. The loss of touchpoints.
The goals of a legal system should be focused on facilitating the benefits, while limiting the harms. A balance should be expected, but it has not occurred.
Background on Copyright Law circa 1990 – Objects of protection – each piece of recorded music entails two copyrights; the copyright of the music composer. The composer gets exclusive rights of reproduction; exclusive right to make derivative works; presumptively exclusive right to distribution; a right of public performance. The second piece is the copyright interest in the sound recording (only since 1972). So, the performer has a copyright. Different entitlements: exclusive right of reproduction, in a narrower sense – verbatim copies are prohibited, but playing by ear is not an infringement of the performer, only of the composer; exclusive right of derivative works – e.g., sampling; exclusive right of distribution of the recording to the public; but until 1996 no public performance right. Radio broadcasting of recordings used to mean that the composer had to be paid, but the performer doesn’t get paid, because public performance is not in the law as of 1996.
Exceptions and limitations also exist: some of the most important. First sale doctrine – once a performer has sold a copy, the performer has no further control (over resale, etc.) Compulsory licenses (jukeboxes, PBS, cable and satellite retransmissions; “covers”) – the government sets a fee that the copyright owner must accept in exchange for what would otherwise be an infringement – almost entirely related to public performance. Cover licenses – compulsory mechanical licenses – section 115; so covers of songs are legal provided the compulsory license is paid, and the original performer cannot limit. Finally, we get fair use, the most complex of these, so we’ll come back to it in a minute.
Terry shows how a network of relations leads to the structure of the music business. Payola is the oddity in the network, where record companies pay radio stations to broadcast music produced by the record companies.
(Z: Isn’t payola illegal? F: A scandal of the 50s likening it to bribery. Z: a distinction from the supermarket. F: The modern payola is public, and is tolerated, while the old style under the table version was made illegal.) (L Rein: What about the payola of paying retailers to put CDs on the shelf? F: Retailers are also getting hurt as the sales of CDs decline. There are three sorts of retailers – the Best Buys sell as loss leaders; Tower Records, etc. sell as a business as a chain; and the little specialized operations. The damage has been disproportionately – the HMVs and Tower Records are getting nailed, so individuals are having to go to the alternatives. And most end up at the Best Buys, which take this kind of payola for shelf space. The size of this $$ means that the record companies won’t do this for all their repertoire, narrowing the scope of music available.)
Another question: where is Amazon in this heirarchy? So far, they are unaffected by this, and they are largely intermediates. Their retail costs are lower. And intermediate case.
Clarification: so shelf payola is tolerated because it’s not hidden; at least that appears to be the public policy perception.
Now let’s get film into the story. The model is more complex, but the rights are simpler. The movie producer gets all the rights enumerated above. The producer aggregates the rights of the author, screenwriters, composers, released from the location, rights from the actors, etc. The producer lies at the center the net (note that this is not the case in Europe, usually). The producer then assigns distribution rights to the studio. Copies of the monies are rented (plus performance licenses) from theaters, TVs, etc. Sales to video stores, licenses to cable companies, etc.
Fair Use: the key influence has been the Betamax case of 1984. The case introduced a doctrine embodied in section 107 of the law today: a key exception to copyright. Fair use exists in the eye of a court; a declaration has to be made on a case-by-case basis. The factors to be weighed (1) the character of the use; (2) the nature of the copyrighted work; (3) amount and important of the material used; and (4) how serious is the impact on the potential market. Construed by the US Supreme Court over the relation between the studio and the TV network.
Betamax arises out of a perception that movies are being copied without the advertizing; thus threatening the licensing stream. The studios assert harm, but they need to identify whom to sue. A clear violation of the right of reproduction, so the users could be sued. There was some anxiety that the users might be sued, but in the end they sued the facilitator – contributory and/or vicarious infringement (i.e, helping others to infringe).
5-4 this is declared legal – we get “significant noninfringing uses” – and a Betamax allows a single noninfringing use (timeshifting), so the machine is legal.
- Archiving is illegal – it’s not timeshifting.
- The other 2 cases the Supreme Court neede more time for? (a) campbell v. acuff rose – the 2 live crew decision
and (b) A case involving the Gerald Ford biography
- What about Jazz? Isn’t this all improv and building upon each other? How does this work. Is there some internal trick – yes. Partly this requires “fixed in a tangible medium of expression” – jazz is out; partly this is a question of amount copied – it has to be more than a phrase.
A discussion of unintentional mimicking – not illegal under copyright, unlike patents.
Cycles of innovation and resistance
DAT Recorders / AHRA – the DAT is created; the audio home recording act mandated a serial copyright management sytem, a tax and royalty system, and a non-commercial harbor for customer (section 1008). Thus, DAT is frustrated.
Encryption circumvention / DMCA section 1201 – the developers of the technology to play digital entertainment by employing encryption systems to limit consumer access. CSS, SDMI, RealMedia and eBook Reader. All these encryption systems have been cracked, largely by non-US teenagers. DeCSS, Felten, Streamripper and Sklyarov. So, a law is set up. The DMCA and section 1201 – civil and criminal penalties for circumvention. Courts were enthusiastic at one time (Streambox and Reimerdes), but somewhat less so lately in Felten and Sklyarov (acquitted).
Music lockers / MP3.com litigation – the Beam-It Service, allowing you to listen to music that you had bought, on demand from your music locker. The recording industry decided that this was not OK, even though the CDs had been bought by the consumers. As a commercial activity, this is not fair use, and Universal won, got willful infringement, and bought MP3.com
Webcasting / DMCA and CARP – radio over the internet, offering up a huge variety of music. Webcasters, like radio stations, had to pay the compulsory licenses. Webcasters did not have to pay record companies; and the record companies saw a new source, since they lost to radio. So in 1996, a digital public performance right in sound recordings was created – a new burden not found in the analog world. There are three kinds of digital audio xmissions – 1-exempt; 2-compulsory licenses, set by the CARP; 3-interactive requires negotiations. The panel came up with a fee schedule, with an uproar leading the librarian of congress to cut the rate. If you do the math. Terry does the math to show the costs for a small caster of a million dollars a year – 10,000 listeners (small)
Centralized file sharing; napster; Napster Scour litigation – 40 to 70 million uses leading to a claim comparable to those in the Betamax – contributory and vicarious infringement was claimed. The Sony defense was asserted. The 9th Circuit said there was no substantial non-infringing uses. Leading to pure peer to peer systems; leading to another round of suits; largely leading to the same outcome. Most recently, the Aimster decision upheld this patter. However, the Grokster decision said that there were non infringing uses.
P2P / P2P litigation – see above
CD burning / CD copy protection – CD burners are now everywhere; less and less CDs being sold; Terry’s children have more copied CDs than manufactured. The response has been technical, via copy protection methods. These technologies have been tried, but there also has been a backlash. The record companies are likely to move to new platforms, DVD-audio
A continuing cycle, leading to a doubling in the length of the copyright title since 1990. The consequence, we have failed to achieve the benefits.
Defects in the Resulting System – high transaction costs, price to consumer to access to recorded music is high, no celestial jukebox; encryption limits access to smiotic democracy; continued concentration of the music industry; and the P2P system continues to challenge the artists’ compensation.
Where do we go from here? Not enough time to say, but we’ll get there later today
(note: since Terry handed out overheads, I hope I can clean this up later)