Frustration is common among those who deal with copyrights on a daily basis, constantly trying to glean logic from a relatively laconic statute which, at times, seems to have been put together by Lewis Carroll with an assist from Stephen King. Although a great deal of copyright legislation has been enacted during the 1990s, problems remain, problems that have been exacerbated by a number of judicial decisions.

One of the first things we are told about the Copyright Act is that it is a political document, not something built upon strictly logical principles. However, it really is not until you start living with it, day in, day out, that you come to realize how very
political it is. When the Copyright Act is filtered through the frequently inexperienced, even more frequently jaundiced, eyes of the current federal judiciary, the results for copyright proprietors often are comparable to those experienced by the French army at the battle of Verdun in World War I.  Nonetheless, we soldier on, despite the political opposition of special interest groups, frequently bizarre court decisions, and the sometimes bewildering opposition of academics. According to Richard A.
Epstein, professor of law at the University of Chicago,

In this holiday season we are reminded that it is better to give than to receive. But it is even better to give what you own--not what belongs to other people. Yet that's precisely what Congress and the president did when it presented Disney shareholders with an early Christmas present this year by passing the Copyright Term Extension Act.... For a grateful Disney, which led the lobbying for the legislation, this was no Mickey Mouse extension but a gift of billions of dollars in future revenues. Thanks to Congress' giveaway, this happy gang of cartoon characters--Mickey, Minnie, Donald, Goofy, and Snow White--won't soon slip into the public domain. [FN1]

Despite such opposition, the music publishing and recording industries have made progress, but at`considerable cost, which threatens to go even higher--in part as the result of compromises that have been the inevitable companions to recent legislation. In every legislative deck, it seems, there is a joker.  The amalgamation of jokers in recent decks raises questions for the music publishing industry and perhaps for the record industry as well.

In the last decade of the 20th century, we've seen a considerable number of domestic and foreign initiatives that were intended to broaden and deepen various types of intellectual property protection, including the following:

. The Copyright Amendments Act of 1992, [FN4] which provided for automatic renewals without the necessity of registration;
. The Audio Home Recording Act of 1992 [FN5] (AHRA);
. The 1994 Uruguay Round GATT agreement, with TRIPS; [FN6]
. The Digital Performance in Sound Recordings Act of 1995; [FN7]
. The WIPO Treaties of December 1996 concerning copyright, phonograms, and performers' rights; [FN8]
. The No Electronic Theft Act, [FN9] which created criminal penalties for those who upload piratical material, even without a profit motive (thus, at least theoretically, preventing future acquittals of the kind that occurred in the LaMacchia case [FN10]);
. The Sonny Bono Copyright Term Extension Act of 1998 [FN11] (SBCTEA); and
. The Digital Millenium Copyright Act of 1998 [FN12] (DMCA).
In each instance, the legislation as originally proposed was designed to remedy specific problems; however, by the time the legislation worked its way through the system, what emerged of course was a compromise (as legislation almost always is), but a compromise that contained within it the potential for considerable harm to our industries.

For example, the AHRA was intended to compensate music publishing and record companies for revenues lost to home recording by imposing surcharges on digital recording equipment and digital recording blanks. On the other hand, the consumer electronics industry, recognizing sub silentio that one of the major attractions of their machines was their ability to copy the works of others, was able to secure a relatively clear field for home copying. As a result, however well intentioned, the
Act falls woefully short of its intentions. This discrepancy is only heightened by widely advertised new hardware that invites the consumer to create his or her own CDs. Whatever pittance the record and music publishing companies receive under the AHRA may well be dwarfed by the losses from such technological advances. This is the teaching of the Diamond Rio case.
Once again, we see how a piece of legislation designed to rectify a past evil becomes the justification for a new evil. In Recording Indus. Ass'n of Am., Inc. v. Diamond Multimedia Sys., Inc., [FN13] the Recording Industry Association of America (RIAA) tried to enjoin the manufacture, importation, distribution, and sale of the Rio PMP 300 (Rio), an MP3 music player capable of downloading digital-quality sound. Music copied onto Rio's memory cards can be uploaded to computers, and its
memory cards also can be removed and transferred to other similar devices. The RIAA claimed that the overwhelming majority of Internet-available MP3 music files infringe and that the Rio basically would be an instrument of infringement. However, the trial court denied preliminary injunctive relief on the ground that if, as the RIAA contended, the Rio was subject to the AHRA, then section 1008 of the Act prohibited copyright infringement actions. Moreover, Diamond Multimedia might have a "fair use" defense under the betamax case. The trial judge brushed aside the plaintiffs' claim of irreparable injury rather glibly, stating that "[t]he only potentially 'incalculable' injury asserted by Plaintiffs is the Rio's contribution to the traffic in illegal MP3 files." [FN14] That reminds one of the old line, "Aside from that, Mrs. Lincoln, how did you enjoy the play?" In fairness, Judge Collins pointed out that even if the Rio contained the serial copy management system technology required by the AHRA, it still would contribute to the traffic in MP3 files. "This type of injury," she stated, "is precisely why the AHRA provides for royalties." [FN15] The Ninth Circuit made the situation even worse, holding that the players did not fit within the definition of "recording devices" under the AHRA. [FN16] Can it be that the AHRA now has been relegated to the status of a quaint, faded relic?

It is not difficult to see a scenario under which Rio memory cards (or successor devices) displace record sales (whether in hard copy form or in download form.). At the time the AHRA was enacted, surveys indicated that those who did the most home copying were for the most part those who bought the most legitimate records as well. Under that scenario, the AHRA made good sense: since home copiers were the RIAA's best customers, a small return from digital home recording equipment and digital blanks would be acceptable. But if the PMP 300 and its progeny become the prevalent model, and if the record companies cannot even collect the relative pittance permitted by the AHRA, then the prospects for the conventional recording industry look dim.

Although the RIAA is in the process of launching its secure digital music initiative, designed to protect legitimate recordings against unauthorized copying, and while Diamond Multimedia has announced that its PMP 500 model will include protective components, the recording and music publishing industries cannot rest easily, given the predilections of people who come from a culture that proceeds from the premise that everything on the Internet ought to be free (because of the origins of the Internet as a forum for the interchange of R&D). We hear commentators tell us that copyright is a dead issue, morally and practically if not legally. Attempts to assert lawful rights are met with breathtaking volumes of hate mail and defiant behavior. The justification for such responses typically is a combination of "free Internet" thinking and the arguments that the users cannot afford the record and music publishing companies' exorbitant prices and that these megaliths are rich enough. For example, OLGA (the On Line Guitar Archive) flourished for a long time until the efforts of Dave Olsen of Warner Bros. Publications, Inc., in Miami and Charlie Sanders of the National Music Publishers Association succeeded in cutting it down to the point where it no longer
is a major factor. Essentially, OLGA was nothing more than a compendium of illegal derivative works. To sever OLGA's ties to mainstream Internet sites was no simple task. The organizers of OLGA were aware of certain court decisions holding that state governments (and therefore state universities) were immune from copyright infringement suits, [FN17] and so they availed themselves of Web sites maintained by such universities. Undaunted, Dave and Charlie convinced many of these universities that it was at least immoral and unethical for them to harbor such infringing--even, since the No Electronic Theft Act, potentially criminal--activities, and several dozen of these institutions were persuaded to turn OLGA off. Finally, Dave and Charlie managed to virtually shut down OLGA altogether. This did not come without a price. Dave and Charlie received thousands of hate e-mails, some of which included death threats. Dave received 592 such communications in a single day. At this point, some remnants still exist, but OLGA per se no longer is active. Services such as Sunhawk [FN18] make legitimate arrangements available for download at reasonable prices, and the National Music Publishers Association's (NMPA) Internet
Anti-Piracy Task Force (IATF) is working to set up a method whereby those whose former outlets were piratical can operate legitimately.

But as dismaying as OLGA was, International Lyric Server (ILS) was even more of a problem. Based in Switzerland, ILS unlawfully uploaded thousands of song lyrics and distributed them throughout the world. In a typical week, ILS's top 10 lyrics each would receive between 10,000 and 15,000 hits. In accordance with the IATF's custom, the initial approach to ILS was of a conciliatory nature, it usually being preferable to do business than to litigate. However, ILS's response was that no license was needed; the Internet is about freedom. In essence, the publishers should "get a life." Now rebuffed, the NMPA obtained a TRO in Switzerland, the proprietors of the site ignored the TRO, and the Swiss authorities thereupon seized ILS's server. The parties reached a settlement, and the NMPA now is working with the former proprietors to reconfigure ILS and restart it as a legitimate enterprise.

The creators of the most popular MP3 players in the world, Winamp and Macamp, which presently are eight million strong, now have made available a new server ware called SHOUTcast. Available at http://www.shoutcast.com, SHOUTcast permits owners of MP3 players to netcast from their homes and is free of charge for "general nonprofit use" but costs $299/server fee for commercial licenses. On the first day of the availability of this software, 91 stations came online (according to the January 16, 1999, Billboard, that number promptly increased to more than two hundred) via their 56K modems. Other
companies, such as TalkNetRadio.com and Destiny Broadcast Network, also have created similar programs designed for individual broadcast situations. According to Justin Frankel, the creator of the software, "Winamp makes no attempt to keep the user from saving the content (whether it be music or talk)," although Mr. Frankel does state that "if Webcasters need to pay performance fees it is their responsibility." At the present time, technology limits the number of listeners who can tune into a
particular station. In addition, the societies have instituted licensing programs for intercasters, and they also have programs in place to monitor such uses. The creators of these programs see them as analogous to traditional radio, with similar promotional benefits, and the record labels' enthusiastic embrace of promotional Web sites certainly would lend credence to this position. Nonetheless, th piratical possibilities are there, especially when factoring in the international possibilities. As the Economist stated prophetically in its July 27, 1996, edition, "Once copyright works are widely distributed over the Internet, the conspiratorial interests of the pirate and the consumer blend seamlessly together."

The industries continue to fight back: a new technology--MP4--is in the works, promising a totally secure distribution system; and IBM and the record labels are working on the Madison Project, which would permit encrypted, watermarked downloads. Such technologies would permit copyright proprietors to control and to collect for the distribution and recording of their works. Of course, the cyber-types crow, anything like this will be hackable in a matter of weeks and therefore futile. We will have to wait and see.

The GATT and WIPO Treaties were adopted to fight this sort of thing, and they have the potential to be beneficial, but here, too, those on the front-lines understandably are nervous about expressing enthusiasm. Under GATT the plus was the requirement that member countries adopt and enforce minimum standards of copyright protection, a most praiseworthy effort. We see a definite trend toward greater recognition of copyright and a heightened willingness to enforce it. Here, again, though, political realities resulted in a somewhat Faustian bargain. Countries like France, which is culturally protectionist to start with and envious of U.S. domination in the entertainment field, preserved their right to impose local quotas. France, of course, is not alone in this: Canada has imposed "Canadian content" requirements in radio for many years. Nonetheless, the French cultural overseers now severely limit prime time airplay of foreign music and records. In our time, when the U.S. marketplace has matured and foreign markets represent our only opportunity for substantial growth, the fact that local quotas and other discriminatory practices are condoned under GATT represents a potential threat to the long-term health of our industries. What has saved us so far has been the media explosion in Europe and elsewhere--for example, in television, where there has been a huge increase in the number of commercial broadcast, cable, and satellite outlets that could not possibly be serviced adequately with local programming. However, that situation could change, and the European Union is working hard to develop schemes--ranging from subsidies to investment pools for film production--to see that it does change.

A principal motivation for the two treaties adopted by the World Intellectual Property Organization in Geneva in December 1996 was the intention to bolster copyright in the context of online commerce. In addition to recognizing a specific right of online distribution, the Treaty on Copyright Law was the first international expression of the right to be protected against circumvention of technological measures intended to prevent unlawful copying (the U.S., of course, had included such measures in the AHRA) and the right to the integrity of copyright management information. The Treaty on Performers and Phonograms established the rights of performers and producers of sound recordings (the U.S. had adopted similar, but more limited, protection in the Digital Performance in Sound Recordings Act). In addition, there was an "agreed statement," not incorporated into the treaty, that made clear that the Berne Convention right of reproduction included the right to make digital copies.

In the hands of our Congress, the enabling legislation (which was described by David Goldberg and Robert J. Bernstein in the New York Law Journal of November 20, 1998, as "the most expansive set of revisions to the Copyright Act in more than a decade") went through some entirely predictable changes. The telecommunications and consumer electronics industries raised the same sort of opposition that the consumer electronics industry had raised toward the AHRA in the course of congressional
deliberations, resulting in a far lower potential exposure than the copyright indusries would have wished. The copyright industries, of course, proceeded from the premise that online service providers (OSPs) should be directly liable if they carried infringing material. However, existing OSPs, telephone companies, and other online "wannabes" pushed amendments designed to treat OSPs like common carriers: mere conduits and therefore immune. They came out pretty well, although they did not secure the absolute immunity that they sought.

Although an OSP will not be entirely immune, it generally will be protected where it is not the source of the infringing transmission, the carriage essentially is automatic, and the OSP does not select or modify the material. While the OSP is not required to monitor materials that are run through its service, the OSP must comply with industry standards concerning copyrighted materials on the Internet and must establish a policy to disconnect repeat offenders. The OSP must have no actual knowledge of the infringement and no knowledge of facts and circumstances from which infringing activity is apparent, and it must act quickly to remove or block off the material once it obtains such knowledge and awareness. Moreover, where it
has the right and ability to control infringing activity, the OSP must not derive any financial benefit directly attributable to the infringement. Finally, there is a "notice- and-takedown" procedure under which the OSP must remove or disable the infringing material upon receipt of appropriate written notice from the copyright proprietor (unless the uploader provides
evidence that the use does not infringe).

Each OSP must designate an official agent to receive infringement complaints, and the agent's name must be available on the Web site and also must be registered with the Copyright Office. (This registration requirement is a very good thing, given that the Register of Copyrights is required to maintain a registry of such agents, which must be accessible via the Internet, and such a requirement makes it much easier to determine where to send notice.) If the OSP acts expeditiously to remove the offending material or disable access to it, the OSP will avoid liability to the claimant (as well as the uploader, in the event that the uploader decides to contest the takedown). It is noteworthy that the DMCA makes clear that basic rights, remedies, limitations, or defenses to copyright infringement (including free speech and the "fair use" defense) are unaffected by the new
regime and that the DMCA neither enlarges nor diminishes vicarious or contributory liability for infringement.

All in all, this is a fairly reasonable conclusion. In the case of OSPs based in the U.S., we are encouraged. The problem, of course, in cases such as that involving ILS, is the international nature of the Internet; and none of the international agreements yet has addressed this issue. Indeed, the same issues have surfaced in the negotiations concerning the European Union draft directives for the implementation of the WIPO Treaties throughout the 15 member nations.

A good illustration of the international jurisdiction problem is the recent decision of the U.S. District Court for the Southern District of New York in Quantitative Fin. Software Ltd. v. Infinity Fin. Tech. Inc., [FN19] where the court held that neither the Berne Convention nor its implementing legislation confers subject matter jurisdiction in the U.S. for copyright infringement outside the U.S. If ILS posts lyrics unlawfully in Switzerland, and a U.S. resident accesses it on his or her computer, where does the infringement occur? What happens where--as is often the case--one publisher controls the song in the U.S. and a different publisher controls it in Europe? We are not the only ones wrestling with this issue: according to the Netherlands Lawyers Association, "the reference rule for illegitimate acts and infringements on intellectual property rights caused through the Internet should be the 'Lex Protectionis' (the law of the country where the damage manifests itself)." [FN20] However, the authors point out that the European Commission advanced the "country of origin" theory in its Green Paper on Copyright and Related Right in the Information Society. The Dutch Copyright Association concluded, according to the authors, that "the country-of-origin rule can only be effective in case of a worldwide harmonisation of copyrights."

The Dutch lawyers may be on to something. When potential licensees contact Warner/Chappell Music for Internet licenses, and Warner/Chappell only controls U.S. rights, we now must tell them that we only can allow them to permit access from computers in the U.S. and that they must contact the administrators of the copyrights in other countries, a process that currently is impractical and uneconomical. If a woman in New Zealand sets up a lyric site, and its contents are accessed by ILS, which in turn is accessed by a computer in the U.S., we face bewildering legal and practical issues concerning jurisdiction. I believe that
we need a third WIPO Treaty that would determine how worldwide licenses could be issued in split-rights situations and that would establish definitive jurisdictional rules in cases of international infringements such as those of ILS.

Finally, a few words about the SBCTEA [FN21] and its malignant subset, Congressman Sensenbrenner's Fairness in Music Licensing Act. [FN22] The music publishing and recording industries lost a good friend when Sonny Bono died. He and
Senator Orrin Hatch played key roles in securing term extension, the lack of which would have cost the music publishing industry at least hundreds of millions of dollars. Wholly apart from the actual dollars lost through the application of the "rule of the shorter term" in other countries, the failure to pass term extension would have emboldened those foreign mechanical and performing rights societies that feel keenly that their works receive insufficient airplay in the U.S. and that when such works are utilized, the payments therefor are far below the  rates these societies are able to collect (a scenario that certainly is true in Europe).

On the other hand, we are stuck with the Sensenbrenner amendment, vicious and mean-spirited even though substantially defanged. Restaurants with up to 3,750 square feet of gross space (including nondining areas) and retail establishments with up to 2,000 square feet of gross space that observe some very generous limitations on the equipment they use are exempt from performing license requirements. Whereas Congressman Sensenbrenner originally asked that disputes between restaurants and
performing rights societies be heard in the districts in which the individual restaurants were situated, the Act provides for "circuitry," under which a single district court in the home city of each of the 12 federal circuits will hear such cases. [FN23] While far from perfect, this is a far more desirable outcome from the standpoint of the societies and their members. The potential killer for the music publishing industry is Section 206 of the Act, which states:

Except as otherwise provided in this title, nothing in this title shall be construed to relieve any performing rights society of any obligation under any State or local statute, ordinance or law, or consent decree or other court order governing its operation, as such statute, ordinance, law, decree, or order is in effect on the date of the enactment of this Act, as it may be amended after such date, or as it may be issued or agreed to after such date.

Despite its manifest unfairness, the Sensenbrenner amendment carried because the National Restaurant Association has seven hundred thousand members and a presence in every congressional district. The telephone companies, the consumer electronics people, and other opponents of broad copyright protection enjoy similar numbers and dispersion. In our system of democracy, these statistics count, and thus Congress consistently has enacted bills that do not quite go far enough and that contain within
them the potential for negative consequences. Ironically, even a bill that enjoyed extremely wide support--the No Electronic Theft Act--is not likely to yield much comfort, as anyone knows who has ever tried to convince the FBI or a U.S. Attorney's office to bring criminal prosecutions against copyright infringers. [FN25]

As might be expected, the Sensenbrenner amendment has provoked outrage in Europe, where the music industry and its representatives are already unhappy with the situation in this country. The European Union is processing a complaint through the World Trade Organization. According to the European Union, U.S. legislation "appears to be inconsistent with the obligations of the country" under international treaties. [FN26] The restaurant exemption "has been a catalyst for negative public and private attitudes" toward paying royalties for music. The interesting thing about this initiative is that it had its genesis prior to the enactmentof term extension, and actually arose out of a complaint by the Irish Mechanical Rights Organization that the original "fried chicken" exemption (created judicially by the U.S. Supreme Court in the Aiken case) [FN27] deprived the organization of the monies it normally would have collected due to the popularity of Irish music in the U.S.

According to a statement by the International Intellectual Property Association released on May 7, 1998, U.S. core copyright industries (i.e., those that create copyrighted products) accounted for 3.6% of the country's gross domestic product in 1996, amounting to $278 billion and representing 3.5 million jobs.  Between 1977 and 1996, the core copyright industries grew nearly three times as fast as the annual rate of the economy as a whole--4.6% compared to 1.6%. Foreign sales amounted to $60.8 billion, exceeded only by automobiles, aircraft, and agriculture. Our music publishing and recording industries represent a
substantial part of those impressive numbers. We will have to work hard to sustain them.

In part, this will require us to provide constant reminders to our legislative representatives that much more is at stake than the momentary placation of special interests seeking a free ride. To paraphrase the old axiom, "The price of survival is eternal vigilance." Back around the turn of the last century, there were a lot of blacksmiths. Then the automobile arrived in force. Within a few years, there were a lot of auto mechanics but almost no blacksmiths. I believe that the next decade will determine whether the music publishing and recording industries are auto mechanics or blacksmiths.

[FNa1]. Don Biederman is executive vice president and general counsel for Warner/Chappell Music, Inc., and an adjunct professor of law at Southwestern University School of Law in Los Angeles. The opinions expressed are his own.

[FN1]. WALL ST. J., Dec. 21, 1998, at A19. (Professor. Epstein also is the author of PRINCIPLES FOR A FREE SOCIETY: RECONCILING INDIVIDUAL LIBERTY WITH THE COMMON GOOD, published in 1998.) Of course, Professor Epstein clearly is wrong: the characters would not go into the public domain, just certain vehicles embodying those characters. But never mind. And in fairness to Professor Epstein, he also roundly condemns the Sensenbrenner amendment to the Sonny Bono Copyright Term Extension Act, which is discussed below.

[FN2]. To cite but a single example, the film industry: the U.S. studios' foreign revenues for theatrical films hit $5.7 billion in 1998. HOLLYWOOD REP., Aug. 31, 1999, at 78. Generally, the U.S. studios' foreign theatrical revenues are approximately one-half of their total worldwide theatrical revenues.

[FN3]. No. 1:99cv65 (D.D.C., filed Jan. 11, 1999). That this is a highly contentious issue is reflected in the fact that both sides are represented by members of the faculty at Harvard Law School.

[FN4]. Pub. L. No. 102-307, 106 Stat. 264 (1992).

[FN5]. Pub. L. No. 102-563, 106 Stat. 4237 (1992).

[FN6]. 33 I.L.M. 136 (1994)

[FN7]. Pub. L. No. 104-39, 109 Stat. 336 (1995).

[FN8]. WIPO Treaty on Copyrights, CRNR/DC/94, WIPO Treaty on Performances and Phonograms, CRNR/DC/94, both adopted Dec. 20, 1996.

[FN9]. Pub. L. No. 105-147, 111 Stat. 2678 (1997).

[FN10]. United States v. La Macchia, 871 F. Supp. 535 (D. Mass. 1994).

[FN11]. Pub. L. No. 105-298, 112 Stat. 3287 (1998).

[FN12]. Pub. L. No. 105-304, 112 Stat. 2860 (1998). This, of course, ties the U.S. into the 1996 WIPO Treaties, which have yet to come into force because the necessary minimum 30 countries have not yet ratified the treaties.

[FN13]. Recording Indus. Ass'n of Am., Inc. v. Diamond Multimedia Sys., Inc., 29 F. Supp. 2d 624 (C.D. Cal. 1998), aff'd, 180 F.3d 1072 (9th Cir. 1999).

[FN14]. 29 F. Supp. 2d at 627.

[FN15]. 29 F. Supp. 2d at 633.

[FN16]. Recording Indus. Ass'n of Am., Inc. v. Diamond Multimedia Sys., Inc., 180 F.3d. 1072 (9th Cir. 1999).

[FN17]. See, e.g., Chavez v. Arte Publico Press, 157 F.3d 282 (5th Cir. 1998).

[FN18]. Sunhawk Web site <http://www.sunhawk.com>.

[FN19]. No. 97-Civ 7879 (S.D.N.Y. (LMM) July 28, 1998)

[FN20]. HELEEN C. HOOGEVEEN & BERT OOSTING, 12 WORLD INTELLECTUAL PROPERTY
REPORT (BNA) 345.

[FN21]. Pub. L. No. 105-295.

[FN22]. Title II of the SBCTEA amends section 110(5) of the Copyright Act of 1976.

[FN23]. This is now provided in section 512 of the Copyright Act of 1976.

[FN24]. ASCAP v. Pataki, 1997 COPYRIGHT L. DEC. (CCH) ¶ 27,649 (S.D.N.Y. 1997).

[FN25]. The first NET Act conviction was announced as this article was going to press.

[FN26]. BILLBOARD, Jan. 16, 1999, at 5.

[FN27]. Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 (1975).
END OF DOCUMENT