The New War on MP3s

Published May 1, 2008

Intellectual property is a hot issue, with media companies waging a global legal campaign against copyright infringement.

The music industry has gone to court to combat perceived threats ranging from multinational piracy rings to casual file sharers. Recently, it has won some big victories in court.

Yet this frenzy of litigation has yielded some troublesome legal precedents, which highlight the shortcomings of intellectual property law in the United States.

EMI Case

The next potential casualty of America’s deficient copyright regime is MP3Tunes, a San Diego startup founded by Web entrepreneur Michael Robertson, which lets users store digital music files in a secure, Web-based locker they can access from anywhere. MP3Tunes lets listeners access only music they have uploaded themselves. Like a handheld MP3 player, MP3Tunes frees music lovers from dragging around massive album collections on physical discs.

Robertson’s service has run into a major obstacle. EMI, a major British record label, has sued MP3Tunes for copyright infringement. EMI contends that because users are transferring their music to a third party without getting permission from the record label, MP3Tunes is violating EMI’s exclusive right to distribute its music. MP3Tunes faces tough odds given past rulings in copyright infringement cases.

EMI’s argument seems tenuous. MP3Tunes doesn’t “share” files with anybody but the original owner, and paying a third party to act as a custodian does not imply a transfer of ownership. Individuals can already store digital files online using myriad services from Flickr to Mozy. We increasingly back up our entire lives to online repositories, and the individual, not the Web site, remains the owner.

To be sure, intellectual property deserves strong legal protections, and content owners must be empowered with legal tools to combat piracy. But this does not mean laws should erect ironclad walls around digital media, dictating what consumers may do with files they have already purchased.

At some point, content owners have to leave some breathing room. Once someone has purchased an album, moving that music online doesn’t undermine future commercial opportunities for the record company as long as the original buyer retains exclusive access.

New Challenges

The digital age presents new challenges in defining copyright terms. Distinctions based on physical ownership of tangible media seem downright quixotic in a world where intellectual property can be transferred electronically through the Web. Current copyright laws fail to recognize the changing face of the music business, relying instead on an obsolete definition of digital media ownership.

Content owners have rights, but those should not extend to shutting down music storage Web sites that are not abetting copyright infringement. And nothing is stopping EMI from developing its own digital locker service. That a Web startup dreamt up an innovative business model to complement consumers’ busy lifestyles is no cause for judicial intervention.

MP3Tunes is neither facilitating piracy nor discouraging people from buying music in any way. In fact, by making music collections more accessible and therefore more valuable, MP3Tunes might actually cause people to buy more music.

Better Way

This is an old story, familiar since Napster burst upon the scene: Instead of fighting sites like MP3Tunes, major labels would be wise to embrace new ways of delivering value to consumers. Rather than fight Silicon Valley startups, the big music labels could partner with them.

The digital era presents a golden opportunity for consumers and producers alike, if only companies and courts can keep pace with the breakneck pace of technology. Listeners’ appetite for compact discs may have waned, but not so with digital media files. ITunes recently announced that is has sold more than 4 billion songs. In addition, the runaway success of satellite radio and online music subscription services point to a bright future for new music distribution media.

Clinging to outmoded distribution methods will not restore the major labels’ past glory. Heavy-handed tactics will only drive people toward forms of entertainment with flexible rules and innovative supply schemes.

Just as importantly, lawmakers should not support entrenched media’s efforts to squelch new media at the expense of consumers and the equally valid business models of tomorrow.

Need for DCMA Reform

The MP3Tunes dispute underscores the need for substantive copyright reform. The 1998 Digital Millennium Copyright Act (DMCA) sought to preempt future copyright skirmishes by establishing new protections for content secured through Digital Rights Management, but it has fallen short of this aim.

DMCA has its merits. Its Safe Harbor provision, which shields network providers from liability for users’ actions, has been essential in promoting network investment and fostering online commerce. Without legal protections, network operators would have little choice but to preemptively suppress a lot of user speech to avoid costly court battles.

Other parts of the act are more troubling. The most widely criticized section is the anti-circumvention clause, which bans outright any device or software that breaks copy protection. For example, DVDs are copy-protected, so any program that allows owners to make back-up copies is illegal–even if no piracy is involved. Some experts, including noted cryptologists like Dmitry Sklyarov, have decried this section as chilling of academic speech.

Shouldn’t Penalize Pioneers

Some might conclude the obvious answer to the intellectual property dilemma is a sweeping new law, enumerating content owners’ and consumers’ respective rights. But technology is constantly evolving, and any new regulation is bound to face the same difficulties that plague DMCA today.

When Congress tries to foresee the unforeseeable, failure is inevitable. A better approach would be to empower courts to balance intellectual property rights with free speech on a case-by-case basis, while at the same time reexamining DMCA. Should new legislation become necessary, lawmakers should tread carefully, framing the issue with general principles rather than technical specifics designed to compensate for every possible eventuality.

Pioneering businesses like MP3Tunes embody the future of digital entertainment, but unless balance is restored to America’s intellectual property regime, consumers may end up stuck in the information stone age.

Ryan Radia ([email protected]) is a research associate at the Competitive Enterprise Institute (CEI). This article originally appeared on March 24, 2008, at the CEI Web site and is reprinted with permission.