Napster and DeCSS: The Future of 
Entertainment in Cyberspace

I.  Copyright in the Age of Napster and Beyond

(c) 2002 Beverly Robin Green [1]

Introduction – Copyright Survives

Many people in the public and the music business watched and wondered if copyright law and the music business as we know it, would survive Napster.  So far, it has.  The U.S. Copyright Law, 17 U.S.C. § 101 et. seq.,  including the Digital Performance Right in Sound Recordings Act[1]  of 1995, and the Digital Millennium Copyright Act[2],  17 U.S.C. §512 et seq.,  is an    adaptable, evolving work of law that has survived and addressed intangible intellectual property rights from the time of old English common law, through the U.S. Constitution, and beyond.

Copyright law is rooted in Article 1, § 1 of the U.S. Constitution, granting Congress the power to promote the “useful arts” by protecting, for limited times, the rights of “authors” in their “writings”, while balancing that directive with protecting the public from monopolies. The concept of copyright law has responded and evolved over the centuries, both legislatively and judicially, to meet the challenges of changing technologies. 

Even before the first U.S. Copyright Act, copyright law and protection survived a half millennium ago, possibly as great a technological development as the internet in our age, the invention of the Guttenberg press, which made relatively mass production and publishing of copyrighted material possible. Copyright protection was afforded to printed works of authorship, but many years later, in 1908, the U.S. Supreme Court dealt a blow to copyright and the music publishers of America by limiting the scope of their copyright protection (and income).   White Smith v. Apollo [3] held that mechanically made and readable copies of music, as embodied on then hi-tech piano rolls, were not readable “writings” as was sheet music, and therefore, not entitled to copyright protection.  Lobbied by the music publishing industry, Congress addressed and corrected this in the1909 Copyright Act, by extending copyright protection to so-called “mechanical” copies, and laying the foundation for an extremely valuable source of income to this day in the music industry, that is called the “mechanical royalty”.  A mechanical royalty is the payment to the owner of the copyright in the music (referred to in the music business as the “music publisher”), for the license to make and distribute “mechanical” copies of music, as embodied on piano rolls, and later records, CDs, and next, the internet.

A Bundle of Rights

Copyright protects what has long been called a “bundle of rights”.  The current basic  U.S. Copyright Law, the Copyright Act of 1976, which went into effect January 1, 1978 , made comprehensive changes, updating and regulating copyrights.  This current Copyright Act lists at 17 U.S.C § 106, those separate rights in the “bundle”, including the exclusive rights of the copyright owner to 1) reproduce or make copies or phonorecords of a copyrighted work, 2)  prepare derivative works based on  the  copyrighted work, 3) distribute, by sale, rental, lease, or lending, a copyrighted work, 4) publicly perform a copyrighted work (with great differences, however, between the broader protection granted to musical works and the much more recent and limited protection granted to sound recordings), and again, with a difference between the protection of musical works and sound recordings, 5) to publicly display a copyrighted work.

It should be noted that the “performance right” differs as to musical works and sound recordings[4] of those musical works, which are defined as two separate copyrightable works.  Generally speaking, the recognition of copyrights in sound recordings, being, of course, a later technological development from music and music in written form, lagged behind that of music itself, with federal copyright protection for sound recordings only being afforded to sound recordings fixed since February 15, 1972.  Sound recordings made before that date are not subject to federal copyright protection, but are generally subject to state and common law copyright.

Infringement and Technology

Over recent decades, the sound recording industry, especially the five or so(the number keeps shrinking with international mergers) “major record labels” (and their professional organization, the RIAA[5],) has grown as strong or stronger than the music publishing industry, and, as we see in A & M Records, Inc  vs. Napster, Inc [6] can hold their own under the present Copyright Law and in the federal Courts, up through the influential 9^th Circuit, so far.

Copyright infringement requires a minimum basis of 1) proof of ownership of copyright, and 2) infringement of one or more of the exclusive copyrights in the “bundle” of rights under 17 U.S.C. § 106. The record companies who claim copyright ownership through “work made for hire” as defined under the 1978 Copyright Act, 17 U.S.C. § 101, however, may face yet another hurdle, as the issue is brought to a head as to whether they can rightfully claim sound recordings as “work made for hire” or whether the recording artists have some claim to their work. This is because the current “work for hire” definition is limited to certain circumstances or categories of works that may not apply to the creation of sound recordings. This question, recently brought to the fore by a group called the “Recording Artists Coalition” (RAC) that filed a brief in Napster against the RIAA and the major record companies, promises to remain an issue.  A recent attempt, through lobbying of the RIAA, got Congress to slip in “sound recordings” as a category for “work for hire” as a “technical correction” in 1999, but upon the outcry of the music recording artists, that amendment was corrected and repealed retroactively in 2000, with specific provisions that neither the amendment nor its deletion can be given any legal significance, or any interpretation, or indication of congressional approval or disapproval, as if it was never enacted.  In other words, the ownership of sound recording copyrights remains a hotly debated and unresolved topic, while the practice in the music business remains to continue to treat sound recordings as “work made for hire” for record companies, so that the record companies own and control those copyrights.

The next major technological threat to copyright protection especially to music and sound recording copyrights and the music business as we know it, came in the form of Napster and its protégées.   While Napster may be at bay for the moment, a lot of damage has already been done, and there are more (and harder to pin down) peer to peer music “swapping” websites online now than ever before.  While the public is generally rejecting the idea of limited subscription online music services and still expecting everything on the net to be for “free”, the overall effect may be to force the major record companies to bring their pricing more within reason and consumer demands. Hopefully, the record companies will not just take the difference out of the generally short-changed recording artist’s royalties, who lest we all forget, are, along with the music writers and composers, the true “authors” of the copyrights that are to be promoted and protected.

What the Evolving Napster Case Stands For

The Napster case, including Judge Patel ’s well researched opinion, granting a preliminary injunction to the record company and music publisher plaintiffs, and the 9^th Circuit’s further analysis of the fair use factors raised as an affirmative defense by Napster, demonstrate the remarkable way that the cobbled together Copyright Law applies to the new challenges of the internet. And now, things are coming full circle, with Napster lobbying Congress to impose some kind of “compulsory” licensing on record companies for digital downloads, and reaching to get Congress to extend something like the compulsory licensing provisions of the Copyright Law (17 U.S.C. §115) that apply to prevent monopolies of mechanical licensing of musical compositions, to digital downloads of sound recordings. While Napster may be stretching to make the comparison seem fair and logical, the whole concept and regulation of “compulsory” licensing of music is one of the more complex (and misunderstood) aspects of the Copyright Law, and should not, in this writer’s opinion, be lightly expanded to other aspects of the music marketplace. It should also be noted that the provisions for compulsory licensing are extremely restricted and require, among other things, notice prior to distribution. Failure to provide the proper notice “forecloses” the possibility of a compulsory license and renders the making and distribution actionable as acts of infringement. 

Against this background, in January, 2002, for the first time since Napster was shut down in the summer of 2001 under Judge Patel ’s preliminary injunction ruling, as upheld by the 9^th Circuit, Napster has launched a test of a commercial file-swapping technology, using tracks licensed from independent record labels.  Judge Patel ’s Napster ruling took a rather traditional approach to copyright law and preliminary injunctions, and arguably similar copyright and technology cases were distinguished.  In Napster the majority of the music and recordings made available for free copying were copyrighted by the plaintiffs, and it was clear that Napster never sought or obtained licenses. The Court repeatedly stressed Napster’s knowledge, intent, willfulness, and lack of sincerity in internal documents and on the record, and especially, the “vast scale” of the infringement to “millions” of users, and the “usurping” effect on the record companies’ markets for online music. 

Indeed, in distinguishing Napster from the Sony[7] case, the Court stated that “the majority of VCR purchasers in Sony did not distribute taped television broadcasts, but merely enjoyed them at home. See id. at 423. In contrast, a Napster user who downloads a copy of a song to her hard drive may make that song available to millions of other individuals, even if she eventually chooses to purchase the CD. So-called sampling on Napster may quickly facilitate unauthorized distribution at an exponential rate.” (emphasis added), and that “Napster users can keep the music they download.” (emphasis added by the Court). The Court also referred to the “global scale” of Napster usage, in deciding that Napster use does not constitute “personal or home use in the traditional sense.”

The Court also rejected Napster’s arguments as to stretching “time-shifting” to “space-shifting” and as to applying “the Ninth Circuit's assertion, in a case involving an inapplicable statute, that space-shifting constitutes non-commercial personal use. See RIAA v. Diamond Multimedia Sys., Inc.[8], (discussing the applicability of the Audio Home Recording Act of 1992 to the Rio MP3 player).”

 The Sony Case and its Legacy

The Court went on to distinguish that “Under Sony, the copyright holder cannot extend his monopoly to products "capable of substantial noninfringing uses." Sony, 464 U. S. at 442. Napster failed to show that space-shifting constitutes a commercially significant use of Napster, stating that “Indeed, the most credible explanation for the exponential growth of traffic to the website is the vast array of free MP3 files offered by other users -- not the ability of each individual to space-shift music she already owns. Thus, even if space-shifting is a fair use, it is not substantial enough to preclude liability under the staple article of commerce doctrine. See Cable/ Home Communication Corp. v. Network Prods., Inc.[9], (affirming finding of contributory infringement where defendant primarily promoted pirate computer chips and other devices capable of descrambling pay-TV broadcasts as infringement aids); A& M Records v. General Audio Video Cassettes, Inc.[10], (rejecting Sony defense because counterfeiting was chief purpose of time-loaded cassettes that defendant sold). 

The Napster Court also reasoned that “In Sony, the defendant's participation did not extend past manufacturing and selling the VCRs: "[ t] he only contact between Sony and the users of the Betamax . . . occurred at the moment of sale."[11]. Here, in contrast, Napster, Inc. maintains and supervises an integrated system that users must access to upload or download files. Courts have distinguished the protection Sony offers to the manufacture and sale of a device from scenarios in which the defendant continues to exercise control over the device's use. See General Audio Video[12], (finding Sony doctrine inapplicable to seller of blank tapes who "acted as a contact between his customers and suppliers of other material necessary for counterfeiting"); RCA Records v. All-Fast Sys., Inc.[13], (holding that defendant in position to control cassette-copying machine could not invoke Sony); see also Columbia Pictures Indus., Inc. v. Aveco, Inc.[14], (holding that business which rented rooms where public viewed copyrighted video cassettes engaged in contributory infringement, even when it was not source of cassettes). Napster, Inc. 's facilitation of unauthorized file-sharing smacks of the contributory infringement in these cases, rather than the legitimate conduct of the VCR manufacturers. Given defendant's control over the service, as opposed to mere manufacturing or selling, the existence of a potentially unobjectionable use like space-shifting does not defeat plaintiffs' claims.”

Regarding issues of knowledge of infringement, it was not lost on Judge Patel that “Some Napster executives boast recording industry experience” and “possessed enough sophistication about intellectual property laws to sue a rock band [The Offspring] that copied its logo.” 

Massive Scale of Unauthorized Distribution

The Napster court was so concerned with Napster’s “unauthorized sharing of plaintiffs' copyrighted music…on a massive scale” and anticipated such “a hemorrhage of plaintiffs' copyrighted material as users rush to obtain free music before trial” that it found it “necessary to issue an injunction covering both plaintiffs' copyrighted works in suit and those not yet named.” Relying on “the statistical evidence of massive, unauthorized downloading and uploading of plaintiffs' copyrighted works -- as many as 10,000 files per second, by defendant's own admission… [T]he court has every reason to believe that, without a preliminary injunction, these numbers will mushroom as Napster users, and newcomers attracted by the publicity, scramble to obtain as much free music as possible before trial”, characterizing the Napster system as “illegal copying on a scale that is without precedent”. (emphasis added).

The Napster Injunction Appeal

            The U. S. Court of Appeals for the Ninth Circuit upheld Judge Patel ’s preliminary injunction ruling, and her fair use analysis in A&M Records v. Napster[15].  In considering Napster’s claims of “fair use”, as balanced against the irreparable harm to the music industry plaintiffs, and their likelihood of prevailing on the merits, the 9^th Circuit reviewed the circuit court’s analysis of “the factors listed in 17 U.S.C. § 107, which guide a court's fair use determination. These factors are: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the "amount and substantiality of the portion used" in relation to the work as a whole; and (4) the effect of the use upon the potential market for the work or the value of the work. See 17 U.S.C. § 107.”  The Court agreed with the district court’s conclusion that Napster did not meet its burden of proving the affirmative defense fair use.

            The first factor “focuses on whether the new work merely replaces the object of the original creation or instead adds a further purpose or different character. In other words, this factor asks "whether and to what extent the new work is 'transformative.'" See Campbell v. Acuff-Rose Music, Inc.[16],…. The district court first concluded that downloading MP3 files does not transform the copyrighted work. Napster, 114 F. Supp. 2d at 912.” “Courts have been reluctant to find fair use when an original work is merely retransmitted in a different medium. See, e.g., Infinity Broadcast Corp. v. Kirkwood, 150 F.3d 104, 108 (2d Cir. 1994) (concluding that retransmission of radio broadcast over telephone lines is not transformative);UMG Recordings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349, 351 (S.D.N.Y.) (finding that reproduction of audio CD into MP3 format does not "transform" the work), certification denied, 2000 WL 710056 (S.D.N.Y. June 1, 2000) ("Defendant's copyright infringement was clear, and the mere fact that it was clothed in the exotic webbing of the Internet does not disguise its illegality."). This "purpose and character" element also requires the district court to determine whether the allegedly infringing use is commercial or noncommercial. See Campbell , 510 U.S. at 584-85. A commercial use weighs against a finding of fair use but is not conclusive on the issue. Id. The district court determined that Napster users engage in commercial use of the copyrighted materials largely because (1) "a host user sending a file cannot be said to engage in a personal use when distributing that file to an anonymous requester" and (2) "Napster users get for free something they would ordinarily have to buy." Napster, 114 F. Supp. 2d at 912. The district court's findings are not clearly erroneous “includes trading infringing copies of a work for other items, "including the receipt of other copyrighted works." See No Electronic Theft Act ("NET Act")[17], (defining "Financial Gain").”  

            In reviewing the second factor the 9^th Circuit pointed out that musical compositions and sound recordings are entitled to more protection than other “more fact-based works “since “Works that are creative in nature are "closer to the core of intended copyright protection", citing Campbell, 510 U.S. at 586. 

            Regarding the third factor, the 9^th Circuit agreed that “While 'wholesale copying does not preclude fair use per se,' copying an entire work 'militates against a finding of fair use.'" Worldwide Church, 227 F.3d at 1118 (quoting Hustler Magazine, Inc. v. Moral Majority, Inc., 796 F.2d 1148, 1155 (9th Cir. 1986))” and that “file transfer necessarily "involves copying the entirety of the copyrighted work." Napster, 114 F. Supp. 2d at 913, while noting “however, that under certain circumstances, a court will conclude that a use is fair even when the protected work is copied in its entirety. See, e.g., Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417, 449-50 (1984) (acknowledging that fair use of time-shifting necessarily involved making a full copy of a protected work).”

            Finally, in upholding the preliminary injunction, the 9^th Circuit noted that "[F]air use, when properly applied, is limited to copying by others which does not materially impair the marketability of the work which is copied." Harper & Row Publishers, Inc. v. Nation Enters[18]. "[T]he importance of this [fourth] factor will vary, not only with the amount of harm, but also with the relative strength of the showing on the other factors." Campbell , 510 U.S. at 591 n.21.”

Foretelling Changes in the Entertainment Industry: Tasini and NGS

In conclusion, the Napster legal review brings to light that there have been significant cases leading to the current decisions to be made as to the scope of copyright in the digital age. 

And, as to copyright issues in the digital age relating to the more established arena of copyright protection of and writings and visual works (including photographs), the recent cases of Greenberg v. Nat. Geographic[19] and New York Times Co. v. Tasini[20] demonstrate that the courts are developing a consistent policy of protecting copyrights even when muddied by  the technological leap from the printed page to the digital compact disk or the internet. 

In the National Geographic case, the issues were basic: copyright ownership of the photographs and the scope of the license, and the narrow application of the privilege (not the right) of 17 U.S.C. §201 ( c ), in holding that the National Geographic on compact disc was not a mere “revision” of a collective work, but a new, derivative work, which is one of the exclusive bundle of rights of the copyright owner (17 U.S.C. § 106(2)). In Tasini, the U.S. Supreme Court also ruled that the re-publication of copyrighted works of freelance writers in an electronic database, when the articles were only licensed for use in print, also constituted copyright infringement, by creating a new work, instead of just a revision of an existing collective work.

Each of these cases hinged on the first element of copyright infringement, ownership, and depended on the particular contacts involved.  Future resolution of these issues may rely on Congress, or on the future structure of contracts in the marketplace.  Hopefully, for the creative folk, the major publishers, like the record companies, will not simply respond by requiring all ownership and rights in their “standard” contracts, and delete those who fail to comply, leading to a “brave new world” of content in the digital age. The issues of copyright law in the digital age have now wended their way squarely into the courts and the halls of Congress, who will hopefully help guide and protect the creators of copyrightable content and the more powerful distributors of their wares, in resolving their issues and developing business models in the digital marketplace.  And hopefully, copyright law and the creative community and values it is designed to promote and protect, will continue to develop and thrive for at least another half millennium, and beyond.

See Part II, Digital Movies: To CSS or To De-CSS?

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