Piracy and File-Sharing

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Piracy and File-Sharing

Sections within this essay:

Background
Federal Laws
Digital Millennium Copyright Act
No Electronic Theft Act

Napster
After Napster
Grokster
Campus Crackdowns

Additional Resources
Organizations
Motion Picture Association of America (MPAA)
Recording Industry Association of America(RIAA)

Background

Movies, computer software, and music are all forms of intellectual property —products of human intelligence. As technology has evolved from analog technology to digital technology, it has become easier to store and transmit types of intellectual property over the Internet from one computer user to another. This new technology sometimes results in a collision between quickly evolving technology and decades-old copyright law.

Computer technology makes it easy to share digital files between users. A file is a block of information stored on a magnetic media, such as on a hard disk, a tape, or a flash drive; examples of files are computer programs, documents, music, and movies. The practice of sharing files illegally exploded when a format for audio compression produced a type of file known as an MP3 file. This audio compression was important because it significantly reduced the amount of data that needed to be sent over computer networks, but did not affect the perceived quality of the sound or image being transmitted. For example, the MP3 format can reduce the digital recording of a song by a ratio of up to 12 to 1.

File-sharing services allow web users to find and download files from hard drives of other computers. File-sharing is often accomplished through peer-to-peer networks. Pure peer-to-peer computer networks use the computing power of its participants, rather than relying on servers. However, other peer-to-peer networks use a server to communicate the host user's Internet address to a requesting user. The requesting user utilizes this information to connect to the host user's computer. Once the connection is made, a copy of an MP3 file may be downloaded to the requesting user's computer. In a peer-to-peer network, anyone on the network may access files stored on other network computers. Legal issues arise when peer-to-peer networks and other methods are used for the unauthorized transfer and copying of copyrighted materials, such as music, books, and movie files. The illegal duplication and distribution of copyrighted files is known as piracy.

Copyright infringement issues also arise with regard to streaming media. Streaming media is the transmission or transfer of data that is delivered to an online viewer in a steady stream in near real time. Copyrighted content may not be streamed without the express authorization of the copyright holder.

Copyright infringement and piracy issues implicate both criminal and civil law. Most issues are handled under federal law, although state laws sometimes play a part. On the civil side, copyright holders may sue for monetary or statutory damages. In addition, the government may file criminal charges.

The scope of piracy and illegal file-sharing is vast. According to the Motion Picture Association of America (MPAA), more than 1.8 million illegal movies and 3,059 duplicating machines were seized in North America in 2004.

On October 12, 2005, the United States Attorney's Office of the Northern District of California handed down indictments charging several individuals with a scheme to pirate more than 325,000 illegal copies of copyrighted CDs and software. Reportedly the largest CD manufacturing seizure in the country to date, authorities allege that counterfeit copies were made with sophisticated replicating equipment that made the copies look legitimate in every way, even down to affixing the FBI Anti-Piracy warning label that states, "Unauthorized copying is punishable under federal law."

Piracy issues are by no means confined to the United States. For example, in December 2005, officials in Jakarta, Indonesia, announced that they had seized 2.35 million pirated optical discs in three raids over a ten-day period. In the Asia-Pacific region alone, the MPA (the international counterpart of the MPAA) estimated annual losses of approximately $900 million. In 2004, approximately 49,000,000 illegal optical discs were seized in the area.

Federal Laws

Digital Millennium Copyright Act

President Bill Clinton signed the Digital Millennium Copyright Act (DMCA) on October 28, 1998. The law was designed to address problems in copyright laws created by evolving technology. The law was also passed to address international concerns regarding copyright. In 1996, the World Intellectual Property Organization (an agency of the United Nations) passed the Copyright Treaty and the Performances and Phonograms Treaty. This treaty provided for increased protection for copyrighted materials that are in digital form. Signers of the treaty agreed to implement laws to enforce the treaties. The United States is a signatory to the treaty, and the DMCA implemented the treaty on behalf of the U.S.

DMCA goes beyond prior copyright infringement laws. It provided for enhanced penalties for copyright infringement on the Internet. DMCA also criminalizes production and dissemination of technology that is used to circumvent measures taken to protect copyright.

Title I contains provisions that focus on conduct that is intended to circumvent technological measures protecting copyrighted works. It is illegal to "manufacture, import, offer to the public, provide, or otherwise traffic any technology, product, service, device, component, or part thereof," when its primary purpose is to circumvent "a technological measure that effectively controls access to" a copyrighted work. DMCA imposes criminal penalties for such circumvention.

Circumvention devices may be either actual physical medium or digital files that allow for content protection devices put on films, videos, music CDs and the like. An example of unauthorized circumvention devices is the software utility DeCSS, which can break copy protection on DVDs. Using DeCSS, a movie can be decrypted and illegally copied on a computer's hard drive. Two other circumvention devices are the so-called "black boxes" and macrovision defeators.

Two cases demonstrate DMCA's dual role with civil and criminal provisions. In a ruling in a civil case in early 2004, a federal judge from the Northern District of California halted a company from selling DVD copying software, in the case of 321 Studios v. Metro Goldwyn Mayer Studios. Judge Susan Ilston enjoined 321 from manufacturing, distributing or otherwise trafficking in DVD circumvention software. Another case, also from the Northern District of California, involved a criminal prosecution under DMCA. In U.S. v. Elcom Ltd., the government obtained a conviction against a company that marketed a product for the unauthorized reproduction and distribution of electronic books.

No Electronic Theft Act

President Clinton signed the No Electronic Theft Act (NET) in 1997. The law provides for enhanced criminal remedies for copyright infringement. NET was intended to stem the widespread theft of computer software.

The NET Act amended provisions in titles 17 and 18 of the U.S. Code. It permits federal prosecution in cases of large scale, willful copyright infringement even where the purpose is not for a commercial purpose or private financial gain. The law allows for the prosecution of anyone who copies, distributes, or receives software worth more than $1,000, in violation of copyright. Violation is a misdemeanor for the $1,000/six months, but becomes a felony where the value exceeds $2,500.

The law closed a loophole in prior law, which permitted criminal prosecution only for violations that result in financial gain. In 1994 a college student and computer hacker named David LaMacchia used an electronic bulletin board to distribute many commercial software programs. His actions allegedly cost software companies more than $1 million, but La-Macchia himself did not profit. Using pre-NET Act law, a federal judge dismissed the charges against La-Macchia.

Napster

Originally, file-sharing was an unorganized activity. The launch of Napster in 1999 changed everything. That year, college student Shawn Fanning developed a system that made peer-to-peer sharing of MP3 music files easy to do. Named after Fanning's nickname, the development caused an explosion in the popularity of peer-to-peer sharing. College students loved it, but they were by no means the only ones using Napster. Practically overnight, millions were using Napster.

Napster's system allowed music on one computer hard drive to be copied by other Napster users. Digital MP3 files are created from an audio compact disk CD by a process called "ripping." Ripping software allows a CD user to compress the audio information on the CD into the MP3 format, and copy it directly onto a computer's hard drive. Napster users used Napster's centralized servers to search for MP3 files stored on other computers. Then, exact copies of the MP3 file could be transferred from one computer to another via the Internet. The compressed format of the MP3 file is what makes the rapid transmission from one computer to another feasible. Napster's MusicShare software made this all possible. The software was available for free download at the Napster web site. Napster also provided technical support for users. Some estimates estimate up to sixty million people used Napster at the height of its popularity.

Major record companies quickly realized Napster's threat to their profits. They brought suit, charging Napster with contributory and vicarious copyright infringement. A federal district judge in California entered a preliminary injunction against Napster. The judge ordered the company to block users from exchanging copyrighted material.

Napster appealed to the Ninth Circuit Court of Appeals. In 2001, the appellate court upheld most of the lower court's ruling. The Ninth Circuit found that plaintiffs had established a prima facie case of direct copyright infringement. To establish their case, the record labels needed to show ownership of the allegedly infringed material. They also needed to demonstrate that the alleged infringers violated at least one exclusive right granted to copyright holders. The record companies' evidence showed that they owned approximately 70 percent of the files available through Napster. They also established that a majority of Napster users used the Napster system to download and upload copyrighted material.

Napster argued that it had engaged in fair use of the copyrighted material. If so, Napster did not violate copyright laws. The doctrine of fair use first developed in court decisions, but it was later made a part of copyright law, in section 107 of U.S. copyright law. According to the law, a reproduction of a particular work may be considered "fair" if used for purposes such as criticism, comment, news reporting, teaching, scholarship, or research. The law also provides four factors to be used in determining whether or not a particular use is fair:

The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes;
The nature of the copyrighted work;
The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
The effect of the use upon the potential market for or value of the copyrighted work.

Determining whether a use is fair use or an infringement of copyright is often difficult. For example, when examining the amount of a work that has been used, there is no specific number of words, lines, or notes that may safely be taken without permission. Moreover, merely acknowledging the source of copyrighted material is not a substitute for obtaining permission from the copyright holder.

Napster contended that its system was fair use, rather than infringement. It supported this argument with claims that Napster users used the service to make temporary copies before purchasing music ("sampling"), and to access music its users already owned in CD format ("space shifting"). The district and appellate court rejected both these claims. Sampling was a commercial use, the court ruled, even if some of the users eventually purchased the music. Moreover, although wholesale copying does not preclude a claim of fair use, it militates against such a finding. In addition, the recording industry established that its marketability had been affected by Napster.

The appellate court found that Napster could be liable for contributory copyright infringement. Contributory copyright infringement is defined as "one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another." The Ninth Circuit determined that the district court did not err when it concluded that plaintiffs would likely prevail on this point: "Napster, by its conduct, knowingly encourages and assists the infringement of plaintiffs' copyrights."

The recording companies were ordered to provide Napster with lists of recordings. Once that had been done, Napster had the burden to promptly remove those recordings from its system. In 2001 Napster agreed to use screening technology to block distribution of files identified by the recording companies.

After Napster

Grokster

The legal rulings against Napster signaled its virtual demise, but the sharing of copyrighted material over the Internet adapted and continued. Other companies developed services that did not rely on centralized servers to facilitate the file-sharing. Grokster, StreamCast, and other companies distributed free software that allowed users to connect directly with one another. Since the software was free, the companies made money through sales of advertisements included with the software.

Companies in the music industry and the motion picture industry sued to stop these new file-sharing services. The plaintiffs alleged that copyright infringement accounted for 90 percent of the activity on these peer-to-peer networks. Evidence in Grokster showed that the companies marketed themselves to former Napster users and that they did not offer any way to filter copyrighted material that passed through their software.

When the Grokster case was filed in the latter part of 2001, the controlling law was found in the 1984 ruling in Sony Corp. of America v. Universal City Studios, Inc., more commonly called the Betamax case. In Betamax, the entertainment industry sued Sony for selling videocassette recorders (VCRs), because they could be used to record copyrighted movies. The Supreme Court held that Sony was not liable for damages of contributory copyright infringement. It ruled that where a product may be used for "substantial" or "commercially significant noninfringinguses" it was not liable for infringement. This was true even where VCR owners used the product in a manner that constituted copyright infringement, because the VCRs could be used for other noninfringing purposes.

The Grokster litigation reflected the everchanging face of technology, and the laws' attempts to keep up with those changes. Initially, a federal district court judge in California ruled against the music and movie industries, and declined to distinguish between Betamax and Grokster. Moreover, Judge Stephen Wilson distinguished the Ninth Circuit decision in the Napster case. Wilson found that Napster was different because it actually provided a network for the infringement to take place; these defendants did not. On appeal, the Ninth Circuit agreed, ruling that Grokster and the other defendants did not have actual knowledge of copyright infringement, nor the right or ability to supervise its users.

The Ninth Circuit opinion in Grokster conflicted with a ruling from the Seventh Circuit Court of Appeals. In the case of In re Aimster Copyright Litigation, the Seventh Circuit held that Aimster, which provided services similar to Grokster and Stream-Cast, was liable for violation of copyright laws.

The plaintiffs in Grokster filed a writ of certiorari to the Supreme Court, and the case was accepted for review. The court's unanimous decision settled the conflict between the Seventh and Ninth Circuit rulings. On June 27, 2005, in Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd., the U.S. Supreme Court ruled that companies providing peer-to-peer Internet file-sharing programs could be held liable for the copyright infringement by the users of their service. The opinion, written by Justice David Souter held that the Ninth Circuit had misread the Betamax decision. The high court determined that most of the evidence in the case indicated the defendants' purpose was to facilitate a way for users to share files illegally.

The Supreme Court returned the case to the federal district court for final resolution. Rather than continue with the litigation, the parties came to an agreement, which was announced on November 7, 2005. Grokster agreed to immediately discontinue its former business operations, and agreed to have a judgment and a permanent injunction entered against it in favor of the plaintiffs. The Grokster website in December 2005 included the following announcement: "There are legal services for downloading music and movies. This service is not one of them. Grokster hopes to have a safe and legal service available soon." The nearly-bare website also included some information and links about copyright laws.

Campus Crackdowns

Shutting down Napster, Grokster, and other filesharing systems has not made the problem of illegal file-sharing disappear. Moreover, illegal file-sharing has always enjoyed immense popularity among college students, so music industry officials began to concentrate anti-piracy efforts against these individuals. In December 2002, the Recording Industry Association of America (RIAA) sent letters and other warning messages to colleges and universities. College administrators pledged to work with the recording industry to prevent illegal file sharing. RIAA also announced an amnesty plan, available to persons who admitted to illegal sharing of files. Dubbed "Clean Slate", the system required those seeking amnesty to destroy or delete all illegally downloaded copyrighted sound recordings, to refrain from downloading illegal recordings in the future, and to certify that they have not been sued for copyright infringement nor performed any downloading for a commercial purpose.

RIAA has also filed civil lawsuits against students who build their own Napster-like systems on campus. In April 2003, the RIAA filed civil lawsuits against four individual students at Princeton University, Michigan Technological University, and Rensselaer Polytechnic Institute. According to allegations in these complaints, copyright infringement at universities is a serious problem. RIAA alleged that students made between 27,000 and a million songs available through their universities' networks. The music industry also contended that statistics indicated that nearly 50 percent of the available computer resources at some universities were being used for unauthorized copying and distribution of copyrighted material. These cases were settled; defendants paid damages reported to range from $12,500 to $17,000.

The music industry continues to fight against unauthorized file-sharing. On December 15, 2005, RIAA announced copyright infringement lawsuits against 751 individuals, including students at Drexel University, Harvard University, and the University of Southern California. This announcement followed filings of more than 800 such suits in November 2005. Some of the RIAA lawsuits have been filed against unknown persons, so-called "John Doe" lawsuits. This initial approach is necessary because in 2003, the U.S. Court of Appeals for the District of Columbia ruled that RIAA could not require Internet service providers (ISPs) to provide the identities of users who had allegedly engaged in illegal file-sharing. Thus, RIAA initially files against the John Does where an individual cannot be identified. RIAA then requests a court order to force the ISPs to release the names.

Additional Resources

Media, Technology, and Copyright, Michael A. Einhorn, Edward Elgar Publishing, Inc., 2004.

Prosecuting Intellectual Property Crimes Manual, Computer Crime and Intellectual Property Section, Criminal Division, U.S. Department of Justice, 2001, available at http://www.cybercrime.gov/ipmanual.htm

NET Act, Summary of Changes to the Criminal Copyright and Trademark Laws, Department of Justice, Feb. 18, 1988, available athttp://www.usdoj.gov/criminal/cybercrime/netsum.htm.