Intellectual Property In The Online World: An Ongoing Digital Dilemma

Reprinted with permission from Volume 13, No. 6 © 2005 The Metropolitan Corporate Counsel, Inc. June 2005

From the very first moment when a record company learned that a song could be shared through an online file sharing service for free, or a photographer discovered that his/her photo was being distributed as a high-resolution graphic without a license or an author saw proprietary content posted on a web site without permission, the battle between content providers and technology providers has been raging. New technological advancements are often met with serious concerns over the ability to use such systems for the unauthorized use, copying or distribution of intellectual property.

File Sharing Comes To The Supreme Court

Despite the demise of the old Napster service in 2001 (the trademark is now owned and used by the legal music service Napster, LLC), the popularity and use of peer-to-peer ("P2P") file sharing networks has exploded during the past few years through such services as KaZaa, Morpheus, Grokster, Gnutella, eDonkey and dozens of other systems. At the same time, music sales have been falling, and many blame the widespread availability of free music through such P2P networks. The Recording Industry Association of America ("RIAA"), Motion Picture Association of America ("MPAA") and others who represent copyright holders whose creative materials are traded via P2P services, have successfully used the threat of statutory damages under the Copyright Act to bring actions and obtain settlements against individual end users. However, they have been largely unsuccessful in holding current providers of P2P services liable for the alleged infringing activities occurring through use of such services, due, in large part, to technological differences between the first generation of P2P providers and the most current P2P networks. In 2004, the U.S. Court of Appeals for the Ninth Circuit affirmed a District Court's grant of summary judgment in favor of the P2P service providers Streamcast Networks (a/k/a Morpheus) and Grokster, holding that the providers were not liable for contributory or vicarious copyright infringement. The decision relied upon the landmark 1984 Betamax decision (Sony Corporation of America v. Universal City Studios, Inc.) by the U.S. Supreme Court, which held that the maker of a product with a substantial non-infringing use could not be held liable for copyright infringement merely because the product is used by some users to commit infringement. The entertainment industry appealed the decision, and on March 29, 2005, the United States Supreme Court returned to this heated debate by hearing oral arguments in the case of MGM v. Grokster. Technology providers and content providers are eagerly awaiting a decision to see whether the Court makes a ruling that gives content providers the legal authority to bring actions directly against the P2P services or whether the Court sides with technology providers and the independent technology innovators, who may be, in the words of Justice Souter, just a "guy in the garage."

However, the Supreme Court may or may not have the last word on this issue, as Congress has discussed amending the Copyright Act to allow direct actions against P2P providers for inducing copyright infringement.

Broadcast Flag

The ability to transmit content via digital television, or "DTV", was heralded by the technology industry as the wave of the future. While embracing a new outlet for its content, the entertainment industry became concerned over the potential for the unlicensed distribution of high-quality broadcasts. In response to these concerns, the Federal Communications Commission adopted what became known as the "Broadcast Flag" rule in 2003 to, in the words of the FCC, create a "redistribution content control protection system…[that would]…protect digital broadcast television from the threats of mass, indiscriminate redistribution while protecting consumers' use and enjoyment of digital broadcast content." The Broadcast Flag requirement would have required all providers of equipment capable of receiving digital television transmissions to implement approved Broadcast Flag technologies by July 2005. Since the technology industry was obviously not overly anxious to implement an expensive new system for the sole purpose of benefiting the entertainment industry, technology providers brought suit alleging that the FCC had overstepped the authority granted to it by Congress. On May 6, 2005, a three judge panel from the U.S. Court of Appeals for the District of Columbia unanimously agreed with the technology industry that the FCC did not have the right under its current authority to impose a system such as the Broadcast Flag.

Family Entertainment And Copyright Act

While the technology and entertainment industries await the outcome of MGM v. Grokster, President Bush signed into law the Family Entertainment and Copyright Act on April 27, 2005. The Act establishes stiff criminal penalties for some of the most objectionable, and largely indefensible, acts of copyright infringement affecting the entertainment industry. These acts include the distribution of pre-release audiovisual works on the Internet and using a camcorder to record a movie in a theater. At the same time, the Act permits the marketing and distribution of certain technologies designed to enable a user to delete certain offensive content from a movie. Because the bill addressed the most objectionable practices, did not address many controversial issues and included provisions that benefited both the technology providers and the content providers, it represented an unusual instance where the industries agreed on a piece of legislation. The Family Entertainment and Copyright Act is a rare exception to what has become the rule in this area. As new technologies are introduced each year, from multi-purpose wireless devices to advances in the transmission of broadband signals, the battles between technology providers and content providers are likely to continue since neither side believes that current law adequately addresses their industry’s unique concerns and needs.