The Battle against Illegal File Sharing on the Legal Front - Research Paper Example

Name Course Tutor 29th May, 2012 Executive Summary Illegal file sharing has affected the music business since the first magnetic tapes were introduced to the present day when internet speeds are very fast and illegal file sharing has grown to enormous proportions. The purpose of this paper is to propose a viable option for new internet music distribution business to succeed. The paper explores judgment of the Universal Music Australia Pty Ltd v. Sharman License Holdings Ltd. [2005] FCA 1242 and uses the issues raised in the case to explore the historical context of illegal file sharing. It then looks at the Australia copyright law with emphasis on liability for file sharing of copyrighted material. It also offers recommendations to the music industry to adopt a business model that taps the file sharing technology and builds on the success of successful file sharing sites. It finally concludes that a new online music business would succeed despite the challenge from illegal file sharing. Contents Executive Summary 1 Introduction 3 Universal Music Australia Pty Ltd v. Sharman License Holdings Ltd. [2005] FCA 1242 3 Undisputed Principle 4 Decision 4 Historical context of Illegal file sharing 4 Arguments against File Sharing 9 Arguments for File Sharing 10 Australian Legislation and Case Laws on illegal file sharing 11 Recommendation 11 Conclusion 12 Bibliography 13 Introduction Illegal file sharing is an act where individuals exchange files of artistic work that they do not have the right to redistribution. Illegal file sharing has been accused of driving down the sales of the music industry and forcing various artistes to abandon their careers. However, they are those who feel that illegalizing file sharing of copyrighted material is more detrimental to the music industry than the negative effects it has on music sales. The problem of illegal file sharing is seen by some authorities as an issue of the industry lack of innovativeness in adopting new technologies1. Universal Music Australia Pty Ltd v. Sharman License Holdings Ltd. [2005] FCA 1242 In the case the Sharman licensing limited was the appellant, the company had recently acquired Kazaa a file search and sharing internet service2. Kazaa provide its users free services where they can share their file in an online folder called “My shared Folder” where other users can search and download the material. There were 30 applicants in the case who owned the exclusive rights to the copyright materials involved in Kazaa’s upload and download services. The Applicants accused Kazaa of infringing on copyright, contravening the Trade Practices Act and Conspiracy. Undisputed Principle The court established that Kazaa was involved in the transmission of Copyrighted sound recordings. The courts conclude most copyrighted files were made available and downloaded from the site without the consent of the Copyright holders. The matter under dispute was whether Kazaa had failed to take action to prevent its users from infringing on copyright. Decision The judge ruled in the favor of six of the applicants and issued a restraining order to prevent Kazaa from infringing on the copyright they owned. The judge cited the following grounds for the ruling: a) Kazaa had used ineffective means to deter users from infringing on copyright through warnings in the end user agreement, b) Kazaa had the means to minimize sharing of copyrighted material but did not do so as it went against their business interest, c) Kazaa instead encouraged it users to “join the revolution” to upload and download more files3. In the judgment the judge noted that sharing sites had no power to stop illegal file sharing. He came close to recommending the availing of sound recordings at a fee as viable business model for the applicants and an alternative for illegal file filtering. Historical context of Illegal file sharing The music industry first challenge with file sharing began with the rise of portable computer storage devices and network transfer technologies. The 1971 invention of the floppy disk by IBM enabled the few computer users to carry out an insignificant amount of illegal file transfer among themselves. In 1978 another way to share files was introduced for distributing information about a particular topic (The UseNet)4. The UseNet was also used to share IP illegally and continues to be one of the methods used for illegal file transfer to date. In the 1980s file sharing occurred over phone lines linking two computers through modems. The challenge to music sales was still low as the internet speeds were significantly slow and the downloading process was too technical for ordinary computer users. For years illegal file sharing had gone unchallenged but this changed in 1981 in Sony Corp. of America v Universal City Studios. Inc, 464 U.S. 417 (sup ct 1984), the court ruled that individuals were free to make duplicate copies of television shows to view later at a convenient time5. The ruling was to pose a big challenge to the music industry in future cases against illegal file sharing. The magnitude of illegal file sharing on the music industry grew gradually in the 1990s with advances in computing technology. The proposal for the Worldwide Web (WWW) were submitted; proposing to interconnect millions of hypertext documents and enable ordinary users to access these files at will. The success of the WWW and its merger with the internet technology and introduction of mp3 format in 1991 would ease the transfer of files over the internet meaning producing artistes and companies had lesser control over who would access their work. One year later a file compression system (MP3) was introduced meaning music could now occupy lesser capacity on storage media and could be downloaded or uploaded much faster. In 1993 the first public response to illegal file sharing was launched by the Software Publishers Association (a Software manufacturer’s umbrella group). This public response shows that owners of IP were already starting to feel the heat of their files being shared without their permission. In November 1999, MP3.com was launched enabling users search the Web for Mp3 files but later grew into a hosting cite6. By 1999 the site users downloading up to 4 million mp3 files a day and the sites Initial Public offering was the largest for a technology firm in 19997. In 2000, the site introduced a service where users could share the music they were listening to live. The streaming service was accused of infringing on the IP of UMG who filed sued mp3.com over the matter. In the case UMG Recordings v. Mp3.com, Inc 92 F.Supp. 2d 349 (S.D.N.Y 1999), the plaintiff was ordered to pay UMG $200 million8. Another file sharing site Napster was created in 1999 and would be a huge commercial success hitting 26.4 million users daily by February 20019. The firm had to shut down operations one year after it was established. In the 2000s the challenge of illegal file sharing had become so enormous, every year several peer-to-peer file sharing sites would come up and most would be pulled down through legal action. However, a user would still be spoilt for choice while looking to download music illegally over the internet. In 2000, freenet, edonkey and Gnutella three major file sharing sites were established effectively taking the place of Napster and Mp3.com still caught in legal battles with recording companies10. Gnutella enabled decentralized file sharing where users did not need to upload their files onto centralized servers in order to share them11. The decentralization meant the owners of Gnutella had no control over the files that were exchanged over the network. Freenet also allowed users to upload and download music without requiring any identification12. The two sites were designed to make successful litigation over their file sharing services very hard. In 2001, in A&M Records, Inc V. Napster, Inc, 239 F.3d 1004 (9th cir 2001) it was ruled Napster had infringed the IP right of the plaintiffs both directly and indirectly because it had control over the activities of its users and knowledge that they were infringing on the IPs of the plaintiff13. After the pulling down of Napster, BitTorrent was founded to join the other companies that offered free file sharing services14. In 2003, experts in e-businesses advised the music industry to adopt a business model that uses file sharing to market their products. The model referred to as Open Music model proposes the availing of music easily over the internet by various record labels through a monthly subscription option15. The model proposed includes most of the features of illegal file sharing operations. In the Same year apple established the online iTunes Music Store adopting some of the features of the open Music model but with digital locking mechanism that prevents sharing of the music16. In 2004, the trend of lawsuits against file sharing sites, closure orders and launch of new sharing sites continued. RIAA (Recording Industry Association of America) filed 750 lawsuits against file sharing sites17. Other sites bowed to pressure from the MPAA and shut down their sharing operations. In 2005, Mininova was launched while Lokitorrent was shut down and acquired by the MPAA. In the same year in MGM Studios, Inc. v. Grokster, Ltd. 545 U.S. 913 (2005)18, the US Supreme Court cleared developers of Grokester of accusations of vicarious infringement of copyright law19. In November that year the official BitTorrent website agreed to comply with the Digital Millennium Copyright Act 1998(DMCA). In 2007 in the case of Capitol Records, Inc. v. Thomas, 579 F.Supp.2d 1210 (D. Minn 2008) the file sharer was found guilty and the plaintiffs were awarded $222,000 for the 24 songs he had shared20. In 2008, RIAA officially announced the pursuit of lawsuits against individuals that share files illegally had stopped21. The Ruling of Arista Records LLC v. Lime Group LLC 715 F.Supp.2d 481 (S.D.N.Y. 2010) in October, 2010 ordered all the operation of Livewire’s software stopped22. The company relaunched a newer version of the software in November which could allow access to the functionality of the banned software thus circumventing the ruling. Limewire were sued in March 2011 from liability accruing from the new software. In 2012, the most popular sharing site Megaupload was pulled down by US federal Authorities as its operations infringed copyright on numerous occasions23. Fileserve, BtJunkie and Filesonic all voluntarily stopped sharing files while other site blocked US users. From the historical perspective it is clear that illegal file sharing is deeply rooted among internet users especially among the youth and technology enthusiasts. On occasions, attempts by music industry association seem successful in tackling the problem but later they are circumvented technically or through laws. When the RIAA or MPAA shuts down a site it later appears on the internet under another name24. The magnitude of the problem is also another concern for example if RIAA or MPAA decided to prosecute the cases of the 26 million daily Napster users the suits would be impossible. However the Music industry justifies it continuing fight against illegal file sharing by presenting the arguments discussed below. Arguments against File Sharing The music industry led by the four of the biggest recording studios in America: Warner music, Universal Music group, EMI Group and Sony Music Entertainment have always maintained that illegal download and upload of music to sharing sites is just like mugging a person on the street25. The companies urge that they have used a lot of money in producing the music and the talented individual who produced the artistic has right to share all the monetary benefits that accrue from the music. By distributing the property of another individual without their consent it amounts to stealing that individual’s intellectual property. A second argument is based on the economic losses made by artistes and producers due to illegal file sharing. The Music industries argue that most people who download their music illegally are the most likely people to buy legit music thus file sharing denies the industry an opportunity to make a sale. Arguments for File Sharing Proponents of file sharing argue that file sharing is not wrong and present a very strong case for file sharing. Some groups believe that recording companies are protecting their own interests rather that those of recording artistes in resisting free file transfer. They accuse the big recording companies of paying artistes very little in term of loyalties while keeping the rest for themselves. The music industry has not been able to rebutt this claim and only offers a weak counter argument that this does not make file sharing right26. A second argument for file sharing is based on the transfer of ownership when one purchases an item. File sharing proponents maintain that once you have purchased a CD you can use it whichever way you prefer including sharing it with friends. This is further supported by the argument that music quality on CDs is poor and file sharing offers a person a chance to select only the best music. The file sharing community also cites the U.S Digital Millennium Copyright Act 1998 safe harbor provision which allows ISPs to store files on behalf of a client if they do not have the knowledge that the files infringe on the IP of others27. Australian Legislation and Case Laws on illegal file sharing In Australia, the law does not expressly forbid peer-to-peer file sharing. However, the Copyright act protects owners of IP from infringement through copying of their intellectual property. The Copyright Act 1968(Cth) makes it illegal to reproduce another individual copyrighted work28. The Act holds anyone who avails or downloads content from Peer-to-Peer networks liable if they do not have the permission of the copyright holder both individuals and organizations. Unlike the U.S law fair use terms in the Australian context are narrower with fewer exemptions for copying copyrighted work29. But, time shifting in the case of television programs is allowed. Recommendation To tackle the problem of illegal file sharing the music industry should adopt the open music model and avail an alternative to illegal file sharing. Most people accuse the industry of dragging their feet in adopting a business model that would make illegal file sharing irrelevant. If the industry adopts an industry wide iTunes style of merchandizing music most users would desist from using the illegal file sharing sites. With millions of customers on the internet the music industry would flourish with the profits they would tap from former users of illegal file sharing networks. The music industry should take advantage of the success of file sharing sites to drive the sales of their music up. Instead of suing sites like Napster and Megaupload the RIAA and MPAA should have sought to partner with the sites to make available the music they produce on the sites for a fee on condition the sites would remove any infringing material. By taking this step the organizations would be able to prevent the theft of their intellectual property rights while also tapping the file sharing market Conclusion From the discussion above it is obvious the battle against illegal file sharing on the legal front will never be won without providing an effective alternative to the users of illegal file sharing sites. However, new legit businesses that are seeking to distribute music over the internet need not worry about illegal file sharing as a good business model can turn file sharing into an opportunity tap technology to enable sustainable growth in the music industry. (Words 2727) Bibliography A. Articles/Books/Reports Alikhan, S, Socio-Economic Benefits of Intellectual Property Protection in Developing Countries, Geneva (2000) Geneva: World Intellectual Property Organization. Iachello, V & Hong, J, ‘End-user privacy in human-computer interaction’, (2007) 1 (1) Foundations and Trends in Human-Computer Interaction 1-137. Johnson, M, McGuire, D & Willey, N, ‘Why file sharing networks are dangerous?’, (2009) 52(2) Communications of the ACM. Levine, R, Free Ride: How the Internet Is Destroying the Culture Business and How the Culture Business Can Fight Back (2011) London: Bodley Head. B. Others A&M Records, Inc. v. Napster, 239 F.3d 1004 (9th Cir. 2001) Anderson, N, 2012. Why the feds smashed Megaupload (Accessed May 29th 2012) . Arista Records LLC v. Lime Group LLC 715 F.Supp.2d 481 (2010) Capitol Records, Inc. v. Thomas, 579 F.Supp.2d 1210 (D. Minn 2008 Carey, D, 2012. The History of File Sharing (Accessed May 29th 2012) . Caslons.com 2007. Caslons Analytics filesharing (Accesses May 29th 2012) Copyright Act 1968(Cth) Digital Millennium Copyright Act 1998 Editorial, ‘Sharing Files and Filing Suit’, CBS News (online) (Accessed May 29th 2012) http://www.cbsnews.com/elements/2003/06/26/in_depth_scitech/timeline560590.shtml Hermida, A, 2004. Musicians 'upbeat' about the net, BBC website (Accessed May 29th 2012) . http://anonireland.com/acta/documents/effectoffilesharing.pdf MGM Studios, Inc. v. Grokster, Ltd. 545 U.S. 913 (2005) Nistor, C, 2009. File Sharing – History (Accessed May 29th 2012) . Shuman, G, 2002. Advanced Peer-Based Technology Business Models. MIT Sloan School of Management (Accesses May 29th 2012) . Sony Corp. of America v Universal City Studios. Inc, 464 U.S. 417 (sup ct 1984), Strowel, A, 2009. Peer-to-Peer File Sharing and Secondary Liability in Copyright Law (Accesses May 29th 2012) . Strumpf, K & Oberholzer‐Gee, F, 2005. The Effect of File Sharing on Record Sales: An Empirical Analysis Journal of Political Economy UMG Recordings v. Mp3.com, Inc 92 F.Supp. 2d 349 (S.D.NY 1999), Universal Music Australia Pty Ltd v. Sharman License Holdings Ltd. [2005] FCA 1242 Wolff, M, 2010. Facing the Music: Rock stars and music-industry execs once ruled the earth, but now -- in terms of size and profit margins -- the music industry is becoming the book business (minus the literacy) (Accessed May 29th 2012) . Read More