Copyright Law vs. Peer-to-Peer File Sharing: Key Cases

Introduction to Copyright Law

When the technological explosion of the last few decades created new challenges in the area of copyright law, many people thought it would be a straightforward matter. They were wrong. For years, courts around the world have been charged with determining whether companies like Napster and online movie download services are breaking the law — and if so, how they can be stopped. Copyright was a relatively simple issue before the Internet was invented. Works were fixed in tangible form and could not easily be stolen. Bootlegged tapes and videos sold for profit were no different from plagiarism in the eyes of the law, and it was a straightforward procedure to prosecute and sentence offenders.

The advent of the Internet, however, created an entirely new frontier of questionable practices for which no clear guidelines had yet been established. Whether copyright laws are violated when users download songs and movies online has, so far, been decided on a case-by-case basis. There are also international considerations, because Internet users in other countries can access services similar to Napster, and the copyright laws of those nations may differ significantly from those of the United States, further complicating the situation. As the world continues to expand its online capabilities, it will become increasingly important to establish consistent guidelines for protecting copyrighted material in the digital environment.

Before one can fully comprehend the importance of — and the confusion surrounding — copyright law, one must first understand what copyright protects and why. According to the dictionary, a copyright is the exclusive right to reproduce, publish, and sell the matter and form of a literary, musical, or artistic work. While copyright attorneys and courtrooms argue the logistics around the globe, the concept is straightforward in most cases: if a person writes a book, composes a song, or paints a picture, they own all rights to that work and how it is used. They have the right to reproduce it, publish it, or sell it, and no one else may do so without their express permission. A person who purchases the work cannot resell it or reproduce it without authorization from the originator.

The purpose of copyright is to protect creative work from being exploited without the creator's permission. Beyond the moral rationale, there are significant financial considerations. When a person creates a work, they have the right to benefit from it financially, just as the owner of a mechanic shop benefits financially from the labor performed each day.

Copyright protection under Title 17 of the U.S. Code applies to "original works of authorship," including literary, dramatic, musical, artistic, and certain other intellectual works, whether published or unpublished. Section 106 of the Copyright Act gives the copyright owner the exclusive right to do — and to authorize others to do — the following:

It is illegal for anyone to violate any of these rights. However, sections 107 through 121 of the Copyright Act establish limitations on them. In some cases, these limitations take the form of specified exemptions from copyright liability. A major limitation is the doctrine of "fair use," given a statutory basis by section 107 of the Act. In other instances, the limitation takes the form of a "compulsory license," under which certain limited uses of copyrighted works are permitted upon payment of specified royalties and compliance with statutory conditions. Copyright protection begins from the moment the work is created in fixed form; it immediately becomes the property of the author, and only the author — or those deriving rights from the author — can rightfully claim it.

Throughout the years, copyright laws have been frequently challenged and upheld. In more recent decades, many of the most significant cases have involved the film and music industries because of the increased ability to duplicate and distribute their products. One of the most famous early cases was Sony Corp. of America v. Universal City Studios, commonly known as the Sony v. Betamax case. This case predated the Internet and, for its time, represented a state-of-the-art battle over ownership rights.

The ruling came in January 1984, though the underlying problems had begun several years earlier. When VCRs were first introduced, consumers were excited about the ability to buy or rent movies and watch them at home. Many families who otherwise could not attend movie theaters were now afforded the opportunity to enjoy films. It was not long before the public realized that the VCR included a recording function that could use a blank VHS tape to record television shows and broadcast movies. The entertainment industry was not pleased, and many actors spoke out against the practice, claiming it constituted copyright infringement.

In January 1984, the Supreme Court ruled that home recording of television programs on a VCR violated no law. As the Court stated: "One may search the Copyright Act in vain for any sign that the elected representatives of the millions of people who watch television every day have made it unlawful to copy a program for later viewing at home, or have enacted a flat prohibition against the sale of machines that make such copying possible" (Sony v. Betamax).

Peer-to-Peer File Sharing and Copyright Liability

A critical element of the case was the recognition that television broadcasts had essentially been offered to the public as a shared resource. Recording a program for later private viewing was not for profit and involved content that had already been delivered to the public without charge — making it far less of a copyright infringement than if individuals had been selling those recordings commercially.

Following the ruling that home recording of television programs on blank VHS tapes for private use was lawful, the broader landscape of media reproduction began to shift rapidly. Around the time the Sony trial was concluding, the Internet was gaining momentum. The Internet enabled global communication — between many people at once, or one on one — and proved to be one of the most transformative technological developments in modern history. Dot-com companies sprang up around the world, and with them came digital equivalents of the Betamax question. Napster is probably the most well-known peer-to-peer (P2P) file-sharing service of that era. P2P file sharing appeared to sidestep copyright law in part because it lacked a central server that could be targeted by legal action.

As one observer noted: "Peer to peer means there's no central server to serve the injunction to — the lawyers don't have anybody or anything to route. In the post-Napster world the courts aren't the ones writing the code. Peer to peer means people to people, stringing PCs together without a center."

The central copyright law concepts that P2P developers must grapple with are the doctrines of contributory and vicarious copyright infringement. These are "indirect" or "secondary" theories of copyright liability that can hold a software maker or system developer liable for the infringing activities of end users. In a widely used public P2P file-sharing environment, it is a virtual certainty that at least some end users will engage in infringing activity. By invoking contributory and vicarious copyright infringement, copyright owners have sought to hold P2P developers — such as Napster and Scour — responsible for these infringing end-user activities.

Contributory infringement is similar to "aiding and abetting" liability: one who knowingly contributes to another's infringement can be held accountable. To prove a contributory infringement claim, a copyright owner must establish: (1) an act of direct infringement by end users; (2) that the defendant knew or should have known of that direct infringement; and (3) that the defendant materially contributed to it.

The attempt by P2P file-sharing services to work around copyright infringement laws was addressed by the courts in the Napster case. The law holds that a person violates copyright infringement rules if that person has control over users of a file-sharing system and stands to benefit financially from that system. A third criterion for infringement is that the defendant has the ability or right to control the party who was actually committing the infringement.

The Ninth Circuit's decision in the Napster case was the first to apply contributory and vicarious liability to a peer-to-peer file-sharing system. In ruling against Napster, the court interpreted both doctrines broadly. With respect to contributory infringement, the court ruled that once Napster received notice from a copyright owner that a work was being shared on its system without authorization, Napster had a duty to take reasonable steps — including implementing technical changes — to prevent further distribution. This ruling established that once a P2P developer receives a cease-and-desist letter from a copyright owner, the developer must take action, or face liability.

The Napster Case

The court also ruled that claiming ignorance of what users were doing was insufficient. If the platform owners had the ability to police infringing activity and chose not to, they were acting in violation of their legal responsibilities. Early on, artists and their representatives sent letters to Napster requesting the removal of specific works from its system. Napster publicly acknowledged these requests but explained that complying would be cost-prohibitive and technically impractical, given the scale of the peer-to-peer sharing network it had built. The court found this refusal to police — when the ability to do so existed — to be a violation of copyright responsibility.

Ironically, the Napster case also laid out a roadmap for future P2P companies seeking to avoid similar liability. Some of the options available to P2P developers included: designing for total user control or total anarchy; selling stand-alone software products rather than ongoing services; maintaining plausible deniability about end-user activity; identifying substantial non-infringing uses; disaggregating functions; avoiding direct financial benefit from infringing activity; operating as open-source software; not making or storing copies; not building circumvention devices into the product; and not using someone else's trademark in the company name.

The elements of the Napster case were straightforward. The music industry argued that Napster provided users with a means of circumventing copyright law by enabling them to download full albums without paying for them. Napster responded that it had no control over what its participants were doing, since it did not host or store the music — it merely provided a link between users to share compatible files, which happened to be personally downloaded music encoded in MP3 format.

As one description of the controversy noted: "The problem that the music industry has with Napster is that it is a big, automated way to copy copyrighted material. It is a fact that thousands of people are making thousands of copies of copyrighted songs, and neither the music industry nor the artists get any money in return for those copies."

Songs found on MP3 sites generally fall into a few categories: works in the public domain; tracks uploaded by unsigned artists seeking exposure, who are not losing royalties and may in fact benefit from the wider audience; tracks released by record companies to build interest in a new album; and content paid for through legitimate licensing arrangements, where the site pays the artist and/or record company royalties. The last model was discussed early in the Napster controversy, but the platform's owners were reluctant to charge users, and the public had grown accustomed to free access.

Adding to the controversy was the Audio Home Recording Act. This law provides the buyer of a CD or cassette with the right to make a copy for personal use and even copies for friends, as long as the original owner is not selling those copies or receiving any other form of compensation. Napster supporters argued that what they were doing was perfectly legal, since the law does not specify who those friends must be or how many copies may be shared.

The industry ultimately sued Napster, and after a legal battle, Napster lost. The case made international headlines as the first major copyright lawsuit of the Internet era. The court ruled that Napster did indeed exercise control over its users — evidenced by its ability to close accounts and block access at any time — and that it had both the ability and the responsibility to monitor activity flowing through its platform, regardless of the fact that files were technically being shared between individual users. The court's decision made clear that the answer for companies wishing to operate legally in the P2P space was either to devolve total control to users or to accept liability for copyright infringement.

Conclusion

There was a time when the issue of copyright law was a simple one. The writings, paintings, or other forms of work were protected and owned by the originator of the work. If somebody wanted to use the work, they had to obtain permission from the creator and then use it only for the agreed-upon purpose. Problems with the system were relatively simple and rare. The advent of the Internet opened an entirely new frontier — one the world had never encountered before. With a click of a mouse, a user can access information on any topic while simultaneously listening to music of their choice. When software hobbyists began experimenting with file-sharing concepts, they developed a way for people to download music for free. What was originally envisioned as a tool for discovering unknown artists grew into something far larger because of how the platform was structured: anyone who signed on as a member was free to share their music library, which often contained copyrighted material.