IP: KaZaA BV lawyers explain why file sharing is not theft

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: Nathan Cochrane <ncochrane () theage fairfax com au>
Organization: The Age newspaper
Reply-To: ncochrane () theage fairfax com au
Date: Thu, 09 May 2002 15:30:11 +1000
To: Dave Farber <dave () farber net>
Subject: KaZaA BV lawyers explain why file sharing is not theft

Hi Dave

Phillips Fox acts for KaZaA. Below, one of the lawyers, Mimi Curran,
explains why the firm won in the Dutch case around contributory
copyright infringement and the legal future of P2P in the face of
changing US legislation and interpretation.

Favourite quote: "Although there is much talk of convergence, the
reality is that computers have the edge on traditional media in
attracting users and that the traditional media companies are struggling
to find their way with the new technology available."

---

File sharing software scores its first victory in the courts
Although the American courts sounded a death knell for Napster last
year, other peer to peer file sharing software systems continue to
operate on the Internet. Various law suits both in the US and Europe
have been commenced against a number of these operators and now a Dutch
company, Kazaa BV, has been successful in the Dutch appellate courts in
relation to a claim brought against it by Burma/Stemra (the Dutch
equivalent of AMCOS).

The technology
What is peer to peer file transfer? It is software that when downloaded
onto someone's computer, enables that person to access another person's
hard drive and to find and copy certain files that the software is
designed to recognise. In effect, it allows a direct link between two
computers and can be an effective way of transferring data.

The Napster case
The Napster web site made available the software necessary for the peer
to peer file transfer to work. People used it primarily for copying MP3
music files so bypassing the need to actually purchase recorded music
from record stores.

The Napster site did not maintain a central database of musical tracks -
users did not have to access the site again once they had obtained the
software.

Napster was not itself copying the music that users accessed from each
other.

It did however provide a database of what was available from other users
of the site, making it easier for users to find out whom to go to for
certain pieces of music.

It was this database that caused the American courts to find against
Napster, not the technology itself. The compilation of the database gave
Napster actual knowledge of the copyright infringement that was
occurring with the various uses of the software. Under Australian law,
Napster, by its conduct, was authorising infringing acts.

Alternative sources of peer to peer file transfer software
Although the American decision spelt the end of Napster as a free
service (it has recently relaunched as fee paying service but take up
has not been great), a number of other operators (Kazaa, Morpheus,
Grokster and Gnutella) have stepped in to fill the gap.

These services have avoided the mistake made by Napster and do not
provide any central database. All they do supply is the software.

The Dutch decision
The Dutch court ruled that file-trading developers were not liable for
the copyright infringement that occurs by people using the Kazaa
application.

The decision mirrors rulings in other countries that made the sales of
video recorders and MP3 players legal. Indeed it reflects the view of
the judge in the Napster case that actual knowledge of infringement
cannot be assumed if a technology has the possibility of being used for
non-infringing purposes and as well as infringing purposes.

However, despite the excitement that the decision has generated amongst
technology companies, the developers still have to overcome a number of
cases being brought against them in the US as well the introduction of
new legislation in the US to combat the threat to traditional media from
the new technologies (see below).

Why the traditional medial companies are concerned
Increasingly, people (particularly younger people) are switching off
their televisions and turning on their computers instead to watch films
and television programmes (often without the hassle of the advertising
which may have paid for or contributed to the cost of making the
programmes in the first place), listen to music (free of course), play
games, have access to news sources from around the world, talk to online
friends and order pizza, all without having to leave the comfort of
their bedrooms!

The Record Industry Association of America (the RIAA), in its case
against Napster, produced persuasive statistics to show that college
students were buying fewer CDs because of the availability of software
products like Napster.

An alternative view is that the music industry has done little to help
itself by charging high prices for its products and entering into
extremely expensive recording deals with artists (and having to pay to
get out of them again), so it is not surprising that hard up students
will try to find a cheaper way to access entertainment.

The real problem facing the traditional media is how to harness the
technology and make it pay (and consumers pay for it!). Digital
television companies in the US and the UK have had to file for
bankruptcy. This is mostly due to them trying to attract audiences on
the basis of supplying expensive content (sport and films) which the
limited market cannot sustain or not being sufficiently distinguishable
from other free to air or pay services available to consumers.

Although there is much talk of convergence, the reality is that
computers have the edge on traditional media in attracting users and
that the traditional media companies are struggling to find their way
with the new technology available.

What steps (apart from litigation) are record companies taking to stop
the use of file trading technology to copy music files?

In addition to suing just about every peer to peer file transfer
operator, the film and music industries are also backing a bill in the
US Congress that, if enacted, will mark a departure from the traditional
approach of controlling how people use technology to make copies of
protected rights. Instead, the new bill seeks to control the technology
itself.

The bill requires the entertainment and technology industries to agree
to a technological standard to halt the unauthorised copying of digital
video and film. The standard will have to be included on all digital
media devices (hardware or software) that reproduces, converts,
retrieves or accesses copyrighted works in digital form.

The bill is opposed by many of the large technology companies. They fear
that it will stifle innovation and reduce the effectiveness of any
device capable of playing entertainment content The battle is likely to
be long and drawn out as there are powerful interests on both sides of
the argument. If successful, it is possible that other countries will
bring in similar legislation. In fact, it is arguable that given the
global scope of the Internet, the entertainment industries will not
benefit greatly unless similar restrictions can be introduced on a
global basis. The problem remains for the entertainment industries that
once a user has the software, there is no effective way to police what
that user does with the software.

Phillips Fox will keep you updated as the matter progresses.
For further information contact:
Mimi Curran, senior associate
Tel +61 2 9286 8587
mimi.curran () phillipsfox com


IT & eCommerce e- Bulletin
May 2002
-- 

Nathan Cochrane
Deputy IT Editor
:Next:
The Age and Sydney Morning Herald
http://www.next.theage.com.au



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