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December 29, 2003
Volume 3, Issue 1

Impact of the Johansen Case

Will DVD Acquittal Mean Tougher Copyright Laws

The final weeks of 2003 have not augured well for defenders of traditional copyright in the digital age.

First, a Canadian court ruled that peer-to-peer (P2P) downloading was legal, although it did not declare that uploading was. This was followed by an important decision in Amsterdam, where the Dutch Supreme Court reaffirmed that KaZaA's developers could not be held responsible for actions of the software's users.

An even more stunning blow came last Friday, when the US Court of Appeals rejected the Recording Industry Association of America's (RIAA) argument that Internet service provider (ISP) Verizon Communications was obligated to divulge identities of suspected unauthorized-file uploaders under the Digital Millennium Copyright Act of 1998 (DMCA).

Now this week, prosecutors from Norway's Economic Crime Unit, despite support from the Motion Picture Association of America (MPAA), lost yet another significant battle in the ongoing copyright wars.

The prosecution's argument focused on DeCSS, a technology that removes the Content Scrambling System (CSS), an encryption technology intended to prevent DVDs from being copied.

Jon Lech Johansen created DeCSS so that he could watch DVDs on his Linux machine. At the time, no Linux-compatible player existed.

On Monday, a panel of judges rejected the appeal that prosecutors had filed based on a lower court's decision against their claims in January. That means the decision will stand, at least until possible additional appeals take the case to the Norwegian Supreme Court.

Although DeCSS usage has greatly evolved from that for which this software was originally intended, the court has ruled that Johansen cannot be held responsible for its use, much like KaZaA developers cannot be held responsible for user actions and Verizon cannot be held responsible for P2P traffic on its networks.

No public announcement has been made regarding a further appeal. Considering the near global swing of favor away from such legal arguments, that maneuver may not be advisable. Aside from legislative changes, most Supreme Court rulings become national policy.

Report from CEO Marty Lafferty

Over the holidays, we're completing the third P2P music distribution business model to share with interested constituents.

In the process of developing it, as well as the first two models, with input from many parties for which we're very grateful, we've learned a great deal and are making progress towards a viable solution that we believe a critical mass of affected parties can support.

Meantime, separately, another P2P music model has been submitted to us, about which we'd like to obtain your feedback between now and early January, for possible incorporation into the third major business model that we' re now finalizing.

We've forwarded a full outline of this alternative model, which is summarized below, to a small group of selected music and technology industry leaders, and will be glad to provide it to you. Please e-mail marty@dcia.info to obtain a copy.

This alternative is predicated upon an established marketplace expectation that music ought to be easy to access and move from place to place. "What are you listening to? Can I borrow it?" It builds upon this natural consumer interaction with music - extending the technology of P2P distribution into a commercial framework. Music rights holders would be paid as their works are redistributed, as well as provided with sales performance data.

This model is based on one of the basic premises of P2P of file-sharing - that each end-user can be both uploader and downloader: a provider and a consumer. This proposal extends that notion to allow P2P users to also be buyers/sellers of music - mostly back-catalogue - with the permission of music rights holders for a reasonable price.

It would work in conjunction with the DRM /search prioritization model that the DCIA presented in October, based in part on Charter Member Altnet's growing distribution of licensed videogames, videos, and music via P2P. This previously proposed strategy would be used primarily for new-release music files that come directly from rights holders and allow the listener to have a relationship with the artist. Users would pay a premium (competitive with a CD equivalent) for the confidence that such files would download fast and be of unquestionably high-quality.

This new "file-exchange" strategy would be used in conjunction with the premium pay structure described above to allow users to upload music that they've obtained offline and, along with music they've downloaded, make such files available to other users for a fee. Pricing would be determined by guidelines established by music rights holders. Files that are available as rights-holder-originated music would not be available for users to sell in the same way as this new category of "file-exchange" music.

"File-exchange" transactions would go to clearing houses (not necessarily in real time) that debit buyers' accounts and credit sellers' the amount of revenue sharing to which they're entitled for a sale. Music rights holder credits would be redeemed through locale-specific performing rights bodies, as a line extension of similar work they've been established to do for non-P2P distribution.

Rights holders would need to work closely with creators of P2P software applications and others in the distribution chain to develop tools to help identify music files to be distributed in this way. These files would be looked-up on a service similar to CDDB or Bitzi where users would be able to update the metadata for the files and make them available to others. This service would also give permission for the files to be shared or not by connecting to a clearing-house web service that would associate a file identifier with specific files in its database. If a file were already registered on this service as "rights holder release only," it would only be available in that way, according to terms set by the rights holder.

Clearing houses in each country would collect revenue from transactions and pass it on to in-place performing rights organizations with geographic jurisdiction. Music rights holders would register their catalogues with their selected clearing houses. Each clearing house would share its database with other clearing houses so that the rights holders would be able to view stats on their monthly sales as well as earn revenue from "file-exchange" sales.

The quality control issue would be critical because music rights holders would have to accept users uploading and potentially repackaging their works. If users had the capability to package collections of music files - e.g., party or drive playlists - this idea could demonstrate how fans selling to each other have potentially even higher acceptance than branded distributors. Users could even register their playlists with clearing houses and potentially earn revenue from other people trading their collections. Of course, the music rights holders would also receive their revenue from each file inside such collections.

Please feel free to respond to this alternative P2P music distribution model. We are especially interested in whether or not you believe it should be further explored for incorporation into the third major model we're in the process of completing.

Happy New Year from the entire DCIA team of Adam, Doug, Karen, Kelly, Mark, Rick, Sari, and me.

Coverage of SNL Response to Senators' Letter

The Hollywood Reporter
Brooks Boliek

The chief executive of the most widely used peer-to-peer system told a half-dozen senators that their suggestions for changes in the way that the P2P networks do business are unworkable or already available on the popular file-sharing systems...

Sharman Networks, Ltd. (SNL) CEO Nikki Hemming told the lawmakers that it is unfair to characterize P2P systems like KaZaA as a "platform predominantly used for copyright infringement and illegal access to pornography."

The letter comes after a half-dozen senators, led by Sen. Lindsey Graham, R-SC, asked the P2P networks to explain why they couldn't implement a series of changes to their systems that would prevent the free exchange of pirated material and pornography.

Hemming responded by telling the lawmakers that the changes already are available or impossible to do. She also criticized the lawmakers for their slavish adherence to the RIAA's suggestions.

"We cannot help but note that the 'three common-sense' steps that your letter urges P2P software distributors to take are essentially the same as the 'three common-sense and easily implemented reforms' urged by RIAA chairman and CEO Mitch Bainwol in his Sept. 30 oral testimony before the Senate Permanent Subcommittee on Investigations," Hemming wrote.

"As our answers indicate, (the P2P industry) is already taking such steps to the extent that they are practicable and achievable. However, to the extent that they cannot be implemented or are at odds with the very nature of P2P technology, it is not reasonable for the RIAA to set preconditions that they know cannot be met."

The most egregious condition the senators requested was for P2P networks to implement a filter that would recognize copyrighted works and prevent their unauthorized redistribution. Hemming said that was technologically impossible.

"This sort of filter is in no way a feasible solution for the filtering of copyrighted works - films, music, text and other works in all of the languages of (P2P) users - for many reasons, not the least being that such a filter does not exist," Hemming wrote.

Copyright 2005 Distributed Computing Industry Association
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