What is copyright infringement and how do the courts determine when infringement has taken place?

Copyright infringement occurs when one of a copyright owner’s exclusive rights is violated. A copyright is violated when someone copies, distributes, performs or displays all or part of a copyright work without the permission of the copyright owner. For instance, a copyright in a musical work may be infringed through the sale of “pirate” or bootleg recordings, by the use of digital “samples” without permission, or by the unpermissive use of a musical work in a video or motion picture. To establish copyright infringement in a court of law, a copyright owner must establish proof copyright ownership and proof of copying. Proof of copying may be established either by direct evidence of copying (i.e., an admission) or by indirect evidence showing 1) access to the original work; and 2) “substantial similarity” between the original and allegedly infringing work. 

Courts will not find copyright infringement if two people independently come up with the same or a “substantially similar” work. Also, the less original a copyrighted work is, the less protection it may be entitled to under copyright law. If two works are strikingly similar, some courts may even infer that a defendant had access to the copyrighted work. Whether a work infringes another usually turns on the issue of substantial similarity. In the case of music, courts have ruled that infringement may occur where the “whole meritorious part of the song” is incorporated into another song, without any substantial alteration.

Is current legislation equipped to handle such a change in the way music distribution occurs?

      Copyright law protects the music industry’s most important assets - musical compositions and sound recordings. The copyright owners in musical compositions, generally music publishers, cannot control the availability of their song catalog. Under copyright law, once compositions are publicly released in a phonorecord, composition copyright owners are required to grant licenses to those musical compositions for use in all other sound recordings. The First Sale Doctrine has traditionally been applied to the disposition of a material object containing copyrighted material thereon, such as a sound recording fixed onto a compact disc. As will be discussed below, in the online landscape lawful purchasers would not be transferring the material object. Rather, purchasers would be transferring music files (i.e., copyrighted material) from one material object to another. This ability to transfer arguably falls outside the scope of the policy against restraints on the alienation of tangible property, therefore eliminating any rationale for the application of a First Sale Doctrine to online transfers of lawfully purchased music files.

      Current online music distributors have empowered consumers with the ability to dispose of lawfully purchased online music files. The ability to dispose of, in the traditional sense, is significantly different than the ability to transfer the music format that is not fixed in a phonorecord. The online music distributors’ current models provide the consumer with a limited right to burn music files to compact discs. Once the music format is fixed in a phonorecord, the compact disc, the First Sale Doctrine permits the consumer to dispose of that particular phonorecord (which is not limited to a particular music player).

Because the First Sale Doctrine applies in the above example, online music distributors should preclude further access to the music format once it is burned onto a compact disc. But they continue to provide access to the copyrighted work, even after it is burned onto multiple compact discs and potentially sold to third parties. Additionally, they permit consumers to upload the music format on to a number of portable digital music players and still allow the consumer to retain a copy on the computer hard drive.

The rights granted by online music distributors are very consistent with the freedom consumers’ gain over store-purchased compact discs. The distribution models have evolved, but the means to dispose of copyrighted works has not. The current online models embrace the new technology of distributing a music format not fixed in a phonorecord, but refuse to grant consumers with an equal ability to transfer that music format from their computer hard drives to another consumer’s hard drive - facilitating a digital First Sale Doctrine.

This article suggests that a digital First Sale Doctrine not only promotes the underlying policy of copyright law to enrich public culture, but also aids marketing of the recording industry, which in turn, benefits its bottom line. The online music distributors, through their recording industry licensors, must realize that greater accessibility equals greater exposure and ultimately greater profit margins. To fully employ a digital First Sale Doctrine, however, sweeping measures are required.

What can be done to protect copyright owners?

      When an online music distributor distributes the music file to a consumer, it is only the format that is being distributed. The current First Sale Doctrine does not apply to formats. Congress should enact a digital First Sale Doctrine that accounts for the technological “maneuvering” that occurs when a music format is transferred from one hard drive to another. The legislation must make clear that transfer of the music format to a third party must not implicate the reproduction right. Based on the overreaching controls copyright owners exercise over copyrighted material, legislation alone cannot implement a First Sale Doctrine in the online setting. Sound recording copyright owners are not required to distribute their music online or license it out to online music distributors. Even if Congress did enact a digital First Sale Doctrine and an online music distributor created a model that enabled purchasers the ability to transfer a music format without being fixed in a phonorecord, the copyright owners would refuse to license their works to that particular distributor.

A compulsory license in sound recordings is necessary to ensure that investment will be made in developing newer models of online distribution. Without assurance that copyright owners must license their works to all lawful online distributors, investors have no incentive to aid in the development of First Sale Doctrine technology.

In 2001, Rep. Cannon proposed legislation mandating a compulsory license in sound recordings - the Music Online Competition Act [MOCA].  Like the compulsory license in musical compositions, MOCA required sound recording copyright owners to license their works to all similar distribution entities once an initial license was granted to an affiliated online distributor. An amended law should trigger the compulsory license once a license is granted to any online distributor. Not until Congress enacts laws creating a digital First Sale Doctrine and make the licensing of sound recordings to online distributors compulsory will an investment into developing the technology be undertaken.

      The current online music distribution models are not programmed to facilitate record or police the transfer of a digital format not fixed in a phonorecord. In order to ensure that the transfer does not implicate the reproduction right, distributors would have to either prevent burning and uploading onto portable music players or once the consumer chose to burn or upload the digital format, disengage the transfer option. This technology is feasible.

      Like all other new technologies, the purchasing public will quickly come to understand their property rights in online music. The legal groundwork must be laid before the technology is developed and operational. Technology alone, however, cannot ensure the free alienability of music in the same way a compact disc may be alienated.

      Each online music distributor represents a separate and isolated community. Users from one community can only communicate with other users in that community. If First Sale Doctrine technology existed, the users of a particular community would be limited in the genres of music they could trade or sell and the amount of people they could trade or sell to. No single online distributor offers every sound recording ever created. All music purchasers do not subscribe to the same online distributor. And, a music format purchased from one distributor might not be compatible with the media devices used by another distributor. It is not feasible to have every user register with each online distributor in order to effectuate the First Sale Doctrine.

      As online music distribution grows in popularity, specialty distributors will begin to emerge. These distributors will focus in a specific genre of music or a specific artist, offering tracks that larger distributors would not make available because of storage space and administrative costs. If a First Sale Doctrine in the online landscape is going to work, there must be broad-based community infrastructure that (1) allows users from one community the ability to transfer a music format to other users in different communities and (2) ensure that the music format is converted to make it compatible with another online distribution model.

      In the traditional distribution model, it would be unheard of to prevent a lawful purchaser from selling or trading a non-commercially released album from a local music store to a purchaser that shops at a commercial music outlet, but not the local store. Therefore, a super distributor linked to all online music distributors is needed. The super distributor would serve as a transfer and conversion system enabling users from one music distributor the ability to transfer a music format to the user of another online distribution.

      By using a super distributor, rather than requiring every distributor to create or use a universally compatible music format, the online distributors retain autonomy over their music catalogs and marketing strategy. In any case, the super distributor must be an organization operated with the participation of every online music distributor.

      Ultimately, the ability to initiate an operational digital First Sale Doctrine rests in Congress recognizing lawful purchasers’ right to transfer the music format via online distribution and forcing the sound recording copyright owners to license their works to online distributors. Future investors need assurance that the content will be available before they will invest in developing First Sale Doctrine technology. Surely the sound recording copyright owners will not invest the money to develop a second-hand online music market that arguably usurps what would be otherwise first sales. With the legal foundation laid, copyright owners will become nearly irrelevant.

      Even without legal foundation, however, copyright owners should develop and embrace First Sale Doctrine technology. Some commentators have argued that a second-hand market actually results in more first sales by allowing consumers to offset initial costs through a subsequent sale. This argument is equally applicable to the online landscape. Most important, the model proposed in this article opens up a market once dominated by the major record labels. And, it is to the benefit of the major record labels too.

      By empowering consumers, this proposed distribution model enables millions of music purchasers to teach others and learn about new forms of music. In turn, this equates into a larger percentage of the consuming public using online music distribution and ultimately, larger online music sales spread over a larger percentage of musicians. In the case of the independent labels, it allows them to reach users in other distribution models that do not license the independents’ catalogs.

      The major labels also benefit from the promotion garnered for less-marketed artists. The cost of initially releasing albums online is significantly less than a full marketing campaign and compact disc manufacturing. If this model is successful, the record labels need not necessarily continue searching for hit records, nor have to worry about large overhead costs for promoting new artists. Instead, they can place the artist in the online distribution stream and see how far word of mouth takes them (how up-and-coming musicians gain local and regional popularity through live performances). 

Where are we headed in the future of digital distribution and how can artist’s use the current copyright laws (or lack thereof) to their benefit?

          Artists continue to struggle to generate revenue even though they can easily establish a distribution network via iTunes, eMusic, Amazon, CDbaby.com, and so on.   Here lies the problem. Digital distribution is fragmented among only a few big players. Consumers continue to remain loyal to their chosen distribution networks whether it be iTunes or a bitorrent site like Mininova.  When a person hears a new band or song, it is almost instinctual that they Google the name and stumble onto either a MySpace page or an artist website.   Discovery is not the issue.  The issue arises when someone hopes to buy the music, but is forced to search through iTunes, see if the band is available on eMusic, or scour the web for torrent files.   From a user experience perspective, this deters a good amount of the target audience away from seeking out actual copies of the music in exchange for the ability to stream music.   

So what is the solution?  A few companies have been working to develop open Application Program Interfaces (API) music e-commerce stores which can be easily integrated on any web page.  Imagine visiting an artist’s website and being able to access an entire discography with the ability to stream and purchase songs, without ever leaving the page. SNOCAP has been at this for a while, creating an easy to integrate open API for an artist’s MySpace page.  The company has been relatively unsuccessful with the idea, mainly because of their exclusive partnership with MySpace. Musicians must realize that MySpace serves mainly as a portal for discovery not commerce. Music fans head to an artists MySpace page to stream tracks and get information rather than buy music. 

Already, a number of music service providers such as MOG have arranged deals with MediaNet Open to become their streaming music service.   The service may help decentralize digital distribution and allow artists e-commerce stores to become fabricated into the basic layout of their web page.  Another cool feature is that even music fans can embed the API on their site.  Imagine a fan blogging about their favorite artist while also helping them sell the music on their own site. While open API’s may not be the revolutionary technology necessary to immediately stimulate revenue from digital music, I believe that it may hold the key to democratizing music e-commerce.   While the web inches its way toward Web 3.0 capabilities, we will begin to see more open API’s integrated into websites.  We are already beginning to see the “life-stream” appear on many web pages via the Twitter open API. 

Conclusion

Online music distribution is far from implementing a digital First Sale Doctrine. It is not as simple as enacting legislation that grants music purchasers the ability to transfer a digital format not fixed in a phonorecord. A convergence of law, technology, Internet infrastructure and economic incentive must be present before a viable digital First Sale Doctrine can flourish in the online music distribution model.

Public access to creative works is the foundation on which copyright law was established in the United States. The ability to dispose of lawfully purchased property is equally important to the balance between copyright owners and consumers. If these policies underlying copyright law apply in the online landscape, then property ownership in a music format should be alienable like all other property.

Digital formats are not mediums containing information, but they certainly might fit within the broader definition of property. If market demand shapes the marketplace, as online music distribution gains in popularity, more challenges on the application of copyright law in the online setting should be expected.