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Digital Music & Copyright: Third Party Liability & Home Taping

Andrew McRobert
Senior Research Fellow
Asia Pacific Intellectual Property Law Institute
Murdoch University *

Contents

    Introduction

  1. The Internet is something of a double-edged sword for the recorded music industry. Whilst it presents itself as a radically reinvented delivery model for digital music [1] it also facilitates sophisticated copyright infringement on a global scale. [2]

  2. The recording industry has been slow in adopting Internet technology for two main reasons. First, there has been a lack of a secure digital file formats which incorporate copying protection mechanisms. Second, the Internet threatens the position of the recording companies as the 'middleman' between artists and consumers, as digital technology allows artists to record and then distribute their songs directly to consumers at minimal cost. [3]

  3. The failure of the major recording labels to make the transition to online distribution has allowed a number of unauthorised online music distribution technologies to emerge. Perhaps the most infamous of these technologies is the software owned by Napster [4] ("Napster"). At its peak, Napster had more than 20 million users worldwide [5] and the company expected that number to grow to 75 million by the end of 2000. [6] At peak times, there were about a million simultaneous users of Napster. To put that figure in perspective, America Online (the largest ISP in the United States with a market capitalisation of about US$108.5 billion), has about 1.6 million users at peak hour. [7]

  4. The litigation concerning Napster's MusicShare software has received widespread mainstream media coverage. In the litigation, the Recording Industry Association of America ("RIAA") and eighteen record companies [8] allege that Napster is "running an online bazaar devoted to the piracy of music" [9] rendering it liable for, inter alia, contributory and vicarious copyright infringement. In July 2000, Napster was ordered by the Ninth Circuit to filter out all songs in which the plaintiffs' held copyright. The result of the required modifications to the MusicShare software was to drive most of Napster's consumers, and most of the available files, away from the service. Napster conceded that a few of the songs identified by the plaintiffs were still slipping through the service before it voluntarily shut itself down for "database upgrades" on 1 July 2000. However, only about 100,000 to 150,000 people were still using the service, sharing an average of just 2.5 songs, according to consulting firm Webnoize. [10]

  5. In September 2001, Napster reached a tentative settlement of a separate lawsuit involving the National Music Publishers' Association and struck a deal on distributing songs for a fee. Under the settlement, Napster will pay $26 million in damages for infringement of copyright. The deal is intended to compensate songwriters and music publishers in respect of the copyright vesting in song lyrics and melodies (but not in respect of the sound recording copyright). This means that Napster must still reach a settlement with the RIAA, which represents a much bigger hurdle, given that its members are now setting up competing services such as MusicNet. [11]

  6. This paper is not intended to serve as a chronology of the Napster litigation, but rather to examine two of the central issues arising in the Napster litigation under United States, Australian and Chinese copyright law, namely, (1) the liability of persons for the infringement of copyright by others; and (2) the issue of 'home taping'. The analysis suggests that whilst current copyright principles are adequate to deal with the challenges posed by Napster-like technology, they are ill-equipped to counter more ingeniously designed distribution technologies, such as those based on the Gnutella protocol.

    Digital Music Technology - a Primer

    MP3 (MPEG-1, Audio Layer 3)

  7. MP3 is a standard, non-proprietary compression algorithm designed to make a digital audio file smaller by a factor of approximately twelve to one [12] while preserving the original level of sound quality when played. The format was developed in 1992 by the Moving Pictures Expert Group of the International Organisation for Standardisation in conjunction with the Fraunhofer Institute. MP3 achieves the reduction in file size through the use of software called a 'codec' (compressor/de-compressor algorithm) and a process referred to as 'psycho-acoustic masking'. The process relies on the imperfect nature of human hearing and allows certain inaudible tones from a piece of music to be stripped out before compression. [13]

  8. MP3 is the most popular music file format in use on the Internet, due in part to the fact that it does not contain any security features such as watermarks or serial copying protection mechanism. [14]

    Peer-to-Peer Networking

  9. Peer-to-peer networking (often referred to as P2P), is a communications model in which each party has the same capabilities and either party can initiate a communication session. It can be contrasted with alternative communications models such as the client/server model and the master/slave model. In some cases, peer-to-peer communications are implemented by giving each communication node[15] both server and client capabilities.[16] On the Internet, peer-to-peer is a type of transient network that allows a group of computer users with compatible networking software applications to connect with each other and directly access files from one another's hard drives. Napster and Bearshare (a Gnutella protocol client) are examples of this kind of peer-to-peer software.

  10. A user must first download and run the particular peer-to-peer networking application. After launching the program, the user enters the IP address[17] of another computer belonging to the network, or employs an automated tool to perform this function.[18] Once the computer finds another network member online, it will connect to that user's connection (who has obtained their IP address from another user's connection and so on).

    The Napster Software

  11. Napster's "MusicShare" software was available as a free download from its Web site located at http://www.napster.com. The software became fully functional once a user registered with Napster by selecting a username and a password. Persons who registered were not required to use their real name or address.[19]

  12. Once a user logged on to the Napster network (simply by connecting to the Internet and running the Napster software), the MusicShare software interacted with a Napster server. If the user had enabled the sharing of MP3 files on their computer, Napster uploaded the names of the user's files to its servers (and not the music files themselves). Once the filenames were successfully uploaded to the server, they became a 'location' on the network. A particular user's MP3 files were only accessible to other users while he or she was online.[20]

  13. All Napster users were able to access the MP3 files located on other users' computers by using a built-in tool to search for a particular song, either by the name of the artist or the title of the song. The software performed a simple text search of the file names indexed on the relevant server and returned a list of specific MP3 file names to the user. The user was then required to peruse the list in order to determine if the desired digital music file was among those listed.[21]

  14. If the desired song was listed, the requesting user simply double-clicked on the file to download it to their computer.[22] The server-side software then engaged in a dialogue with the requesting user's software and that of the user hosting the MP3 file ("host user"). The Napster server to which the requesting user is connected obtained IP address information from the host user. The server then communicated the host user's address information to the requesting user, whose software established a connection with the host user's software and subsequently downloaded the MP3 file from the host user's computer.[23]

  15. The significance of this approach is that MP3 files were transferred over the Internet as between users, and were neither stored, nor passed through, any Napster controlled server.[24]

    The Gnutella Protocol

  16. 'Gnutella' is a protocol[25] designed for sharing files in a distributed network. The Gnutella protocol was designed by AOL's Nullsoft division to surpass the file sharing capabilities of Napster, but was soon released into the public domain.[26] It allows a user to share any type of file from his or her computer and make it available to anyone using Gnutella-based software (such as the Bearshare[27] or LimeWire[28] programs). Therefore, Gnutella-based clients are not limited to sharing MP3 files, but also share digital movie files, as well as a number of other types of content. By way of example, a user with sufficient bandwidth[29] can download every episode of the Warner Brother's TV series "Buffy the Vampire Slayer" through the Gnutella network.

  17. There are no Gnutella servers in the traditional sense, like web servers or mail servers. A Gnutella client is a server. This means that Gnutella is a distributed protocol, where every machine in the network is connected to every other machine and no single server is responsible for distributing all of the content. Therefore, if one computer goes down the network is unaffected, because all the other machines are connected to each other through multiple redundant connections.

  18. The Gnutella protocol follows the peer-to-peer model explained above. When you use a Gnutella program like Bearshare to do a search the client software sends a search query to all the computers you are connected to. These computers return their results to you and pass your query on to each of the computers they are connected to. This process continues and scans the Gnutella-net for the file you are looking for.

  19. One analyst has described the Gnutella architecture in the following way:

    "Unlike Napster, iMesh or any of the other similar systems, no central point links people together and serves as an index to all of their files and searches. Instead, thousands of individual computers connect to each other in a massive digital daisy chain, passing search requests down the line as they come in."[30]

  20. This decentralised file sharing architecture has significant implications for the policing and prosecuting of copyright infringements.

    Copyright Law & Digital Music Technology

    United States

    Subsistence of Copyright in Digital Music

  21. The music files exchanged[31] through the use of Napster would in the majority of cases be subject to two distinct copyrights under the United States Copyright Act 1976 ("U.S. Act")[32] that is, the copyright in the musical composition and the copyright in the sound recording.[33] As is the position under Australian and Chinese law, the copyright in a sound recording protects an artist's particular rendition of a song and is independent of the musical and/or literary work copyrights.

  22. One submits that the definition of "sound recording" in the U.S. Act is sufficiently broad to cover musical compositions recorded on a compact disc (CD), computer's hard disk or similar storage media.[34]

  23. Section 106 of the U.S. Act provides that owners of copyright enjoy certain exclusive rights, including the right:

    1. To reproduce the copyrighted work in copies or phonorecords;
    2. To distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
    3. In the case of literary and musical works, to perform the copyrighted work publicly;
    4. In the case of literary and musical works, to display the copyrighted work publicly; and
    5. In the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

  24. Notably, the 1976 Act did not provide the owners of copyright in sound recordings with a public performance right. Indeed, no public performance right was introduced until the passing of the Digital Performance Right in Sound Recordings Act (US) in 1995. Pursuant to this Act owners of copyright in sound recordings were granted the exclusive right to authorise the digital transmission of their works.[35]

  25. Certain Internet communications are also encompassed. The basis of these can be traced to Article 8 of the WIPO Copyright Treaty 1996 ("WCT") which provides that:

    "... authors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them."[36]

  26. This provision was seen as necessary in light of the problems that some member states had experienced with existing technology-specific definitions such as broadcasting and cable diffusion.[37]

  27. Under the U.S. Act copyright owners in musical works have the exclusive right to perform or display the work publicly. "To perform or display a work 'publicly'" is defined in s101 as, inter alia:

    "... to transmit or otherwise communicate a performance or display of the work to ... the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times."

  28. No definition of "transmit or otherwise communicate" is given in the Act. As will be seen in the ensuing discussion, the new communication right has a bearing on the copyright liability of users of the Napster software.

    Copyright Liability of Users

  29. As a plaintiff cannot succeed on a claim of contributory or vicarious copyright infringement absent evidence of direct infringement[38] one must first examine the potential liability of MusicShare users.

  30. It is likely that users will infringe a number of the exclusive rights of copyright owners of songs[39] in the typical operation of Napster. For example:

  31. In order to combat the contributory and vicarious infringement claims, Napster has raised two affirmative defences in support of MusicShare users. First, that their use constitutes 'fair use' under section 107 of the U.S. legislation. Second, that such use is covered by the 'home taping' exception contained in s1008 of the Act. The following section of this paper discusses these two defences.

    Fair Use

  32. The U.S. fair use doctrine is a common law doctrine employed by the judiciary to counteract the broad definition of exclusive rights in the statute.[41] Section 107 of the U.S. Act provides a non-exhaustive list of factors to employ in analysing a fair use claim. These factors include:

  33. As to the first factor, Napster has sought to characterise Napster as predominantly facilitating private non-commercial 'sharing'.[42] The term 'sharing' is somewhat misleading, in that if I 'share' a CD with a friend, no reproduction of the CD is involved. In the Internet file-sharing context, music files are reproduced each time they are downloaded to a user's computer, and each user can individually enjoy the piece of music.

  34. The fact that MusicShare users got something for free that they would ordinarily have to buy suggests that they reaped an economic advantage by using Napster's software.[43]

  35. The creative nature of the copyright material exchanged through MusicShare tips the balance away from a finding of fair use under the second factor.[44]

  36. The fact that the uploading and downloading of MP3 files using MusicShare involves copying the entirety of the copyright work further weakens the fair use claim. In Sony -v- Universal City Studios [45] ("Sony"), the U.S. Supreme Court held that wholesale copying for private home use can tip the fair use analysis in favour of the copyright owner if the copying is likely to adversely affect the market for the copyright material.[46]

  37. However, there does appear to be some merit in the claim by Napster that its software contributes to sales of recorded music by acting a sort of 'listening station', whereby users can 'road test' recordings that they are interested in before purchasing. At the peak of MusicShare's popularity, sales of CDs in the United States were at an all time high.[47] However, one submits that the following posting on the Napigator.com Web site (in response to news reports that Napster was contemplating charging a monthly access fee), points to the long-term effect of Napster on the market for recorded music:

    "... 15 bucks a month ... for all I care they could set it to $500 a month. I'm not paying ... I don't know, but I don't feel that paying for something I can get for free's a good idea."[48]

  38. Napster provides users with unrestricted access to both authorised and unauthorised sound recordings.[49] Despite Napster's claims to the contrary, the primary value of Napster to its users is the ability to download music for free that they would otherwise have to pay for.[50] Given the above considerations, it is unlikely that a court would uphold the fair use defence.

    'Home Taping'

  39. Napster also claims that its users are protected by the 'home taping' immunity conferred by section 1008 of the U.S. Act. This section, introduced by the Audio Home Recording Act 1992[51] ("AHRA") provides that:

    "No action may be brought under this title alleging infringement of copyright based on the manufacture, importation, or distribution of a digital audio recording device, a digital audio recording medium, an analog recording device, or an analog recording medium, or based on the non-commercial use by a consumer of such a device or medium for making digital musical recordings or analog music recordings."[52]

  40. The application of the AHRA to the 'brave new world' of digital music on the Internet, a development unforseen by its drafters, was the subject of proceedings in the 1999 decision of the U.S. Court of Appeals for the Ninth Circuit in Recording Industry Association of America -v- Diamond Multimedia Systems[53] ("Diamond").

  41. Diamond involved an application by the RIAA for an injunction under ss1002(a)(1) and 1003(a) of the U.S. Act to prevent the release of Diamond's "Rio PMP 300" portable MP3 player ("Rio"). These sections prohibit the sale of "digital recording devices" which do not incorporate the Serial Copy Management System ("SCMS"), or do not comply with certain administrative requirements. Copyright infringement was not pleaded in the case.

  42. The Ninth Circuit ruled that the Rio did not directly reproduce a digital music recording because music files stored on a computer's hard drive, the source of the Rio's MP3 files, are excluded from the statutory definition of a "digital music recording".[54] This is due to the fact that a computer hard drive is comprised of more than "only sounds, and material, statements, or instructions, incidental to those fixed sound" as required by the relevant statutory definition.[55] Furthermore, the Court concluded that the statutory language of section 1001(5)(B) specifically precludes computer hard drives from the definition of digital music recordings.[56]

  43. The Court stated, obiter , that a computer does not constitute a "digital audio recording device" under the Act, as it is not "designed or marketed for the primary purpose of ... making a digital audio copied recording for private use".[57]

  44. The United States Copyright Office and the Department of Justice filed an amicus curiae brief with the Ninth Circuit criticising Napster's assertion of the s1008 defence, saying that it would allow people to trade music "on a scale beggaring anything Congress could have imagined".[58] Given the Diamond ruling that computer hard drives are outside the scope of s1008, it would appear that users of file sharing software such as Napster or Bearshare cannot avail themselves of the immunity from prosecution conferred by that provision.

    Liability of Napster for Vicarious Copyright Infringement

  45. The test for vicarious copyright liability under U.S. law, formulated in Shapiro Bernstein and Co. -v- H.L. Green Co.[59] ("Shapiro"), is as follows:

    1. The right and ability to supervise infringing activities by the direct infringer (but not necessarily knowledge); and
    2. A direct financial interest in the direct infringement.[60]

  46. Vicarious liability prevents those who profit from copyright infringement from hiding behind an undercapitalised operation when the copyright owner sues.[61] There can be no finding of vicarious or contributory infringement absent proof of direct infringement.[62]

  47. As to the first limb of the test, courts have generally looked to the practical, as opposed to the legal ability of a third party to control the activities of the direct infringer.[63]

  48. Some guidance on the issue of Napster's liability for vicarious infringement case can be gleaned from case law. In the first case, Polygram -v- Nevada/TIG [64] the plaintiff alleged that the defendant, the trade show organiser of COMDEX, was vicariously liable for the infringements perpetrated by four of 2,000 exhibitors who publicly performed six copyright songs at the trade show. Whilst the court held in favour of the defendant on another issue[65] it provided a detailed discussion, obiter , of the vicarious liability issue.

  49. On the issue of control, the court recognised that the defendant had various regulations, none of which prohibited the unauthorised broadcast or performance of copyright music during the exhibition. The court noted that the defendant's employees enforced the regulations and that the defendant instructed exhibitors to comply with copyright laws. As a result, the court concluded that the defendant had the right and ability to control the direct infringers.[66]

  50. On the financial benefit issue, the defendant acknowledged that music was an integral part of the exhibition, and that banning music would be a dramatic departure from its standard operating procedures.[67] The court concluded that only some degree of financial benefit attributable to the direct infringement was necessary in order for the financial benefit element of the test to be satisfied.[68]

  51. In Fonovisa Inc. -v- Cherry Auction Inc.[69] ("Fonovisa") the plaintiff brought an action against the operators of a swap meet alleging, inter alia, contributory and vicarious copyright infringement.[70] Cherry Auction Inc. permitted vendors to sell counterfeit recordings of music that infringed the plaintiff's copyright. In discussing the control issue, the court made note of the fact that Cherry Auction had the right to terminate vendors for any reason whatsoever and through that right had the ability to control the activities of vendors on the premises.[71] Further, Cherry Auction promoted the swap meet and controlled the access of customers to the swap meet area. Schroeder J analogised the situation with that existing in Gershwin Publishing Corp. -v- Columbia Artists Management Inc.[72] ("Gershwin"), ruling that the control element was satisfied because the defendant (1) could control the direct infringers through its rules and regulations; (2) policed its booths to make sure the regulations were followed; and (3) promoted the show in which direct infringers participated.[73]

  52. Schroeder J, in holding the financial benefit limb to be satisfied, noted that the defendants reaped substantial financial benefits from admission fees, concession stand sales and parking fees, all of which "flowed directly from customers who want[ed] to buy the counterfeit recordings at bargain basement prices".[74] Her Honour stated that the court's decision in this regard was fortified by the line of cases that imposed vicarious liability on the operator of a business where "... infringing performances enhance the attractiveness of the venue to potential customers".[75] Justice Schroeder ruled that the sale of pirated recordings at the swap meet was a "draw" for customers, similar to the draw of the performance of pirated music in the line of dance hall cases canvassed in Shapiro .

  53. Significant parallels exist between the above cases and the issues under consideration in the Napster litigation. At the material time, Napster's terms and conditions of use stated, inter alia:

    "2. ... Unauthorized copying, distribution, modification, public display, or public performance of copyrighted works is an infringement of the copyright holders' rights. You should be aware that some MP3 files may have been created or distributed without copyright owner authorization ... you agree to comply with all of the notices, terms and conditions posted on the Napster web site, including but not limited to the Terms of Use and the Napster Copyright Policy posted thereon ... 4. ... Napster, Inc. may terminate this license at any time if you are in breach of any of these terms and conditions of use. Upon such termination you must and agree to immediately destroy all copies of the [software]."

  54. Further, when Napster was provided with a list of users who had allegedly infringed copyright in songs by the heavy metal band Metallica, it cut the users' access to its system.[76] These factors suggest that Napster had the right to control its users.

  55. Whilst Napster has argued that it is technologically infeasible to distinguish between authorised and unauthorised material, this assertion does not ring true. Napster's servers maintain a constantly updated list of files, labelled with title and artist information. This information forms the entire basis of Napster's search facility, and is the sole basis by which Napster users identify songs to download. It would require only a technically simple modification to the software in order for it to read a list of unauthorised song titles and use this list to filter search results returned to users. Indeed, Napster employed filtering technology based on song filenames in an attempt to comply with orders made by Justice Patel in mid-2000.[77]

  56. The issue of direct financial benefit is more complex. Certainly the company's announcement of a deal with BMG indicates that it is a commercial venture.[78] However, there is little evidence that it has at all material times derived a direct financial benefit from its service. Perhaps the strongest argument on this issue is that the substantial user base that Napster has cultivated has attracted a substantial level of venture capital to the company, as well as increasing recognition of the 'Napster' name among consumers. Further, the unauthorised music available through Napster enhances the attractiveness of its service, similar to the sale of counterfeit recordings in Fonovisa . This notwithstanding, one submits that there may be some difficulty establishing the second limb of the test.

    Liability of Napster for Contributory Infringement

  57. The U.S. action for contributory copyright infringement originates in tort law and stems from the notion that one who materially contributes to another's infringement should be held accountable.[79] Although there is no express statutory basis for the doctrine, contributory infringement is recognised as a valid basis for finding a person jointly and severally liable for the infringement of a copyrighted work.[80] The classic statement of the doctrine is contained in the following passage from Gershwin :

    "One who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another, may be held liable as a 'contributory' infringer."[81]

  58. One does not need to establish actual knowledge of specific infringing acts, it is sufficient if the defendant has reason to know of the third party's direct infringement.[82]

  59. The author submits that the argument that Napster "materially contributes" is stronger than any claim that it "induces" or "causes" the infringement. In Fonovisa , Schroeder J, in discussing the 'material contribution issue', stated that it would have been difficult for the infringing activity to take place on the scale alleged without the support services provided by the swap meet proprietors.[83] The Court stated (at 264):

    "[The defendant] actively strives to provide the environment and the market for counterfeit recording sales to thrive. Its participation in the sales cannot be termed 'passive', as [the defendant] would prefer."

  60. The Ninth Circuit rejected the approach of the District Court in that case that the contribution to infringement should be limited to circumstances in which the defendant "expressly promoted or encouraged the sale of counterfeit products, or in some manner protected the identity of the infringers".[84] The Court preferred the analysis of the Third Circuit in Columbia Industries Inc. -v- Aveco Inc.[85] that "providing the site and facilities for known infringing activity is sufficient to establish contributory liability"[86]

  61. It has been held that a BBS operator who actively encourages the uploading of material by subscribers participates in the infringing activity.[87] In another case, a BBS operator, who had been notified of certain infringing activity but did not remove the material, was found to have materially contributed to the activity.[88]

  62. Schroeder J is one of the judges that heard Napster's appeal against the original preliminary injunction. Her Honour has been reported as saying that the swap meet owner in Fonovisa "controlled what was going on, on those premises. Here, Napster doesn't have any idea what's being transmitted".[89] The author respectfully disagrees with her Honour's view. There can be little doubt that Napster had knowledge that acts of copyright infringement were carried out through the use of its service, indeed its terms and conditions of use contemplated this possibility. The fact that the technology in this case does not require physical interaction between Napster and its users should not be a material. Indeed, it is alleged that a document authored by Napster co-founder Shawn Fanning mentions the need to remain ignorant of users' real-life identities "since they are exchanging pirated music".[90] Napster has also been informed on a number of occasions that infringing sound recordings are being traded through its facilities.[91]

  63. It would appear, certainly in view of the Ninth Circuit's decision in Fonovisa, that Napster "materially contributes" to its users' infringement. It "actively strives to provide the environment and the market for [the infringement] to thrive".[92]

    Sony Corp of America v Universal City Studios Inc.

  64. The Sony decision is a seminal decision, representing a special category of case within the vicarious and contributory copyright infringement doctrines. In Sony, Universal City Studios sued the Sony Corporation for, inter alia, contributory and vicarious copyright infringement. Universal alleged that Sony's Betamax video recorders facilitated unauthorised copying of protected Universal programs by consumers.

  65. In discussing Universal's allegations, the Supreme Court noted that in certain situations "the imposition of vicarious liability is manifestly just [because] the contributory infringer [is] in a position to control the use of copyrighted works by others and had authorized the use without permission from the copyright owner".[93] The Court noted that the situation in Sony was distinguishable from such a case in that Sony did not have an ongoing relationship with the ultimate consumer.[94] The Court further stated that:

    "... [i]f vicarious liability is to be imposed on petitioners in this case, it must rest on the fact that they have sold equipment with constructive knowledge of the fact that their customers may use that equipment to make unauthorised copies of copyrighted material. There is no precedent in the law of copyright for the imposition of vicarious liability on such a theory."[95]

  66. The Court drew an analogy with the principle of patent law that the sale of "a staple article or commodity of commerce suitable for substantial non-infringing use[s]" does not constitute contributory infringement.[96] The Court went on to say that:

    "... the sale of copying equipment, like the sale of other articles of commerce, does not constitute contributory infringement if the product is widely used for legitimate, unobjectionable purposes. Indeed, it need merely be capable of substantial non-infringing uses."[97]

  67. The Court concluded that "time-shifting" of television programmes[98] fell within the parameters of the fair use doctrine.

  68. One submits that the Sony "non-infringing use" principle has little application to the Napster litigation. The critical factor in Sony, and the point of departure from previous cases, was that the defendant in that case merely sold an 'article of commerce' and did not have an ongoing relationship with the consumer. The same cannot be said of Napster. Given this, the fact that Napster may have a number of substantial non-infringing uses is irrelevant.

    Australia

    Subsistence of Copyright in Digital Music

  69. Under Australian copyright law, a typical pop song would attract a separate copyright in the literary work (in the lyrics), the musical work (the musical composition) and copyright in the sound recording under the Copyright Act 1968 (Cth) ("Act").

  70. A "sound recording" is defined in section 10 of the Act as the "aggregate of sounds embodied in a record". "Record" is in turn defined as any "disc, tape, paper or other device in which sounds are embodied". These definitions are sufficiently broad to cover digitally recorded music, including music files stored on personal computers.[99]

  71. Significant revisions to Australian copyright law were introduced with the enactment of the Copyright Amendment (Digital Agenda) Act 2000 ("Digital Agenda Act"), which entered into law on 4 March 2001. The primary purpose of the Digital Agenda Act was to bring Australia's copyright legislation into conformity with its international obligations under the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty concluded in 1996.[100]

  72. Pursuant to these amendments, the exclusive rights of 'broadcasting' and 'cable diffusion' were replaced by a single right of "communication to the public".[101] Section 31(1)(a) of the Act, which lists the exclusive rights of copyright owners in literary and musical works, now includes the following rights:

  73. The Act defines "communicate" as:

    " ... to make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject matter ..."[102]

  74. The Digital Agenda Act also includes for the first time a definition of "to the public", defining the term as meaning the public inside or outside Australia.[103] Similar rights exist in relation to sound recordings by virtue of s85(1) of the Act.

    Copyright Liability of Napster Users

  75. It is likely that a typical Napster user would infringe a number of distinct copyrights through the typical operation of the MusicShare software. For example:

    Fair Dealing

  76. Division Three of the Act sets out various exceptions to infringement. Section 40, which permits certain uses of copyright works for the purpose of research or study, lists the factors to be taken into account in determining whether or not a dealing with a copyright work is 'fair'.[105] The factors to be considered are:

    1. The purpose and character of the dealing;
    2. The nature of the work or adaptation;
    3. The possibility of obtaining the work or adaptation within a reasonable time at an ordinary commercial price;
    4. The effect of the dealing upon the potential market for, or value of, the work of adaptation; and
    5. In a case where part only of the work or adaptation is copied - the amount and substantiality of the part copied taken in relation to the whole work or adaptation.[106]

  77. Although these factors are technically limited to the 'research or study' fair dealing defence, it is generally accepted that they should also be referred to in relation to other heads of fair dealing.[107] Referring to the argument made above in relation to similar considerations under section 107 of the U.S. Act, it is most unlikely that the infringing acts of Napster users would qualify as fair dealings under Australian copyright law.[108]

    'Home Taping'

  78. The only 'home taping' style exception under Australian copyright law is contained in section 111 of the Act. This section states that a broadcaster's copyright is not infringed by the making of a copy of a broadcast for "private and domestic use". However, the exception is narrow and the taping of many broadcasts will infringe copyright in the underlying literary, musical, dramatic and artistic works contained in the broadcast.

  79. Given the near impossibility of pursuing individual home copying infringements, the Australian Government attempted to impose a levy on blank tapes, and an exemption for home taping, similar to the scheme created by the AHRA in the United States.[109] However, the scheme was declared invalid under section 55 of the Constitution by the High Court in Australian Tape Manufacturers Association Ltd -v- Commonwealth of Australia.[110]

    Liability of Napster for 'Authorising' Infringement

  80. Under section 13(2) the Act, it is provided that the exclusive right to do an act in relation to a work or other subject matter includes the right to authorise a person to do that act in relation to that work or subject matter. Under ss36(1) and 101(1) of the Act, it is provided that the copyright in a work or other subject matter is infringed by a person who, not being the owner of the copyright and without a licence from the same, does or authorises the doing in Australia of any act comprised in the copyright.

  81. Authorisation of infringement is a separate and distinct head of liability from any liability based on general principles of vicarious liability or agency.[111] The original judicial view of 'authorisation' in Australian was narrow, requiring something akin to a positive act or express permission to perform an act in breach of copyright.[112] However, following the decision of the Australian High Court in University of New South Wales -v- Moorhouse[113] ("Moorhouse"), the word 'authorise' has its dictionary meaning of "sanctioning, approving or countenancing".[114]

  82. It must be established that a direct act of infringement has taken place before any question of authorisation of infringement can arise.[115]

  83. In Moorhouse, the question before the Court was whether or not the University of New South Wales should be held liable for authorising the various acts of infringement carried out by students using the library's photocopying facilities.[116] The following passage from the judgment is often cited as correctly stating the Australian test for authorising infringement.[117]

    "Express or formal permission or sanction, or active conduct indicating approval, is not essential to constitute an authorisation: Inactivity or indifference, exhibited by acts of commission or omission, may reach a degree from which an authorisation or permission may be inferred ... However, the word 'authorise' connotes a mental element and it could not be inferred that a person had, by mere inactivity, authorised something to be done, if he neither knew nor had reason to suspect that the act might be done ... "[118]

  84. The university had reasonable grounds to suspect that some infringements would occur if adequate precautions were not taken. The university failed to take any precautions, as there was no effective supervision of the machines nor adequate notices placed on or near the machines instructing users as to the position relating to copyright.[119]

  85. Pursuant to the Digital Agenda Act amendments, Australian copyright legislation codifies the Moorhouse test in sections 36(1A) and 101(1A). Under those provisions a Court will be required to have regard to:

  86. When considering copyright infringement claims against manufacturers of copying equipment or media, courts in Australia and the UK have not explicitly taken the 'non-infringing use' approach adopted in the U.S., preferring instead to base their reasoning on the degree of control that the manufacturer can reasonably be expected to be able to exert in respect of the after-sales use of its product by consumers. This is well illustrated in the decision of the House of Lords in CBS Songs Ltd -v- Amstrad[120] ("CBS Songs").

  87. In CBS Songs the Court was asked to grant an injunction against Amstrad to prevent it selling double cassette decks that were capable of copying cassettes at twice the normal speed.[121] The plaintiff contended that the equipment would lead to widespread home taping of copyright works, and that Amstrad would be liable for authorising such infringement. The court refused to grant the relief sought by the plaintiffs, on the ground, inter alia, that:

    "No manufacturer and no machine confers on the purchaser authority to copy unlawfully. The purchaser or other operator of the recorder determines whether he shall copy and what he shall copy. By selling the recorder [the defendants] may facilitate copying in breach of copyright but do not authorise it ... the operator of an Amstrad tape-recording facility, like all other operators, can alone decide whether to record or play and what material is to be recorded."[122]

  88. As Amstrad was not in a position to be able to control the subsequent uses of its product by consumers, it could not be said to have 'authorised' any infringement of the plaintiff's copyrights facilitated by its equipment.[123]

  89. Although Lord Templeman in CBS Songs did not refer to the Sony decision, and its 'non-infringing use' principle, it does appear from his judgment that the fact that the equipment had lawful purposes was relevant.[124]

  90. The decision of Whitford J in CBS Songs Inc v Ames Records & Tapes Ltd ("Ames") [125] also merits attention in this context. Here, the defendant operated a record lending library from which records were lent to subscribers in circumstances where they might be used for home taping. The Court held that the defendants were enabling and assisting home taping but not 'authorising' it in the necessary sense. It is interesting to note that Justice Gummow in delivering his judgment in WEA International -v- Hanimex Corp. Ltd [126] was of the view that the result in Ames would have been different if "the retaping had taken place on the defendant's premises with a machine made available by him".[127] In such a situation, the requisite degree of control would exist, and authorisation could be established.

  91. The following passage from Lawton L.J.'s judgment in Amstrad -v- British Phonographic Industry Ltd [128] usefully illustrates the distinction between Moorhouse and the copying equipment cases:

    "[Once Amstrad] had sold their models ... they had no control over how they were used. It is this fact which distinguishes this case from the Moorhouse case. In that case the University were at all material times in a position to control the use of the photo-copying machine which had been used to infringe copyright."[129]

  92. It is the issue of the degree of control that a third party can exercise over either the direct infringer or the copying facilities that is determinative of the question of authorisation liability under Australian law.[130]

  93. As argued above, Napster is not in the same position as a supplier of electronic equipment (such as a video recorder or a home stereo system). Napster exercises control over persons permitted to access its servers, and can prevent users of Napster from exchanging certain MP3 files. To paraphrase the Moorhouse court, the architecture of Napster is such that infringement is "likely" to occur "unless some means [is] adopted to prevent that from being done."[131]

    China

    Subsistence of Copyright in Digital Music

  94. Article 3 of the Copyright Law of the People's Republic of China 1990[132] ("CCL") states, inter alia, that copyright subsists in "written [and] ... musical ... works". Article 4 of the Regulations for the Implementation of Copyright Law of the People's Republic of China 1991 ("Regulations") define "written works" and "musical works" respectively as "... works expressed in written form, such as novels, poems, essays and theses" and "such works as symphonic works and songs, with or without accompanying words, which can be sung or performed".

  95. China is a member of the Berne Convention and works created in a member state are protected under the CCL.[133]

  96. Article 10 outlines the exclusive rights of the owners of copyright in written and musical works, which include:

  97. Due to a somewhat curious approach to drafting, Article 45 independently lists the various grounds of copyright infringement. [134] This article provides that:

    "Anyone who commits any of the following acts of infringement shall bear civil liability ... (5) exploiting a work by performance, broadcasting, exhibition, distribution, making cinematographic, television or video productions, adaptation, translation, annotation, and compilation, or by other means, without the permission of the copyright owner, unless otherwise provided in this Law ... (8) committing other acts of infringement of copyright and of other rights and interests related to copyright."[135]

  98. One product of this approach is that whilst copyright owners enjoy the exclusive right of "reproduction" under Article 10(5), exploiting a work by "reproduction" is not listed as an act constituting infringement under Article 45.[136] Presumably it could be argued that unauthorised exercise of the reproduction right conferred by Article 10(5) constitutes "committing other acts of infringement of copyright" as contemplated by Article 45(8).[137]

  99. The music files exchanged using Napster's software would also attract copyright protection as "sound recordings".[138] Article 39 of the CCL relevantly provides that "a producer of sound recordings ... shall have the right to authorize others to reproduce and distribute his sound recordings ... and the right to receive remuneration therefor".

  100. "Sound recordings" are defined under Article 6(2) of the Copyright Law Implementing Regulations 1991 ("Regulations") as "the original recordation of any sound" and "producer of sound recordings" is defined in Article 6(5) as "a person who makes sound recordings". Although these definitions are somewhat vague, they would appear to cover digitally recorded music.

    Digital Treaties Implementation

  101. China is not a party to either the WCT or WPPT, and the CCL does not, in its current form, adequately protect copyright owners in relation to the exploitation of their works on the Internet. China is currently finalizing revisions to a number of its intellectual property laws, including the CCL.[139]

  102. Rather than the technology neutral right of "communication to the public" contained in the WCT (and the Australian legislation), the CCL retains the exclusive right of "broadcasting". "Broadcasting" is defined in the Regulations as "disseminating the work by wireless radio waves or cable television system."[140]

  103. This definition would not encompass a communication of a digital work over a typical computer network. This notwithstanding, the uploading (copying) of material to a Web server would appear to be caught by the reproduction right. The application of the CCL to Internet technology was the key question before the Beijing First Intermediate People's Court (BFIPC) in Wang Meng and Others -v- Beijing Cenpok Intercom Technology Co. Ltd ("Beijing Online").[141] Six famous Chinese writers filed suit alleging unauthorised and illegal copying and distribution of their works over the Internet. The defendant contended that Article 10(5) of the CCL did not cover works posted on the Internet.

  104. The BFIPC's approach centred on the interpretation of the words "and the like" contained in Article 10(5). The Court upheld the decision of the lower court that the words should be treated as encompassing Internet distribution of works. The Court also rejected the defendant's argument that it had no control over the actual content of its Web site.[142]

    Liability of Napster Users

  105. It is likely that a typical Napster user would infringe a number of the exclusive rights of copyright owners in songs under Chinese law. For example:

  106. Some commentators have also suggested that the non-commercial "distribution [of copyright works] without the permission of the copyright owner" may constitute an infringement of copyright, subject to civil liability, under Article 45(5).[144]

    'Home Taping'

  107. There appears to be scope for arguing that a home taping 'fair use' exception exists under the CCL. Article 22 relevantly provides that the "use of published works for private study, research and self entertainment" is considered to be a 'fair use' and no action for copyright infringement shall lie.[145]

  108. One Chinese commentator, Professor Zheng Chengsi has argued that:

    "Article 22(1) provides that use of a published work of another for the user's own individual study, research or self-entertainment is permissible. This clause includes fair dealing for personal use. Such use ... is not limited to reproduction. It applies to all manner of exploitation as provided in art. 10(5) of the Chinese Copyright Law, except broadcast and distribution ... such personal use is not limited to personal study and research, but extends to personal entertainment."[146]

  109. He further notes that the Chinese interpretation of the wording of Article 22(1) suggests that making more than one copy of a work may be permitted under the personal use exemption.[147] Professor Zheng later states that whilst the exact scope of the Chinese fair dealing exceptions are yet to be determined, the majority of the drafters agree that Chinese courts should have regard to section 107 of the U.S. Act in determining whether or not a use is 'fair'.[148] However, on a plain reading of the English translation of Article 22(1), it would appear that any use that can be categorised as "personal use" is permitted. It has been suggested that the fair use exceptions are broader than is allowable under the Berne Convention (and Article 9(2) of TRIPs), particularly the exception for "self entertainment".[149]

    Liability of Napster

  110. Assuming for present purposes that the activities of typical Napster users would not be permitted under Article 22(1), one then turns to consider the potential liability of Napster itself under Chinese copyright law.

  111. Chapter Two of the CCL outlines the economic rights of owners of copyright as:

    "... the right of exploitation and the right to remuneration, that is, the right of exploiting one's work by means of reproduction, performance, broadcasting, exhibition, distribution, making cinematographic, television or video production, adaptation, translation, annotation, compilation and the like, and the right of authorizing others to exploit one's work by the above-mentioned means;"[150] (emphasis added)

  112. Further, Article 39 provides that:

    "A producer of sound recordings ... shall have the right to authorize others to reproduce and distribute his sound recordings ... and the right to receive remuneration therefor." (emphasis added)

  113. When taken in conjunction with Articles 45(5) & (8) of the CCL, an action for infringement by authorisation would appear to be available under Chinese law. However, it is not yet clear whether the Chinese concept of 'authorisation' will align itself with the "sanctioning, approving or countenancing" approach of Australian courts, or the more restrictive approach of courts in the United Kingdom.

  114. It is worth noting in this context that in March 2000, the Chinese Ministry of Culture issued the Circular on Relevant Issues Concerning the Online Business of Audio-Visual Products ("Circular"), which contains various regulations in relation to dealings in audio-visual products over the Internet.[151]

  115. Article 1 of the Circular states that all online business activities dealing in audio-visual products are prohibited unless authorised by the appropriate administrative agencies. Article 2 then states that any business wishing to deal in such products must report to the provincial administrative department in charge of the relevant audio-visual market to register, and must obtain an "audio-visual business license" in accordance with the relevant provisions of the Regulations on the Administration of Audio-Visual Products. Foreign-funded and Chinese-foreign joint ventures are not permitted to operate an online business involving audio-visual products[152] Article 5 of the Circular, states that:

    "Audiovisual products to be sold over the Internet must be legal products manufactured by domestic audiovisual-product producers ... The following business activities are forbidden: ... illegal audiovisual products, including smuggled and pirated products ... Selling imported audiovisual products over the Internet, dealing in MP3 music products downloaded from the Internet, and wholesale transactions of audiovisual products over the Internet are also prohibited."[153]

  116. The Circular appears to be a supplement to the Administration of Audio and Video Products Regulations 1994, and focuses on licensing commercial activities relating to audio and video products, rather than establishing civil causes of action.[154]

    Challenges posed by de-centralised file-sharing technologies

  117. The following words of one Australian commentator hint at the problems facing the music industry:

    "... where defendants have put it beyond their power to prevent the infringement, for instance by selling or giving away the means by which [an act of infringement] can be committed, it will be less likely that this will amount to authorisation ..."[155]

  118. Whilst the above discussion indicates that current concepts of third party copyright liability are likely to be adequate to deal with 'Napster-like' software applications, the same cannot be said of software employing a true distributed, peer-to-peer architecture.

  119. Arguably, the supply of decentralised file sharing software (such as Gnutella) is analogous to the supply of electronic goods in Sony and CBS Songs, where an ongoing relationship with the consumer is absent. It is unlikely that a plaintiff could establish the requisite degree of control in order for liability to attach to the designers of this type of software. Even if legal liability did attach, once the software is made publicly available, the only way of shutting down the network is to pursue individual infringers.

  120. It would appear that the recorded music industry may target ISPs in its efforts to combat Gnutella-like technologies.[156] Whether or not Australian ISPs would be legally prudent in complying with any threats of litigation from music publishers is questionable, given current authority on 'authorisation' liability, and the exceptions from liability contained in sections 39B, 43A, 111A, 112E and 195AVB of the Copyright Act 1968 (Cth).

    Conclusion

  121. The increasing popularity of Internet file sharing technologies poses a significant threat to the interests of the recorded music industry.

  122. Recourse to a levy-based solution, such as that employed in Germany[157] appears fraught with difficulty. Imposing a levy on blank recording media such as audio tapes, audio recorders (digital or analog), in order to compensate copyright owners, is logically defensible. Levying a royalty on multi-purpose devices such as personal computers or computer hard disks is another question entirely. The Diamond litigation in the United States illustrates the difficulty in delineating the boundary between products that should attract a levy and those that should not. Industry opposition to any such levy on computer hardware would be likely to be considerable.

  123. The recording industry's technological saviour, the Secure Digital Music Initiative is also under fire, with reports that all of the SDMI protection mechanisms have been circumvented.[158] There are also reports that recent technology introduced by various record companies, which was intended to prevent the 'ripping' of CD audio tracks into MP3 files, have been hacked.[159] Certainly, it seems somewhat naïve to believe that any technological protection mechanism will not be circumvented in time.

  124. Copyright law has consistently failed to serve as an effective tool in the recording industry's fight against unauthorised 'home taping'. New technology now provides the copying facilities free of charge and has given individuals access to a global pool of recordings.[160]

  125. Whilst the law will continue to serve a vital role in preventing commercial enterprises from profiting through dealing in unauthorised sound recordings, it is unlikely that it will ever provide a sufficient answer to the problem of 'home taping'.[161]

  126. However, if music publishers successfully develop innovative and high quality delivery mechanisms for digital music, they may maintain their commercial viability. By making legitimate digital music distribution technologies more user-friendly and comprehensive than their illegitimate counterparts, music publishers will have a service that consumers are willing to pay a reasonable price for.

    Notes

    * B.Sc (Comp. Sci.) LLB LLM, Senior Research Fellow, Asia Pacific Intellectual Property Law Institute, Murdoch University, Western Australia.

    [1] As one commentator has noted, the emergence of the Internet as a mechanism for marketing and distributing music will bring about a fundamental change in the perception of music as a product to that of music as content: see Garlick M, "Pricing Recorded Music in an Online World", Gilbert & Tobin, 1 July 2000 at http://www.gtlaw.com.au/pubs/pricingrecordedmusic.html.

    [2] "Internet Piracy - The Problem and The Response", IFPI at http://www.ifpi.org/antipiracy/internet_piracy.html.

    [3] Plaintiff's Complaint for Contributory and Vicarious Copyright Infringement, Violations of California Civil Code Sect. 980(a)(2), and Unfair Competition, Case No. C99-5183-MHP, filed 6 December 1999 ("Complaint") at pp 9-12.

    [4] For further information on the ownership of Napster: See Gomes L, "UCLA, Rock Group Limp Bizkit, Others May Prosper if Napster Goes Mainstream", Wall Street Journal Interactive, 2 November 2000 at http://interactive.wsj.com/articles/SB973125431509468152.htm.

    [5] Harmon A, "Online Davids vs. Corporate Goliaths", New York Times, 6 August 2000 at http://www.nytimes.com/library/review/080600napster-review.html.

    [6] Opinion of Patel J on Application for Preliminary Injunction, Case No. C 99-5183 MHP, delivered 2 July 2000, U.S. District Court for the Northern District of California at p 4.

    [7] Mann C, "One Hot Property: Napster is Beginning to Rival Even AOL", Inside.com, 31 October 2000 at http://www.inside.com/story/Story_Cached/0,2770,13276_9_12_1,00.html.

    [8] Including Sony Music Entertainment Inc., Geffen Records, BMG, Universal Records, EMI & Virgin Records.

    [9] n. 3 above, at p 1.

    [10] Borland J, "Napster gets temporary reprieve" at http://news.cnet.com/news/0-1005-200-6605948.html.

    [11] See further Zeidler S, "MusicNet says to roll out platform in coming weeks" at http://www.siliconvalley.com/docs/news/reuters_wire/1487585l.htm.

    [12] See http://www.iis.fhg.de/amm/techinf/layer3/index.html.

    [13] Id.

    [14] Smith T, "Digital Distribution of Music", Copyright World, April 2000, 15.

    [15] In the current context, a personal computer.

    [16] See further http://searchnetworking.techtarget.com/sDefinition/0,,sid7_gci212769,00.html.

    [17] An IP address is a 32-bit number that uniquely identifies each sender or receiver of information that is sent in packets across the Internet.

    [18] Such as "G-Net Wizard": see http://www.bearshare.com/help/faqbearshare.htm.

    [19] The following facts regarding Napster's architecture are taken from Patel J's ruling on the preliminary injunction, delivered 26 July 200, n. 6 above, and the various depositions referred to therein.

    [20] In this sense Napster 'locations' are transient, they are repeatedly added or removed each time a user signs on or off the network.

    [21] The returned file names may have contained typographical errors or otherwise inaccurate descriptions of the content of the files as the names were determined by each host user.

    [22] Napster 'locations' could also be accessed through Napster's 'hot-list tool feature'.

    [23] Napster facilitated the same mode of file transfer whether a user accessed a specific MP3 file through the search engine or hot-list.

    [24] Until January 2000, Napster incorporated a feature whereby if a download of a song was interrupted (for example by the host user logging off the network), it would locate the song on another connected computer and automatically resume the download: see Berschadsky A, "RIAA v Napster: A Window Onto the Future of Copyright Law in the Internet Age", 18 J. Marshall J. Computer & Info. L. 755.

    [25] A protocol is simply a standard format that allows two pieces of software to communicate. For the complete Gnutella protocol specification, see: http://www.clip2.com/GnutellaProtocol04.pdf.

    [26] See http://www.bearshare.com/gnutella.htm.

    [27] See further http://www.bearshare.com./

    [28] See further http://www.limewire.com./

    [29] For a definition of this term see: http://searchnetworking.techtarget.com/sDefinition/0,,sid7_gci211634,00.html.

    [30] Borland J, "RIAA: Gnutella not yet a threat" at http://news.cnet.com/news/0-1005-200-5383626.htm.

    [31] The author believes the term 'sharing' to be misleading in that the music files are duplicated through downloading, and not "shared" in any real sense. The term "exchange" is used in this paper.

    [32] Codified as Title 17 of the United States Code (U.S.C.).

    [33] A similar situation exists under Chinese law. Under Australian law, the lyrics of a song constitute a separate literary work copyright from the musical work copyright.

    [34] 'Sound recordings' are defined in s101 as: "... works that result from the fixation of a series of musical, spoken, or other sounds ... regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied". "Phonorecord" is in turn defined as "... material objects in which sounds ... are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device".

    [35] See Brauner S, "High-Tech Boxing Match: A Discussion of Copyright Theory Underlying the Heated Battle Between the RIAA and MP3ers", 4 Va. J.L. & Tech 5.

    [36] See also WIPO Performances and Phonograms Treaty 1996 ("WPPT").

    [37] See for example T Aplin, "Liability of Internet Service Providers for Moral Rights Infringement in Australia" [1999] 1(1) Dig. Tech. L.J. http://wwwlaw.murdoch.edu.au/dtlj/articles/vol1_1/aplin.html; F. Macmillan & M. Blakeney, "The Copyright Liability of Communications Carriers" 1997 (3) Journal of Information, Law and Technology at http://elj.warwick.ac.uk/jilt/commsreg/97_3macm/

    [38] See Cable/Home Communication Corp. -v- Network Productions Inc. 902 F.2d 829 at 844; Sony Corporation of America -v- Universal City Studios Inc. 464 U.S. 417 (1984) at 434.

    [39] In this paper the term "songs" refers collectively to musical compositions and sound recordings.

    [40] Distributing MP3 files through file sharing software may render a user criminally liable under the No Electronic Theft Act ("NET") 1997, codified as 17 U.S.C. 506 and 18 U.S.C. 2319. In November 1999, a college student in Oregon pleaded guilty and was sentenced under the Act to two years probation for posting pirated material (including over 1,000 MP3 files) on his Web site. The Act imposes liability regardless of profit motive. See Sullivan J, "MP3 Pirate Gets Probation", Wired News, 24 November 1999 at http://www.wired.com/news/mp3/0,1294,32276,00.html. Cf s132(2) of the Copyright Act 1968 (Cth).

    [41] Copyright Act 1909 (US): Sony -v- Universal City Studios 464 U.S. 417 (1984) at 433.

    [42] Opposition of Defendant Napster to Plaintiff's Motion for Preliminary Injunction, Case No. 99-5183 MHP/C 00-0074 MHP, at 5-8.

    [43] See Sega Entertainment Ltd -v- MAPHIA 857 F. Supp 679 at 687 (N.D. Cal. 1994).

    [44] See Harper & Row Publishers Inc. -v- Nation Entertainment 471 U.S. 539 at 563 (1985); Playboy Entertainment Inc. -v- Frena 839 F. Supp. 1552 at 1558 (M.D. Fla. 1993).

    [45] 464 U.S. 417 (1984).

    [46] Id at 449-50, 456.

    [47] See "2000 Midyear Market Report on U.S. Recorded Music Shipments" at http://www.riaa.com/MD-US-3b-00-mid.cfm. See also Selvin J, "Did Napster help boost record sales?" at http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/08/05/PK220163.DTL and "Music sales slide despite Napster demise" at http://www.siliconvalley.com/docs/news/tech/083036.htm.

    [48] Napigator Message Board Forum, posting from "Onymous", 4 November 2000 at http://forums.napigator.com/read.php?f=4&I=12995&t=12995&1=0 (visited 6 November 2000).

    [49] A significant number of unsigned artists used Napster to distribute their music independently of the large recording companies.

    [50] An early version of the Napster Web site advertised the fact that users could find their favourite music without "wading through page after page of unknown artists": see n. 6 above, at 6. The plaintiff record companies claim that the "recordings of every artist on the Billboard Top 200C as well as every sound recording on the Billboard Hot 100 C can be located on and downloaded from Napster": see n.3 above, at 15.

    [51] Section 1008 was introduced against the background of increasingly available DAT technologies. The primary purpose of the AHRA was to grant the right to consumers to home record copyrighted material in exchange for a levy on, and the implementation of copyright protection mechanisms in, "digital audio recording devices" as defined by the Act. The AHRA constituted the legislative recognition of a compromise reached between the recording industry and the electronics industry in 1989 when both groups met in Athens, Greece, to form an industry cooperative. See further Gosse E, "The RIAA Could Not Stop the Rio - MP3 Files and the Audio Home Recording Act", 34 U.S.F.L. Rev. 575 and Rosenberg S, "Anticipating Technology: A Statute Bytes the Dust in Recording Industry Association of America v Diamond Multimedia Systems Inc.", 45 Vill. L. Rev. 483.

    [52] Section 1001 defines a "digital audio recording device" as: "Any machine or device of a type commonly distributed to individuals for use by individuals, whether or not included with or as part of some other machine or device, the digital recording function of which is designed or marketed for the primary purpose of, and that is capable of, making a digital audio copied recording for private use ...".

    [53] 180 F. 3d 1072 (9th Cir. 1999).

    [54] A "digital music recording" is defined as: "[a] material object (i) in which are fixed, in a digital recording format, only sounds, and material, statements, or instructions incidental to those fixed sounds, if any; and (ii) from which the sounds and material can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device": 17 U.S.C. § 1001(5)(a).

    [55] Ibid at 1077-1078.

    [56] 17 USC § 1001(5)(B) states that: "A 'digital music recording' does not include a material object (i) in which fixed sounds consist entirely of spoken word recordings; or (ii) in which one or more computer programs are fixed, except that a digital musical recording may contain statements or instructions constituting the fixed sounds and incidental material, and statements or instructions to be used directly or indirectly in order to bring about the perception, reproduction, or communication of the fixed sounds and incidental material".

    [57] Ibid at 1078 referring to 17 U.S.C. 1001(3).

    [58] See Amicus curiae brief of U.S. Copyright Office and U.S. Department of Justice at http://www.loc.gov/copyright/docs/napsteramicus.html.

    [59] 316 F. 2d 304 (2nd Cir. 1963). See further Polygram International Publishing Inc. -v- Nevada/TIG Inc. 855 F. Supp 1314 (D.Mass. 1984).

    [60] Fonovisa Inc. -v- Cherry Auction 76 F.3d 259 (9th Cir. 1996) at 262-263.

    [61] See Ferron W & Daley-Watson C, "On-line Copyright Issues: Recent Cases and Legislation Affecting Internet and Other Service Providers and Publishers", Section IV(C) at http://www.seedandberry.com/online_copyright_issues.htm.

    [62] Sony Corp. of America -v- Universal City Studios Inc. 464 U.S. 417 (1984) at 434.

    [63] For e.g. in Gershwin Publishing Corp. -v- Columbia Artists Management Inc. 443 F.2d 1159 (2nd Cir. 1971) the defendant lacked the contractual ability to control the direct infringer. This notwithstanding, the court held that the defendants were in a position to police the direct infringers due to the defendant's "pervasive participation in the formation and direction" of the direct infringers, including promoting and advertising them (at 1163). See also Fonovisa Inc. -v- Cherry Auction Inc. 76 F. 3d 259 (9th Cir. 1996) at 263; Davis -v- E.I. DuPont de Nemours & Co. 240 F.Supp. 612 (S.D.N.Y. 1965)

    [64] Polygram International Publishing Inc. -v- Nevada/TIG Inc. 855 F. Supp.1314, at 1328-29 (Mass. Dist. Ct. 1994).

    [65] The court ruled that the plaintiff had failed to provide sufficient evidence of, inter alia, lack of authorisation on behalf of the organisers.

    [66] Above, note 64 at 1328.

    [67] cf Artists Music -v- Reed Publishing 31 U.S.P.Q. 2d 1623 (S.D.N.Y. 1994).

    [68] Above note 64 at 1330.

    [69] 76 F. 3d 259 (9th Cir. 1996).

    [70] This decision was referred to by Justice Patel in her ruling on the motion for preliminary injunction against Napster on 26 July 2000.

    [71] Ibid at 262.

    [72] 443 F.2d 1159 (2nd Cir. 1971).

    [73] Ibid at 263.

    [74] Id.

    [75] Ibid at 263.

    [76] However, the users could simply re-register with Napster under an alternative user name: See further Wheeler M, "Napster reloads Metallica fans", ZDNet, 1 June 2000 at http://www.zdnet.com/zdnn/stories/news/0,4586,2580227,00.html.

    [77] See further Hansen E & Bowman L, "Court: Napster filters must be foolproof" at http://news.cnet.com/news/0-1005-200-6549898.html.

    [78] See further Sutel S, "BMG ends Napster war", AustralianIT, 1 November 2000 at http://australianit.com.au/common/storyPage/0,3811,1370041^442,00.html.

    [79] Fonovisa Inc. -v- Cherry Auction Inc. 76 F. 3d 259 (9th Cir. 1996) at 264; Sony -v- Universal City Studios 464 U.S. 417.

    [80] See Fonovisa Inc. -v- Cherry Auction Inc. 76 F. 3d 259 (9th Cir. 1996) at 261 citing Sony-v- Universal City Studios Inc. 464 U.S. 417 at 435 on this issue.

    [81] n. 61 above, at 1162. See also Universal City Studios -v- Sony Corp. of America 659 F. 2d 963 at 975 (9th Cir. 1981) (reversed on other grounds).

    [82] Cable/Home Communication Corp. -v- Network Productions Inc. 902 F. 2d 829 (11th Cir. 1990) at 846. See also Gershwin Publishing Corp. -v- Columbia Artists Management 443 F. 2d 1159 at 1163; Sega Enters Ltd -v- MAPHIA 857 F. Supp. 679 (N.D. Cal. 1994) at 686-687.

    [83] n. 67 above, at 264.

    [84] Id.

    [85] 800 F.2d 59 (3rd Cir. 1986).

    [86] Ibid, at 264.

    [87] See Playboy Enterprises Inc. v Russ Hardenburgh Inc. 982 F.Supp. 503, 514 (N.D. Ohio 1997).

    [88] See Religious Tech. Center v Netcom On-line Communication Serv. Inc. 907 F. Supp. at 1375.

    [89] Borland J, "Court adjourns without decision in Napster Case", at http://news.cnet.com/news/0-1005-200-2895878.html.

    [90] n. 6 above, at 26

    [91] n. 3 above, at 16.

    [92] Ibid at 264.

    [93] 464 U.S. 417 at 437.

    [94] Id at 438: "[t]he only contact between Sony and the users of the Betamax ... occurred at the moment of sale".

    [95] Ibid at 439. See also CBS Songs Ltd -v- Amstrad Consumer Electronics plc and Another (1988) 11 IPR 1 at 9.

    [96] See 35 U.S.C. § 271(c).

    [97] Ibid at 442. Notwithstanding the Supreme Court's decisive ruling in Sony, copyright owners still appear prepared to bring vicarious and contributory infringement claims against manufacturers of electronic consumer goods which 'facilitate' copyright infringement. NBC, ABC and CBS, the three major U.S. television networks, recently initiated legal proceedings against SONICblue Inc, the makers of the first Internet-ready personal digital video recorder. The television networks allege that SONICblue's ReplayTV 4000 allows users to make and distribute illegal copies of television programs, which would violate their copyrights by allowing users to distribute copies of programs over the Internet. See further http://www.siliconvalley.com/docs/news/tech/071594.htm.

    [98] That is, recording a television programme for viewing at a more convenient time.

    [99] See further Roland Corp. v Lorenzo and Sons Pty Ltd (1992) 22 IPR 245.

    [100] Note however that Australia has not yet acceded to either treaty.

    [101] Paragraphs 35-37 & 81 of Schedule 1 to the Copyright Amendment (Digital Agenda) Act 2000.

    [102] s10 of Copyright Act 1968 (Cth).

    [103] Id.

    [104] There is also the possibility that users of Napster could be held liable under s132(2) of the Act. This section makes it an offence to "distribut[e] infringing copies [of copyright works] in such a manner as to prejudicially effect the market of the copyright owner".

    [105] Certain fair dealings are also permitted for the purposes of criticism or review, for reporting news and for use of works in judicial proceedings or the giving of professional advice.

    [106] See also the similar wording of s103C in relation to the sound recording copyright.

    [107] See TCN Channel Nine & Ors v Network Ten [2001] FCA 108.

    [108] This is particularly so given that the scope of the fair dealing defence under Australian law is less flexible than the U.S. doctrine of fair use.

    [109] See Copyright Amendment Act 1989 (Cth). Section 135ZZN would have conferred a statutory right to copy sound recordings for private domestic use of the person making the copy. Cf Germany, which has one of the most comprehensive copyright levy systems anywhere in the world: see Art52a of German Copyright Law (English translation at http://www.ifrro.org/laws/law_germany.html). A German court recently ordered Hewlett-Packard to reveal how many CD-R and CD-RW drives it has sold in the country during the last three and a half years. The case centered on the use of CD recording equipment to duplicate music CDs. Germany levies a per-unit fee on other types of recording equipment, and the music industry wanted computer-based drives to be included as well: see Geyer H, "Arbitration Board at the German Patent Office confirms levy for CD writers - Higher royalties for digital copying" at http://www.gema.de/eng/updates/pm_cdbrenner.html.

    [110] [1993] HCA 10; (1993) 176 CLR 480.

    [111] APRA -v- Miles [1965] NSWR 405.

    [112] Karno -v- Pathe Freres Pathephone Ltd (1909) 100 LT 260 (KB).

    [113] [1975] HCA 26; (1975) 133 CLR 1 (after considering the early English decisions of Falcon -v- Famous Players Film Co Ltd [1926] 2 KB 474 and Evans -v- Hulton & Co Ltd [1923-1928] MacG Cop Cas 51 (Ch)).

    [114] cf CBS Songs Ltd -v- Amstrad Consumer Electronics plc and Another (1988) 11 IPR 1.

    [115] WEA International Inc -v- Hanimex Corp Ltd (1987) 77 ALR 456 at 353-368; APRA Ltd -v- Jain (1990) 18 IPR 663; Nationwide News Pty Ltd -v- Copyright Agency Ltd (1996) 34 IPR 53. cf MCA Records Inc. -v- Charly Records Ltd (Rimer J, 22 March 2000) referred to in Dickens P, "When is an Authorisation an Authorisation?", [2000] 7 EIPR 339.

    [116] An interesting parallel can be drawn here between the facts in the Moorhouse case and the widespread use of University computer networks in the downloading of MP3 music files: see King B, Campus Music Trades Continue" at http://www.wired.com/news/school/0,1383,45807,00.html.

    [117] See Tolmark Homes P/L -v- Paul (1999) 46 IPR 321 at 329; Nationwide News Pty Ltd -v- Copyright Agency Ltd (1996) 136 ALR 273 at 295; Microsoft Corporation and Others -v- Marks and Anor (1995) 33 IPR 15 at 25.

    [118] Ibid at 12-13.

    [119] Nationwide News Pty Ltd and Others -v- Copyright Agency Ltd (1996) 136 ALR 273 at 295.

    [120] (1988) 11 IPR 1.

    [121] Amstrad had focused its marketing strategy on this feature, one advertisement stating that its new model: "... now features 'hi-speed dubbing' enabling you to make duplicate recordings from one cassette to another, record direct from any source and then make a copy and you can even make a copy of your favourite cassette": Id at 8.

    [122] Id at 10.

    [123] Similar reasoning was applied in the Australian decision of WEA International Inc v Hanimex Corp Ltd (1987) 77 ALR 456 and A & M Records -v- Audio Magnetics [1979] FSR 1.

    [124] For example, his Lordship states at page seven of his judgment that "[t]hese recording facilities may be used for lawful or unlawful purposes". In words reminiscent of the Supreme Court in Sony, his Lordship states at page 9: "There is nothing express or implied in the Act which inhibits the invention, manufacture, sale or advertisement of electronic equipment capable of lawful or unlawful reproduction".

    [125] [1982] Ch 91.

    [126] (1987) 77 ALR 456.

    [127] Id at 468.

    [128] (1985) 6 IPR 257.

    [129] Id at 264.

    [130] Note also that a person may be liable as a joint or concurrent tortfeasor in relation to copyright infringement by involvement in the tortious acts which constitute the infringement: See Henley Arch Pty Ltd -v- Clarendon Homes (Aust) Pty Ltd (1998) 41 IPR 443 at 463; Microsoft Corp. -v- Auschina Polaris Pty Ltd (1996) 71 FCR 231 at 239-246; CBS Songs Ltd -v- Amstrad Consumer Electronics plc (1988) 11 IPR 1 at 12-15. Such involvement will be established where the person: "... made the infringing conduct his own in the sense that the [person] deliberately, wilfully and knowingly pursued a course of conduct that was likely to constitute the infringing conduct or was recklessly indifferent to the risk of it": Henley Arch Pty Ltd-v- Clarendon Homes (Aust) Pty Ltd (1998) 41 IPR 443 at 464.

    [131] [1975] HCA 26; (1975) 133 CLR 1 at 13-14.

    [132] Adopted at the 15th Meeting of the Standing Committee of the Seventh National People's Congress on September 7 1990 and effective from June 1 1991 (Official Translation).

    [133] See Article 2. As a result of the 1998 government reorganization, the Chinese government established the State Intellectual Property Office (SIPO) to monitor IPR protection and devise effective enforcement measures in China: see United States Trade Representative (USTR), 2000 National Trade Estimate on Foreign Trade Barriers (NTE), 31 March 2000 at http://www.ustr.gov/reports/nte/2000/china.pdf.

    [134] The general approach to drafting, and that adopted in Australia and the U.S., is to define the exclusive rights of the copyright owner and then to simply state that infringement occurs when a person other than the copyright owner does any one of the exclusive rights contained in the copyright. Unfortunately, the Chinese approach creates inconsistencies between the rights comprised in the copyright and acts that constitute infringement.

    [135] Article 46 outlines a number of acts that may attract "administrative penalties". The acts listed in this Article include: "... reproducing and distributing the work, for commercial purposes, without the permission of the copyright owner ... reproducing and distributing a sound recording ... produced by others without the permission of its producer". cf n. 29 and n. 90 above. See further Hanes K, "IP Infringement - not just costly, it's a crime", IP Asia (Dec. 1996), 31.

    [136] Note however that it is the subject of administrative penalties under Article 46(2).

    [137] This appears to be the approach of the Beijing First Intermediate People's Court in the "Beijing Online" case discussed below.

    [138] Article 47 of the Copyright Law Implementing Regulations 1991 ("Regulations"), expressly provides that "Audio and video recordings produced and distributed in the territory of China by foreign producers shall be protected by Copyright Law".

    [139] See the Special 301 Report of the United States Trade Representative at http://www.ustr.gov/enforcement/special.pdf and Zhang A, "Proposed Copyright Law Promises Better Remedies", IP Asia (April 1999), 5; "China to Formulate Online Copyright Protections", ChinaOnline, 8 May 2000 at http://www.chinaonline.com/refer/legal/currentnews/secure/C00050170.asp.

    [140] Article 5(3).

    [141] Reported in Sun A, "Beijing Appeal Court Ruled on a Major Case: Copyright Liability for Internet Service Providers Determined", Asia Pacific Law Institute Update Vol. 1 No. 1, January 2000 at http://www.apli.org./

    [142] Ibid at p 3.

    [143] There is some uncertainty as to whether the performance right covers only live performances (for example recitation). Some commentators argue that the right should be interpreted so as to cover, inter alia, the performance in public of sound recordings: See Feng P, Intellectual Property in China, (1997: China, Sweet & Maxwell) at p 101.

    [144] Schlesinger M & Smith E, "Crimes of Copyright Infringement Explained: The Prospect for Strong Judicial Enforcement Against Copyright Infringement", in Cohen M, Bang A & Mitchell S, Chinese Intellectual Property Law and Practice, (1999: The Hague, Kluwer Law International) at p 240.

    [145] An alternative translation of the Copyright Law substitutes "enjoyment" for "self-entertainment".

    [146] Chengsi Z, Intellectual Property Enforcement in China: Leading Cases and Commentary, (1997: China, Sweet & Maxwell) at p 22.

    [147] Id.

    [148] Ibid at p 59.

    [149] n. 129 above, at p 237.

    [150] Article 10(5).

    [151] See "China Regulates Audio-Visual Online Commerce", China Online, 28 March 2000 at http://www.chinaonline.com/issues/internet_policy/currentnews/open/c00032705.asp; "Ministry of Cultural Affairs Promulgated New Rules on On-line Audio-Visual Transactions", Asia Pacific Law Institute, March 2000 at http://www.apli.org/aplinews.html; Chang T & Chong C, "New PRC Internet Regulations", Coudert Brothers, March 2000 at http://www.coudert.com/practice/elawasiamar2000.htm.

    [152] Article 3.

    [153] Persons who were engaged in the business of online dealings in audiovisual products were given until 1 May 2000 to obtain a licence in accordance with the Circular.

    [154] In December 1999, Sony Music, EMI, Warner Music, Universal and China Records Guangzhou instituted litigation in the Second Intermediate People's Court of Beijing against two pirate MP3 sites operating out of China. Both of the sites reportedly offered numerous domestic and international MP3 recordings for download. See "Internet settlement in China leads to joint IFPI/My Web copyright campaign", IFPI, 23 March 2000 at http://www.ifpi.org/press/20000323.html; "My Web Denies China Pirate Web Site Accusation", ChinaOnline, 22 December 1999 at http://www.chinaonline.com/issues/internet_policy/newsarchive/secure/9122120.asp. On 15 August 2000, three people were arrested by Hong Kong Customs for illegally offering MP3 songs for download: see Lo C, "Three questioned over HK pirate music Web site", South China Morning Post, 16 August 2000 at http://www.technologypost.com/internet/Daily/20000816083101135.asp.

    [155] Ricketson S, Exclusive Rights of Copyright Owner & Infringement, The Law of Intellectual Property : Copyright, Designs & Confidential Information, (LBC) p 164 (2000).

    [156] Borland J, "RIAA: Gnutella not yet a threat" at http://news.cnet.com/news/0-1005-200-5383626.htm.

    [157] See art. 53-54h of the German Copyright Law (English translation at http://www.ifrro.org/laws/law_germany.html). See also Knight W, "HP dragged through German courts over music copyright" at http://news.zdnet.co.uk/story/0,,s2082776,00.html; Gruenwald J, "Digital copyright tug o' war" at http://www.zdnet.com/zdnn/stories/news/0,4586,2784806,00.html.

    [158] See Bowman L & Olsen S, "Free-speech lawsuit targets record industry" at http://news.cnet.com/news/0-1005-200-6205709.html; McCullagh D, "Watermark Holes? C'est La Vie " at http://www.wired.com/news/politics/0,1283,43390,00.html. Brown J, "SDMI Cracked!", Salon.com, 12 October 2000 at http://www.salon.com/tech/log12000/10/12/sdmi_hacked/index.html; Borland J, "Hacker cracks Microsoft anti-piracy software", at http://news.cnet.com/news/0-1005-200-7590303.html.

    [159] See Borland J, "Protected CDs quietly slip into stores" at http://news.cnet.com/news/0-1005-200-6604222.html; Smith T, "Anti-rip CD system bypassed" at http://www.theregister.co.uk/content/54/20766.html.

    [160] While it is conceivable that future improvements in technological protection measures may alter this situation, two further points should be noted: (1) Such technological measures cannot be 'backdated', that is, applied to copyright content already in the marketplace. However, a similar effect may be possible through implementing such measures in distribution mechanisms (e.g. file sharing software); and (2) 'Crack proof' technologies appear to be the stuff of myth and legend, as evidenced by the proliferation of 'key generators' and 'cracks' for popular software applications: see generally n. 158 and n 159 above and http://astalavista.box.sk./

    [161] Not least due to the fact that most circumvention technologies are developed with non-commercial motives, namely the technical challenge involved and the subsequent peer esteem. The developers of such technologies will in most cases be difficult, if not impossible to locate, thereby frustrating attempts to prosecute them for any relevant breaches of anti-circumvention laws. Further, the fact that the act of circumventing a technological protection measure is not prohibited under Australian law only serves to exacerbate the 'home taping' problem in the digital environment.

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