[FMC] IP in a post-Grokster World

IP in a post-Grokster World
Preeta Bansal Partner, Skadden Arps (moderator)
Chris Amenita Senior Vice President, ASCAP Enterprises Group
Mia Garlick General Counsel, Creative Commons
Cary Sherman President, RIAA
Siva Vaidhyanathan Assistant Professor of Culture and Communication, NYU
Don Verrilli Partner, Jenner & Block
Fred von Lohmann Senior Intellectual Property Attorney, EFF
Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.
Bansal: This decision had something for everyone.
von Lohmann: Will this change the environment for p2p file sharing? Probably not. Fans enjoy having access to full catalog. We need to get artists paid. EFF likes a collective licensing approach– allow sharers to keep doing what they’re doing and still get the artists compensated. This is not going to solve our porblems any more than the 14,000 lawsuits against file sharers.
Bansal: Will this decision have a chilling effect on technology?
FvL: No fundamental objection to inducement standard. Grokster did not answer our other questions: can you build a tech if it turns out it can be used for infringing? Whenever you hvae to call lots of lawyers to figure out if you can create something, that is, by definition, a chilling effect, whether it is a sampling artist in his basement or an inventor in her garage. The effects may extend far beyond just P2P.
Verelli: The underlying activity (unlawful downloads of music and movies) is a problem of staggering scope. In the court of public opinion, there was a question of whether the activity is lawful. That debate is over, as far as the law is concerned, and will have an immense effect on public opinion. You can’t go out an build a business based on expropriating other peoples’ copyrights. The law in this area must strike a balance between protecting interests of copyright owners and allowing technological innovation. Increasing legitimate channels of distribution.
Bansal: What specific tools has Grokster added to the entertainment industry’s tools?
PV: Inducement liability can be used against a business that is intentionally inducing copyright infringement for damages or injunctive relief. The inducement cause of action itself is a pretty potent cause of action.
Garlick: Ultimately, the lawyers are the ones who benefitted from Grokster. The fact-specific test means that lawyers have to get involved in product design, marketing development.
Bansal: Where does the public end up after Grokster?
Siva: The public remains confused and engaged at the same time. Is there evidence that p2p sharing has decreased since Grokster?
Verelli: Not as such, it is just a prediction, but companies will move to legit business models.
Siva: Remember that what people do is from what companies do. There are many non-commercial services. Souter managed to dodge the Sony issue. The real quesetion is how much liability to companies have for what consumers do downstream. But the effect will be on marketing, and that there will never be another product with -ster at the end of its name. That won’t matter, because consumers aren’t that dumb. I have seen no evidence that the usage of p2p has decreased since Grokster.
The problem is the internet. The internet makes this all possible. This is an almost uncontrollable system of communication at this point. Any sophmore computer science major can create a powerful p2p search engine.
The entertainment industry has been whacking moles for 6 years now, and it hasn’t made a difference. People are still file sharing and supplementing it with other forms of distribution.
Bansal: But they’re not profiting from it.
Siva: The individuals were never profiting from it and know how to stay ahead of the lawyers. And these are communications students who want to work for MTV, not computer science circuits.
Bansal: What’s the response to Grokster in the recording industry?
Sherman: Lot’s of behind the scenes acticity and unbelievable activity in terms of p2p companies still in existince rethinking their business models and licensing/settlement discussions that gives us a lot of hope with transformation to legit business models.
For example, iMesh may launch within a week as a legit service. This demonstrates the power that system can have when it’s not hiding from the copyright law and taking advantage of knowing who the sharers are and what they want. p2p was always about community. This will be a combination social networking, dating and music sharing service.
We’re seeing investment capital start to flow into services. Licensed p2p is the next phase.
Bansal: How does the prevalence of legit p2p models serve you?
Sherman: The goal was never to get rid of p2p, but to get rid of infringement. We’ve lived with physical piracy and will live with online piracy. We want to move people to legitimate p2p services where aartists are compensated.
[OK, so why didn’t the industry license to Napster in 2000 and would have pretty much avoided the escalating file sharing wars of the last few years?]
Bansal: What is the impact on creators, and what’s happening now in the actual marketplace?
Amenita: The decision helped clarify the marketplace. The general public now understood that the activity going on in Grokster was illegal. We never wanted to shut down the technology itself, but the way people use the decision.
Bansal: In Justice Breyer’s opinion, this was the first time that the Court referred to creators separately from the entertainment industry. Creators were amici on both sides of the case.
Amenita: Business itself is not fair. What this decision did was clarify what one could expect to get compensated for. A handshake and a pat on the bat does not send kids to college.
Bansal: What will be the business models of the entertainment industry going forward? The celestial jukebox? The iTunes model? Live performances replace recordings as the driving force behind the industry? Open licensing?
Sherman: The variations on the per-track or subscription services will be interesting. There are some sites that will give out free music in exchange for watching an ad. Major corporations may begin to sponsor musicians (as patrons) and give away the music for free. There may be time-limited or limited quality free downloads. There may be a new relationship between artists and labels or artists and publishers– like the WB e-label that lets artists release songs in various size chunks (singles, albums, EPs).
It will be easier to sell to niche markets on the internet.
Bansal: Has p2p raised the hand of aritsts in breaking the control of labels over the industry?
Sherman: Not necessarily p2p, but the internet. Word of mouth can have a big impact on the internet regardless of having music on p2p or a legit service. [Like MySpace.] Artists can still give away their music for free if the artist decides to .
Siva: The industry has gotten a good idea in the last 36 months after a slow start.
p2p and the internet are largely the same thing. What is legit p2p? Who controls it?
Sherman: Sometimes, it’s actually a transfer from user to user, but the service tests whether it’s a good copy and then transfers it from a user, or from a central server if there is no other good copy.
Siva: Distributed content with filters, and the filter is governed by the license terms. By moving towards this model, you’re moving away from the true p2p model. in unfiltered p2p, you’re talking about every member giving up something (bandwidth, disk space). Under this new system, how can you make it worth the time to give up the bandwidth and space, so what will the consumer get?
Sherman: That will be the interesting test– will the sense of community to be enough to keep users engaged? But that’s what’s interest about iMesh it combines Friendster with p2p.
Bansal: What are some of the other legit p2p business models.
von Lohmann: The baseline reality is that BigChampagne reported that July 2005 saw a new high use of file sharing, which is interesting, because it comes after Grokster and during summer, where college students are at home and using p2p less.
If the goal is to restrict fans, to constrain fans, then the services will not work. But largely agrees with Sherman that experimentation is good. But today’s services have high prices and limited selection and clearing tracks one by one is not a way that the. Music fans are still looking for something as good as napster Classic.
PlayLouder, an ISP in the UK, signed a deal with Sony BMG to let PlayLouder users freely share Sony BMG music among themselves. EFF has been suggesting a model like that. Yahoo can charge $5/month for access to their whole library. Users want more catalog, fewer restrictions.
We want a world where the instinct to be a fan does not depend on incompatible music files and seeing which service has excusives.
Bansal: Where’s it all going to end up when we have unlimited hard drive space?
von Lohmann: The model where you have a blanket license is more flexible and more successfull than any other. Look at the PRO’s. They’ve done a good job of being flexible. It’s about getting paid, not getting
Bonsal: But what happens when users have all the music created already stored on their hard drive? Don’t people pay for cable tv because they don’t have enough storage?
von Lohmann: People pay for cable television because they want to see this season of the Sopranos, this season of Six Feet Under. Music fans are always buying new songs and new albums.
Sherman: PRO’s don’t license every listener in a restaurant. They license every business owner. In Fred’s model, we have to license every single user or sue the individual who isn’t licensed. Aren’t we trying to get out of that game?
von Lohmann: With the internet, the kind of thing that used to have a factory to do can now be done by an individual at home. The fact that you can cut out the intermediaries and go directly to the fans is a great opportunity.
Garlick: p2p and the internet enables direct relationships between artists and fans, especially with things like Mmagnatune. Where Creative Commons is showing is that there are a variety of different ways to publish creative works for publicity.
Bonsal: What’s coming?
Siva: It’s hard to make predictions without data. All these companies will try different ways of doing this. Most will fail, some will succeed, and this will benefit all parties. Five years ago, some people were arguing that the RIAA would be out of business at this point– even then that seemed far-fetched. However, we’re not going back to the time when Backstreet Boys roamed the Earth.
Consumers are about to have a DRM revolt, largely because of the iPod, and will recognize that the only people who benefit from DRM are the companies that build weak DRM.
von Lohmann: For a century, every new tech that has been first attacked by the entertainment industry has ended up growing the entertainment industry: the player piano, radio, the VCR. The internet will not be the first technology for which this is not true. This is not the beginning of the end, but the beginning of the beginning for the entertainment industry on the internet. There will be more creativity and more competition, which will be great for artists and great for fans.
Sherman: DRM takes so many hits as being a limitation on consumers, when in fact is it an enabler of different business models that give consumers more choice to get more music at more prices for different types of uses. The problem needs to be solved, but that problem could be solved at the flick of a switch tomorrow if Apple and MSFT agree.
Amenita: One thing won’t change. You need someone to create in the first place– the songwriter. Since everyone believes that artists should be compensated, let’s see the money.
Verrilli: The debate now isn’t the same as 5 years ago. The debate 5 years ago was over whether copyright as a whole was a dinosaur. The question now is how to move forward in a way that respects copyright with a variety of different business models. The Supreme Court’s decision has helped to take this forward. The risk calculus today is very different than it was 5 years ago.
Garlick: It’s going to be about there being more choice and more flexibility as to what models will work. There is a new relationship between creators, business and users.