Note on proposals for reforming copyright law for music
Henry H. Perritt, Jr.
Various proposals have been advanced for amending copyright law to deal with the phenomenon of music file sharing.
Harvard professor William W. Fisher III, in his book, Promises to Keep, meticulously outlines the current status of the music industry, providing good data on the cost structure of music production and delivery in the world of CDs. He is balanced and objective in his analysis of the interests of the participants in the music industry and the stresses on the institutional arrangements developed for a different technological environment. He reviews several different approaches for reform and ends up preferring a system in which creators of music would register their works with the copyright office, which would result in a unique file name which would be used to track digital copies of the work. Public revenues would subsidize those who register to make their works available to the public, based on techniques pioneered by performing rights organizations. A government agency would collect data and estimate the frequency with which each work is heard by consumers, and registrants would be paid a share of the available revenues in proportion to the relative popularity of each work. Once such a system was in place, Fisher would repeal most of the current prohibitions and copyright law on unauthorized reproduction, distribution, adaptation, and performance. The result would be that most music would be available for free.
Larry Lessig in his excellent book, Free Culture, has explained how extensions of copyright law and computer architectures have combined with concentration in the communication and entertainment industries to narrow enormously the scope of public domain music and other information available for creative effort. Not only does a creator confront a world in which her building blocks are more encumbered by ever with property interests, she confronts a nearly insuperable set of transaction costs if she tries to get permission from all the rights holders in order to build on their work. Lessig explains that fair use, while theoretically at least a partial answer to some of these problems is not in practice because it is so expensive to defend a copyright infringement lawsuit and the penalties for losing are so great.
Lessig offers five reform proposals. First, he suggests that more formalities to obtain and to keep a copyright in force. He suggests a model for copyright registration similar to that used to register Internet domain names. He also suggests a standard for marking files in order to distinguish that which is free from that as to which permission must be obtained. He suggests shortening the term for copyright to the 1976 average of about 32 years. He suggests narrowing the exclusive rights of copyright owners by limiting the right to create derivative works to a much shorter term than the underlying copyright and mark specific derivative uses that are protected, leaving others unprotected. He suggests particular reforms with respect to music file sharing so that they focus narrowly on those who use file sharing networks as substitutes for purchasing copyrighted music, while privileging those who use sharing networks to sample before purchasing, to obtain access to content that is no longer sold but is still under copyright and for those who are using the networks to get access to content that is not copyrighted or access that the rights holder explicitly or impliedly approves. As to works no longer available, he suggests a statutory license that would establish a low statutory licensing rate for the commercial sharing of content not offered for sale by a commercial publisher, while creating an incentive to keep works available commercially by exempting them from the statutory license. He suggests a modification of William Fisher’s proposal. While Fisher offers a proposal to replace the current copyright system, Lessig would have it complement the existing system. He would tax and compensate for file sharing that replaces sales to the extent that actual harm is demonstrated.
Finally, he would “fire all the lawyers” by simplifying the copyright legal regime.
Litman proposes legislation to permit consumer downloads of music and collective licenses to pay for them. She proposes a blanket license for widespread file sharing. The terms of the license would be statutory, but copyright owners could opt out. Opting out would be intentionally burdensome, to encourage file sharing. Rights holders wishing to opt out for the statutory licensing system must use a special file format she calls “.drm” to give notice that the music contained in the file is copyrighted and not licensed for sharing. The .drm format could include copyright rights management data as defined in 17 U.S.C. § 1202. Royalties would be administered by a government agency, because of empirical evidence that private copyright collectives disadvantage, and possibly cheat, small artists. Individual artists would have rights enforceable against the licensees and the royalty agency. She envisions a resulting space for music in which “free” music could coexist with paid music, much as paid information and news sites on the Internet coexist with free information. Her proposal includes some attractive incentives, including the need for a copyright holder to demonstrate that it released files in other than the .drm format in order to be entitled to statutory royalties.
This article suggests a simpler approach: The law should distinguish between informal free-file sharing, which improves the functioning of the market, and piracy, which should be redefined as charging money for someone else’s music. The best direction for copyright reform would create an express privilege for exchanging recorded music among friends and maybe for any non-profit public distribution.
This approach offers several advantages. It would conform the law to reality, eliminating the undesirable result of making millions of (mostly) young people outlaws. It would encourage the kind of social intercourse with respect to music that would promote discovery of new artists, and according to the Oberholzer-Gee/Stumpf study, well might increase sales of physical formats or downloads through services such as iTunes. It also would mitigate the risk of increased free-riding by permitting enforcement and litigation resources to be focused on the real free-riding culprits—those who seek profit from free riding on another’s creative effort. The law should recognize an express privilege for exchanging recorded music among friends and maybe for any non-profit public distribution.
Such a reform could be implemented in two ways. First Congress could amend section 107 of the Copyright Act to allow copying of music for personal use and for exchange among friends as long as the exchange is free; maybe allow Web publishing and other forms of free downloading as long as it is free. Such an approach is certainly within Congressional capability to enact. For example, non-public performances of musical works "without any purpose of direct or indirect commercial advantage and without payment of any fee or other compensation for the performance to any of its performers, promoters, or organizers, are, subject to certain limitations, already expressly privileged. Moreover, Canadian law permits file sharing in a broader set of circumstances than privileged by U.S. law.
A second way is to interpret the existing text of section 107 to privilege the same kind of informal file sharing, on the grounds that the most important factor in fair use analysis is impact on the market for the protected work, and the evidence suggests that informal file sharing increases demand for copyrighted music and music recordings rather than reducing it.
The reality of legislative process when it comes to music and other forms of entertainment is that the interests considered by the legislators are skewed. The entertainment industry enjoys enormous clout on Capitol Hill. It is a generous contributor to election campaigns, to Democrats as well as Republicans—perhaps more to Democrats. That means it gets what it wants, except in those circumstances in which it is opposed by an equally well organized and well heeled lobby, such as the broadcasting industry or the telephone industry. Dan Hunter observed that “Without muscular social welfarist protection of the public domain, intellectual property industries will never voluntarily reduce their expansionary claims. . . . We simply cannot expect those who are granted property interests to reduce their entitlements to accord with social policy.”To some extent the producers of hardware, software and services related to the Internet may represent an effective counterpoise to music industry power in the future, but so far, the music industry has been much better organized than the “Internet industry.”
Another factor is the potential power of aroused consumers, who can get the attention of legislators, when they are sufficiently aroused, as they were in the recent uproar over certain copy protection technologies deployed by Sony-BMG. “For the better part of three hundred years they have expanded their empires, only to find that their encroachment on the public domain has finally generated the kind of proletarian backlask from the have-nots that threatens to undermine all that they’ve work for.”
Monopolists always try to generate monopoly profits by restricting output, i.e. by withholding product from the most efficient channels. In the years to come, the music industry intermediaries, exemplified by the major labels, will continue to do everything they can to delay and frustrate deployment of new music technologies because these technologies represent lower-cost competition by legitimate artists and new kinds of intermediaries. It’s not piracy they are really afraid off; it’s creative entrepreneurship by artists and their supporters.
Some commentators have crafted their reform proposals to achieve political support among the more powerful interest groups.
 See Miller at 323 (identifying as options: voluntary collective licensing, compulsory licensing, ad revenue sharing, P2P subscriptions, bandwidth levies imposed on ISPs, media tariffs on blank CDs, maintaining status quo). Id. at 324-325 (noting that compulsory licensing has been imposed with respect to player piano, satellite televisions, cable television, and Internet radio).
 William W. Fisher III, Promise to Keep: Technology, Law and the Future of Entertainment (2004).
 Fisher at 202.
 Lawrence Lessig, Free Culture: The Nature and Future of Creativity (2004).
 Free Culture at 95-97 (story of frustration in trying to get permission to use a short segment of “The Simpsons” in the background of a documentary); Id. at 100-103 (story of Alex Alban’s efforts to clear rights for segments to be used in a new video mosaic).
 Id. at 98-99.
 Id. at 287.
 Id. at 289.
 Id. at 291.
 Id. at 293.
 Id. at 295.
 Id. at 296-297.
 Id. at 299-300.
 Id. at 301.
 Id. at 303.
 Id. at 304-305.
 Litman at 39 (encouraging mobilization of 60 million people who share music files to balance political power of entrenched lobbying power of recording industry).
 Litman at 49 (“With the exception of works released only in the .drm format, consumer-to-consumer dissemination and any reproduction, distribution or public performance of display that it entailed, would be completely legal. Any music that’s already been released in other formats could be recaptured only with great difficulty . . . .”) [emphasis added].
 Litman at 42 (“royalty collectives may sometimes be better at collecting money than disbursing it”)
 Litman at 43.
 Litman at 45.
 The author credits his friend and former student Andrew T. Strong for persuading the initially skeptical author that this is the best direction for reform.
 Playlist at 214 (reporting on independent study showing that free file exchange did not diminish sales of recorded music and might have increased it).
 17 U.S.C. § 107.
 117 U.S.C. sec. 110(4).
 Litman at 34 & n. 129 (citing BMG Canada v. Doe  F.C. 88 (Can.)); Miller, 82 U.Det. Mercy L.Rev. at 316 & n.95 (describing Canadian law as permitting file-sharing).
 Dan Hunter, Culture War, 83 Tex.L.Rev. 1105, 1120 (2005) [hereinafter “Hunter”].
 Hunter at 1119.
 Accord, Schorr at 74-75 (adherence to major label business models is motivated by desire to avoid competing with small record labels on a national level, and desire to continue to benefit from share of revenue for distribution expenditures).
 See Litman at 39 (explaining why elements of her proposal could attract support from music, recording, computer, and consumer electronic industries to “have a fair chance of enactment”).