TechKnowledge No. 92

Copyright Enforcement Revisited

By Adam D. Thierer
November 4, 2004

Today, the motion picture industry announced that it will begin filing copyright infringement lawsuits against individual file sharers. The industry claims its intellectual property (IP) rights have been violated by the uploading and sharing of movies on various peer-to-peer (P2P) networks. The movie industry’s targeted lawsuit strategy mimics the model previously employed by the music industry, which has filed over 6,000 lawsuits against online file sharers since September 2003.

As was the case when the recording industry announced its lawsuit strategy, many observers will roundly castigate the movie studios for this decision. Indeed, this round of lawsuits will open a window onto the stances of various parties involved in debates on copyright. Opponents of these lawsuits should answer the tough question they often avoid: If not direct enforcement against infringers, what else? Whereas many of the other enforcement strategies the industry has pursued in recent years are excessive and unwise, targeted lawsuits against individuals who violate the copyright laws are probably the most sensible and just way of protecting copyrights without destroying new technologies in the process.

Restating the Copyright Bargain. Copyright law in America can be thought of as a grand bargain between creators and the public. In essence, the bargain is an economic and social quid pro quo, which says: “If you create, we will reward you with a monopoly right to exploit your creation for a limited period of time.”

In many instances, however, this bargain is difficult to enforce. Nowhere is that more evident than in the case of file sharing on the Internet. The P2P phenomenon represents one of the most remarkable developments of our current technological age. Millions of citizens are able to share massive amounts of content with the rest of the world at the click of a button. Such a revolutionary technology was bound to have a downside. In this case, it was the widespread redistribution of copyrighted materials without compensation.

People who believe in unlimited sharing of copyrighted content must be ready to dispense with copyright law altogether. The sharing of information and culture is good, but if there are no limits on sharing whatsoever, copyright will fall. Some might greet that development with enthusiasm, arguing that creativity and innovation will happen in the absence of the copyright bargain. But there remain good reasons to believe that some level of copyright protection is essential to encourage creativity and ingenuity. People act on self-interest and will probably create more if they will profit from doing so.

Assuming this premise is still generally accepted, society must draw some lines to preserve the copyright bargain. If balance is the goal, as indeed it must be, then we need a model of enforcement that takes into consideration both the importance of compensating creators as well as the widespread exchange of ideas and culture. Undeniably, there will always be tension in this balance, but that doesn’t mean the balance isn’t worth preserving.

Making the Tough Enforcement Choices. So, how do we strike the balance in the case of P2P file sharing? The first step will need to be a realization on the industry’s part that not all file sharing is preventable or even undesirable. There are great benefits that accrue to both users and the industry itself from the limited sharing of content. Just as a book shared between friends can encourage a reader to purchase more titles by an author, a song or movie shared online can encourage additional purchases.

But there is a world of difference between sharing a few copies of a song or a movie and uploading entire libraries of albums or movies. Someone who shares thousands of works, giving no consideration to the economic well-being of creators, has fundamentally broken their end of the copyright bargain. If they never compensate creators, file sharers should not be surprised when the industry slaps a lawsuit on them.

Again, many critics will blast the industry for this move. But what are their alternatives? Hopefully, copyright skeptics would agree that targeted individual lawsuits represent a vastly superior enforcement strategy to imposing contributory or vicariously liability on P2P software providers or Internet service providers (ISPs). There are good reasons to be concerned about such “shoot-the-middleman” strategies since they could compromise P2P functionality or deputize ISPs as copyright policemen. The industry favors secondary liability lawsuits, as well as the recently proposed Induce Act, for precisely that reason. It would be far easier for them to push the enforcement costs and headaches onto the middlemen instead of going after the end users themselves. Moreover, the middlemen have “deep pockets” whereas the individual file sharers do not.

Without categorically ruling out the application of contributory or vicarious liability-after all, did Napster really have any “substantial non-infringing uses”?-it would certainly seem preferable to avoid imposing secondary liability on third parties until we have exhausted all efforts to impose direct liability on end users. What makes many uncomfortable with contributory liability in general, and the Induce Act in particular, is that they could cast such a wide enforcement net. Overly broad constructions of contributory liability could result in the shuttering of networks or services with many other important uses.

Twenty years ago, for example, the Supreme Court struck down (by just one vote) a misguided request by the movie industry to impose contributory liability on Sony for marketing Betamax video recording devices to the public. Imagine the lost innovation had the decision gone the opposite way. And imagine the lost sales for the movie industry itself had gotten its way in the Betamax decision! Even before the Betamax decision was handed down in 1984, the industry was making more money from home video rentals and sales than from first-run cinema receipts. That’s still the case today. The industry adjusted its business model in response to technological change and has profited handsomely as a result.

But what is most troubling about the hasty pursuit of secondary liability solutions is that they preceded the more justifiable approach to enforcement-targeted lawsuits against the most egregious file-sharers who cause the biggest problems. Enforce against them and then see what happens. It could be the case that enough targeted lawsuits will act as a sufficient deterrent to widespread file sharing in the future. More specifically, the lawsuits (as well as industry-led copyright education campaigns) will hopefully instill in the minds of most file sharers that it is not acceptable to share massive amounts of IP with the rest of the world without compensating those who create that content in the first place.

Again, it all goes back to balance. Targeted copyright enforcement along the lines of what the music and movie industry are pursuing with their lawsuits against individuals file sharers provides the best way of ensuring baseline copyright protections. It is certainly preferable to a regime of overly broad contributory liability, or ham-handed legislative or regulatory responses.

Adam Thierer (athierer [at] cato [dot] org) is the director of telecommunications studies at the Cato Institute in Washington, D.C. (www.cato.org/tech). To subscribe, or see a list of all previous TechKnowledge articles, visit www.cato.org/tech/tk-index.html.