The legislative history of the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999 contains no reference to Kazaa, Napster, Gnutella or the like, much less concern over individual users who share mp3s on peer-to-peer networks. In order to understand the purpose of the 1999 Act, I need to provide a little context (which the Congressmen themselves point to when discussing the 1999 Act).
Congress had a Boston college student in mind when it passed the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, but it was not Joel Tenenbaum.
For six-weeks between November 23, 1993 and January 5, 1994, David LaMacchia, a 21 year-old MIT student, created and operated a password-protected bulletin board on the university’s servers where he first encouraged users to upload copyright-protected software programs (Excel, Word Perfect, Sim City) , then transferred the software to different password-protected locations, and finally allowed users with access to the latter location to upload the copyrighted material free of charge.
In 1994, the United States District Court for the District of Massachusetts dismissed federal wiretap charges against LaMacchia, holding that the wiretap statutes do not permit copyright prosecutions. The Government had to bring wiretap rather than copyright infringement charges because the then applicable copyright statutes required the infringer to profit financially (or else he could not be charged). This became known as the “LaMacchia Loophole” in copyright law.
Congress passed the 1997 No Electronic Theft Act with the express purpose of closing the “LaMacchia loophole,” by allowing prosecution even when there is no financial gain. See e.g. (Mr. Coble: “H.R. 2265, Mr. Speaker, is a much needed legislative response to a 1994 court case that created a loophole which currently prevents the Department of Justice from prosecuting Internet copyright theft) (note: this same explanation for the NET Act is enunciated by nearly every Congressman that gave a floor speech on the bill). The legislative history confirms that Congress was not concerned with individual users uploading/downloading mp3s on peer-to-peer networks, but instead focused on the “need to help protect the interest of the entire software industry by protecting against the unauthorized copying and distribution of computer programs.” (Floor Statement of Mr. Kyl). The need to protect the software industry arose from the “software industry[‘s]” loss of “over $2 billion in the United States and over $11 billion around the world” in 1996 alone at the hands of software piracy” Id. Nothing in the legislative history of the NET Act mentions individuals who share music on peer-to-peer networks.
Turning to the legislative history of the 1999 Act, Senator Leahy, a co-sponsor of the Act, made clear that the Act has two purposes: First, to “help provide additional deterrence” on top the NET Act by “amending the Copyright Act, 17 U.S.C. 504 (c), to increase the amounts of statutory damages recoverable for copyright provisions (by “adjusting them to inflation” according to Mr. Coble’s floor statement). Second, to instruct the Sentencing Commission to act on an emergency basis to enact guidelines in response to the NET Act (which the Commission had yet to do). Thus, the overriding theme of the 1999 Act was to make sure that the large-scale software piracy concerns enunciated in the NET Act were being dealt with effectively by law enforcement and that additional monetary disincentives would contribute to the deterrence. The Floor Statements of Mr. Rogan confirm that the intent of the 1999 Act was to add another layer of deterrence to the NET Act, rather than respond to individual users sharing music on peer-to-peer networks: “During the subcommittee’s hearing on the ‘Implementation of the NEW Act and Enforcement Against Internet Privacy,’ the concern raised about the lack of prosecutions being brought by the Justice Department and the Sentencing Commission’s failure to address Congress’ desire to impose strict penalties for violators.”
This portion of Senator Leahy’s floor statement from the 1999 Act sums a lot of this up nicely:
“I have long been concerned about reducing the levels of software piracy in this country and around the world. The theft of digital copyrighted works and, in particular, of software, results in lost jobs to American workers, lost taxes to Federal and State governments, and lost revenue to American companies. A recent report released by the Business Software Alliance estimates that worldwide theft of copyrighted software in 1998 amounted to nearly $11 billion. According to the report, if this “pirated software has instead been legally purchased, the industry would have been able to employ 32,700 more people. In 2008, if software piracy remains at its current rate, 52,700 jobs will be lost in the core software industry.” This theft also reflects losses of $991 million in tax revenue in the United States.”
“The Hatch-Leahy-Schumer “Digital Theft Deterrence and Copyright Damages Improvement Act” would help provide additional deterrence by amending the Copyright Act, 17 U.S.C. §504(c), to increase the amounts of statutory damages recoverable for copyright infringements. These amounts were last increased in 1988 when the United States acceded to the Berne Convention. Specifically, the bill would increase the cap on statutory damages by 50 percent, raising the minimum from $500 to $750 and raising the maximum from $20,000 to $30,000. In addition, the bill would raise from $100,000 to $150,000 the amount of statutory damages for willful infringements.”
But the biggest indicator that not even Napster (much less someone like Joel) is contemplated by the 1999 Act comes from Judiciary Committee Statements by Senators Hatch and Leahy (and others) after the 1999 Act had been passed. For example, at an October 9, 2000, Senate Judiciary Committee hearing in Provo, Utah on “Utah’s Digital Economy and the Future: Peer-To-Peer and Other Emerging Technologies, ” Senator Hatch spoke excitedly about Napster the “most famous example of peer-to-peer networking , whose creator is here with us today.” Senator Hatch warmly praised Napster’s 19 year-old creator, Shawn Fanning: “we’re real proud of him and proud of the efforts he’s made and proud of the things he’s been able to accomplish. To quote Mr. Grove, who is a friend, ‘‘The whole Internet could be re-architected by Napster-like technology.’’ Fortune magazine has called the technology embodied in Napster, ‘‘The Next Big Thing,’’ for the Internet.” A litter later, Hatch continued his praise of Fanning:
“One of our witnesses today will be Shawn Fanning. Shawn Fanning is the inventor of the Napster software application and founder of the Napster Internet music community. A native of Massachusetts, Mr. Fanning developed the original Napster application and service in January 1999, while a freshman at Northeastern University. Napster is the fastest growing application in the history of the Internet. In early October 2000 the Napster community numbered over 32 million worldwide. Shawn continues to be active in the development and growth of the Napster technology and business. And of course as you all know, he’s probably been on more front pages of magazines than almost anybody in history except perhaps John F. Kennedy. Now Shawn, we don’t think you should run for office. We think you should keep doing what you’re doing, although knowing a little bit about you, I’m not sure you shouldn’t run for office too.”
Honestly, Senator Hatch seemed positively enamored by Shawn,
“It’s this peer-to-peer technology approach that basically has formulated opportunities for people like never before. And we’re moving more and more into peer-to-peer technology; and when you look at Gnutella, which doesn’t even need a server, it’s a slow system, but nevertheless someday somebody is going to break through on that. Napster was the reason I think we’ve been able to even move in that direction. So let’s turn to Shawn Fanning, who at 18 years of age developed this application and this process, and deserves an awful lot of credit. We’re very proud of him, and he’s been with us back in Washington and agreed to come to Utah especially today just to chat with us a little bit about what his perspectives are. And if some of you young students would like to come up and sit on the floor up here, for those of you who are standing, we would be glad to have you come up here and surround this place, and we’ll turn the time over to Shawn Fanning at this point.”
[NOTE: I think it is important here to remember that Napster was not selling licensed songs at this point. People were uploading and downloading their music, and Naspter provided the platform and indexing. In other words, Hatch is praising the very activity that costs Joel $675,000 and way too much of his young life.)
Again, rather than the urgent, concerned tone Hatch took towards software piracy, the Senator spoke lavishly of Napster’s peer-to-peer sharing approach:
“Peer-to-peer means that everyone’s home computer becomes like a server, so that rather than many customers browsing through the content stored on large servers, individuals search for information or entertainment on each other’s computers. This technology could reduce costs for individuals who want to be their own publisher. It allows for more up-to-date information to be more quickly searchable, and could make more efficient use of computing power. It could further connect us to each other.”
Fanning went on to explain exactly how Napster works, how as of no then they were not paying artist royalties, how wide the practice of sharing music files had becomes (among both children and their parents), how the technology can benefit independent artists, how music sampling can lead to increased revenues for artists and the industry, etc. Shawn even downloaded a song from Napster for Hatch and the Audience to listen to during the hearing.
Far from criticizing Fanning, Napster, or music file sharing, Hatch continued the love-fest with Fanning at the end of Shawn’s testimony:
“Chairman HATCH. Well, Shawn, we’re proud to have you here, and, you know, you’re only 19, but I think we can use you as a professor here. I think we could——
[Laughter.] Chairman HATCH. And by the way, I notice you like to wear baseball caps. Could I interest you in a BYU cap? [Applause.] Mr. FANNING. Mr. Hatch, could I interest you in a Napster shirt? [Applause.]”
The Senate Judiciary Committee’s July 2000 hearing entitled, “MUSIC ON THE INTERNET: IS THERE AN UPSIDE TO DOWNLOADING?” is further corroboration that peer-to-peer music sharing was not on Congress’s radar when it passed the 1999 Act. In July 2000, roughly eight months after the 1999 Act passed, this hearing made clear that Congress had no grasp on how to treat peer-to-peer music file sharing, or even whether the activity was illegal at all:
Senator Hatch: “Our reasons for holding this hearing are to learn more about what is taking place in the marketplace and, in doing so, better equip us to advance the interests of consumers and creators. Insofar as consumers are concerned, they desire access to downloadable music which is not unnecessarily restrictive or unduly burdensome. I want to ensure that the marketplace provides them with the opportunity to access the music they want to hear over the Internet and to do so legally. Insofar as creators are concerned, I want to ensure that artists and creators are protected through an approach to copyright that empowers them to generate maximum revenue for their creative works.”
“[I]t is my hope that we can learn more about the online music marketplace and why there is so much disharmony. We have with us this morning a number of different models of online music services.
MP3.com is a music service provider and offers a number of different services to users. MP3.com shares revenues with artists, often on a 50/50 basis. And we have Emusic, which offers downloads of singles or whole albums, paid for either per song or per album. Emusic has deals with many independent record labels and offers deals to artists that are structured similarly to recording contracts. Both Emusic and MP3.com can track usage levels to accurately account to the artists for use of their music and pay them accordingly. And both Emusic and MP3.com are structured with a central server Web site that makes music licensing relatively easy for creators and consumers. Their organization is similar to the chart on display which diagrams a traditional Web-based search engine, where an individual’s computer deals with information sources through the intermediary of a single server.”
“By way of contrast, consider the architecture of the Napster and Gnutella communities, as represented in these schematic charts over on the right here. As you can see, Napster, which is a business, operates with a central server site through which members submit requests. Requests proceed from the central site out to other Napster users. And with Gnutella, there is no central point, but we are linked directly to other Gnutella users’ PC’s. We can download the music directly from any Gnutella users’ computer to which we are linked.”
This organization has implications for both music licensing and for broader Internet technology. To quote Andy Grove, of Intel, ‘‘The whole Internet could be re-architected by Napster-like technology.’’ Using this peer-to-peer technology to search for information on the Internet allows us to get the most up-to-date information direct from the source, as opposed to traditional Web search engines that are made through intermediaries. With regard to music licensing, however, as you might guess from the charts, peer-to-peer file-sharing poses a much greater challenge than single-source licensing. With each user being a publisher to a greater or lesser degree, the relative lack of a real distribution center makes licensing somewhat chaotic and haphazard, which brings us to the nub of this hearing. This technology presents a unique opportunity to those who make a living by producing copyrighted works. They can be selfpublishers dealing directly with their fans. But it also presents a unique threat, if misused, to rob them of their livelihood, which could rob all of us of their continued work by destroying the incentives to create and publish their works, all of which will require much greater creativity in licensing or distributing copyrighted creative works.”
“To illustrate the file-sharing technology that has proved so controversial, we will demonstrate how a search and download of music is done using Gnutella. If you will direct your attention to the monitors, you will be able to see the process from a live Internet connection. First, we submit a request for particular music or a particular artist. As I mentioned before, we do not submit the request to a central site, but rather we link directly to other Gnutella users and relay our requests through the individual hard drives of members of the new telecommunity who are online. If you look at the bottom left-hand corner of the screen, you can see how many connections we have made with other users. The search engine returns to us a list of the relevant music files available to us from other Gnutella users, together with information on the size of the file and the other users’ bandwidth, and hence probable download speed. We can choose from among the many options returned which files to download, and can watch the progress of downloading. Since the downloading will take a few minutes, we will return to play the music after the ranking member’s remarks. Once the file is downloaded, because the music is in a digital format, I can copy it onto a number of different listening devices to take the music with me. I think music fans have expressed a strong interest in getting popular, legitimate music in this format. One continuing problem raised throughout the evolution of online music, however, is the complaint that the major record labels have not been willing to license online music distributors to provide their music, or have offered licenses on terms much different than online entities related to those labels.”
True, Senator Hatch downloading Creed from Gnutella safely falls under the “fair-use” doctrine, but Senator Leahy freely admitted during the hearing that his own children download songs using such techniques and even send the songs to the Senators who listen to the recordings:
“But when you can move so quickly on some of these sites, and when I go on college campuses, as many of us do, to talk and everybody is talking about what they have downloaded, how they share, and so on, and when my kids pick up a ‘‘Black Muddy River,’’ which happens to be one of my favorites of the Dead, and send it to me—they have heard a new version—and I log on in the morning while I am having my breakfast and there it is, I mean this is a whole different world, and I think we have to recognize that on where we go.”
Why should Joel pay 675k when Senator Leahy, a co-sponsor of the 1999 Act, listens to the song that his daughter sent him on the internet using “some of these sites”? College kids where the Senator visits and his own daughter “share” the music, but Joel steals it. Doesn’t seem like a fair standard. Who should know the law if not the Senator who co-sponsored the most recent Amendment and his own daugther?
Also, the Upside hearing shows that the Senators themselves did not see the existing law as covering the music sharing context:
“While we have been talking, in case some of you wonder what I have been doing up here, I have gone onto Napster and MP3.com, and others. I have been downloading some things, trying to download a couple of versions of ‘‘Touch of Gray.’’ I went from touch of gray to touch of white by the time it got downloaded, it takes so long under the systems we have, although I would mention I would take it any color I could get it, I suppose. But we do move along slowly. I couldn’t help but think—and I am going to go into some questions on this, but if there are 20 million voting-age Napster users and if they suddenly get cut off, I suspect that even those Senators who are not sure what that large screen is in their office, called a computer, are going to start hearing from these people. But also by saying that, if the parties don’t quickly move to some voluntary licensing arrangements, then I suspect there is going to be pressure on Congress to create statutory, compulsory licenses. There will be pressure for Congress to create a single fee for the writers, the performers, the record companies, and all concerned. Think about that. Frankly, I am not sure everybody is going to be happy with it if we did do that, and I would hope that the parties might continue to work together. If I could wave a magic wand today and tell you exactly how to do it, and even if you all agreed, from the artists to the providers to the record companies and everybody else—even if you all agreed that you would take my solution, I am not sure what would be the fairest solution.”
Finally, looking at the Sentencing Commission Amendments enacted in response to the NET Act as authorized by the 1999 Act, there is no mention of mp3 sharing or the like (although it does help to show a fairer way to look at damages):
Subsection (b)(1) implements section 2(g) of the No Electronic Theft (NET) Act by using the retail value of the infringed item, multiplied by the number of infringing items, to determine the pecuniary harm for cases in which use of the retail value of the infringed item is a reasonable estimate of that harm. For cases referred to in Application Note 2(B), the Commission determined that use of the retail value of the infringed item would overstate the pecuniary harm or otherwise be inappropriate. In these types of cases, use of the retail value of the infringing item, multiplied by the number of those items, is a more reasonable estimate of the resulting pecuniary harm.
See Note 2 (B)
2. Determination of Infringement Amount.-This note applies to the determination of the infringement amount for purposes of subsection (b)(1).
(B) Use of Retail Value of Infringing Item.-The infringement amount is the retail value of the infringing item, multiplied by the number of infringing items, in any case not covered by subdivision (A) of this Application Note, including a case involving the unlawful recording of a musical performance in violation of 18 U.S.C. § 2319A.
On June 25, 2003, the RIAA issues this press release:
RECORDING INDUSTRY TO BEGIN COLLECTING EVIDENCE AND PREPARING LAWSUITS AGAINST FILE
Starting tomorrow, the Recording Industry Association of America (RIAA) will begin gathering evidence and preparing lawsuits against individual computer users who are illegally offering to “share” substantial amounts of copyrighted music over peer-to-peer networks. In making the announcement, the music industry cited its multi-year effort to educate the public about the illegality of unauthorized downloading, and underscored the fact that major music companies have made vast catalogues of music available to dozens of services to help create legitimate, high quality and inexpensive alternatives to online piracy.
The first lawsuits were filed on September 8, 2003 (against 261 “major offenders” defined as those who downloaded on average more than 1,000 songs) . See http://www.msnbc.msn.com/id/3078419/ . Less than (10) users who had heard from their internet providers that the RIAA requested their respective names, contacted the RIAA and settled before the September 8 suits. Slate reported (also September 8, 2003) that the RIAA “has at least 1,600 subpoenas in the works to force ISPs to identify file-traders whose IP addresses have been spotted downloading or sharing the copyrighted recordings of RIAA member labels and artists.” http://slate.msn.com/id/2088066/ The first of the 261 September 8th suits settled for 2,000 on September 11, 2009. The defendant was 9 year old girl Brianna LaHara. http://www.technewsworld.com/story/31561.html?wlc=1249707909
Robert John Smith
Louisiana Capital Appeals Project
New Orleans, LA
The Charles Hamilton Houston Institute