Intellectual Property & Copyrights Research Paper

Intellectual Property & Copyrights Research Paper  Covering Cases: Metro-Goldwyn-Mayer Studios, Inc. vs. Grokster, Ltd. A&M Records, Inc. vs. Napster, Inc.

Christopher Pappas

Business Ethics, Law and Communication Wednesday, October 29, 2008

©

2008

Christopher Pappas

TABLEOFCONTENTS INTRODUCTION ....................................................... ...................................................................................... ............................................................. ............................................................ ................................. ... 2 CASESTUDYI:A&MRECOR CASESTUDYI:A&MRECORDS,INC.VS DS,INC.VS.NAPSTER,I .NAPSTER,INC. NC. ........................................................ ............................................................................... ....................... 5 INTRODUCTION ................................ ................................................ ................................ ................................ ................................ ................................ ................................ ................................ ................................ ..........................5 ..........5 NAPSTER’SOPERATION ............................... ............................................... ................................ ................................ ................................ ............................... ................................ ................................ ............................6 .............6 LEGALISSUES ................................ ................................................. ................................ ................................ ................................ ................................ ................................ ............................... ................................ .............................8 .............8 CONCLUSION................................ ................................................ ................................ ................................ ................................ ................................ ................................ ................................ ................................ ............................ ............ 12 CASESTUDYII:METRO‐GOLDW CASESTUDYII:METRO‐GOLDWYN‐MAYERSTUDIOS, YN‐MAYERSTUDIOS,INC.VS.G INC.VS.GROKSTER,LTD ROKSTER,LTD ................................13 INTRODUCTION ................................ ................................................ ................................ ................................ ................................ ................................ ................................ ................................ ................................ ....................... ....... 13 GROKSTER’SOPERATIONS ................................ ................................................ ................................ ................................ ................................ ................................ ................................ ................................ .................... .... 13 LEGALISSUES ................................ ................................................. ................................ ................................ ................................ ................................ ................................ ............................... ................................ .......................... .......... 14 CONCLUSION................................ ................................................ ................................ ................................ ................................ ................................ ................................ ................................ ................................ ............................ ............ 16 ETHICALISSUES

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REFERENCES ....................................................... ..................................................................................... ............................................................. ............................................................. ....................................20 ......20 APPENDIXA............................... A.............................................. ................................ ................................ ................................ ................................ ................................ ................................ ............................... ............................... ............... 24 APPENDIXB................................. B................................................. ................................ ................................ ................................ ................................ ............................... ................................ ................................ ............................ ............. 28 APPENDIXC............................................ C............................................................ ................................ ................................ ............................... ................................ ................................ ................................ ................................ ................... 29

Intellectual Property & Copyrights, Research Paper, 2

INTRODUCTION In1883,theimportanceofintelle In1883,theimportanceofintellectualproperty ctualpropertywasrecognized wasrecognizedforfirsttimei forfirsttimeinthe nthe ParisConventionforthePro ParisConventionfortheProtectionofIndustria tectionofIndustrialPropertyfollow lPropertyfollowedbytheBer edbytheBerne ne ConventionfortheProtectionof ConventionfortheProtectionofLiteraryan LiteraryandArtisticWorks dArtisticWorksin1886.Nowadays,t in1886.Nowadays,the he UniversalDeclarationofHum UniversalDeclarationofHumanRights,andto anRights,andtobemorespe bemorespecificArticle27,p cificArticle27,protectsthe rotectsthe intellectualpropertyrightstha intellectualpropertyrightsthatacreatoror tacreatororanownerof anownerofapatento apatentorcopyrighthason rcopyrighthason his/herownworkorinvestme his/herownworkorinvestment(“Whatisi nt(“Whatisintellectualprop ntellectualproperty?”n.d.). erty?”n.d.). Itistruetosaythatcountriesre Itistruetosaythatcountriesrealizedthatin alizedthatintellectualprope tellectualpropertyisapowe rtyisapowerfultool rfultool foreconomicdevelopmentand foreconomicdevelopmentandsocialandcultural socialandculturalwelfare.Furthe welfare.Furthermore,countries rmore,countrieswanted wanted topromotecreativityandinv topromotecreativityandinventionespe entionespeciallywhenthe ciallywhentheinterestsofthe interestsoftheinnovatora innovatorarethe rethe sameasthoseofthepublicin sameasthoseofthepublicinterest.Asar terest.Asaresult,countriescre esult,countriescreatedlawstopr atedlawstoprotect otect intellectualproperty. Moreover,eachofusshouldpromote Moreover,eachofusshouldpromoteintellectualpr intellectualpropertyrightsb opertyrightsbecauseofthe ecauseofthe benefitswejoin.Forexa benefitswejoin.Forexample,withthe mple,withthepatentsystem patentsystemaninventor aninventorofanewa ofanewandhighly ndhighly effectivedrugforcancerwill effectivedrugforcancerwillcontinuehis/he continuehis/herresearchin rresearchinordertoproduce ordertoproduceabetteran abetterand d moreefficientproduct.There moreefficientproduct.Theresultsofthisinven sultsofthisinventionwillbene tionwillbenefitthemembe fitthemembersofthesociety rsofthesociety withseveralways.Patient withseveralways.Patientswillhavemore swillhavemorepossibilitiesof possibilitiesofbeingcured beingcuredandtheinve andtheinventorwill ntorwill berewardedforhiscreativity. Intellectualpropertyrefers Intellectualpropertyreferstotheintangi totheintangibleproperty, bleproperty,suchaspatents, suchaspatents,copyrights, copyrights, trademarks,andtradedress,wh trademarks,andtradedress,whichbelongtoa ichbelongtoapersonora personoracompany.Tobe company.Tobemorespecific, morespecific,it it referstothecreationsofthe referstothecreationsofthemindlike:symbols, mindlike:symbols,inventions,ar inventions,artisticworks,litera tisticworks,literary,and ry,and images(“Introductiontointellect images(“Introductiontointellectualproperty:the ualproperty:theoryandpra oryandpractice”(1997). ctice”(1997).

Intellectual Property & Copyrights, Research Paper, 3 Generalspeaking,intelle Generalspeaking,intellectualproperty ctualpropertyisdividedintotw isdividedintotwocategories: ocategories: 1. Patentorindustrialproperty Patentorindustrialproperty,whichincludestra ,whichincludestrademarks,inve demarks,inventions,industrial ntions,industrial designs,andgeographicindicati designs,andgeographicindicationsofsource;and onsofsource;and 2. Copyright,whichincludesliterarya Copyright,whichincludesliteraryandartisticwork ndartisticworks,suchaspoems,p s,suchaspoems,paintings, aintings, plays,films,musicalworks,novels,dra plays,films,musicalworks,novels,drawings,photograp wings,photographs,architecturalde hs,architecturaldesigns, signs, andsculptures(“Whatisintelle andsculptures(“Whatisintellectualproperty” ctualproperty”n.d.). n.d.). Moreover,apatentforan Moreover,apatentforaninventioni inventionisanexclusive sanexclusiverightgrantedt rightgrantedtotheinventor, otheinventor, issuedbytheUnitedStatesP issuedbytheUnitedStatesPatentandTr atentandTrademarkOffice ademarkOffice.Apatent .Apatentprovidesprotect providesprotectionfor ionfor theinventiontotheowner theinventiontotheownerofthepaten ofthepatentforalimitedp tforalimitedperiod,genera eriod,generally20yearsfro lly20yearsfromthe mthe datetheapplicationforthe datetheapplicationforthepatentwa patentwasfiledintheU sfiledintheUnitedStatesa nitedStatesandthemainte ndthemaintenancefees nancefees werepaid.Moreover,U.S.p werepaid.Moreover,U.S.patentgrants atentgrantsareeffective areeffectiveonlywithint onlywithintheUnitedStat heUnitedStates,U.S. es,U.S. territories,andU.S.possessions.Pa territories,andU.S.possessions.Patentprotection tentprotectionmeansthatt meansthattheinvention heinventioncannotbe cannotbe commerciallymade,used,distributed, commerciallymade,used,distributed,orsoldwithoutthep orsoldwithoutthepatentowner’ atentowner’sconsent. sconsent. Furthermore,apatentowne Furthermore,apatentownercansellthe rcanselltherightofthein rightoftheinventiontosomeon ventiontosomeoneelse,whowi eelse,whowill ll becomethenewownerofth becomethenewownerofthepatent.Wh epatent.Whenapate enapatentexpiresthe ntexpirestheprotectione protectionends,andasa nds,andasa result,theinventionbecomes result,theinventionbecomesavailableto availabletocommercialexp commercialexploitationbyother loitationbyothers(“Whatisa s(“Whatisa patent?”2005). 

Also Also,,th ther ere ear are ese seve vera ral lty type pes sof ofp pat aten ents tsb but utt the hem mos ost tco comm mmon ona are ret thr hree ee: : 1. Utilityorfunctionpatents,sucha Utilityorfunctionpatents,suchasaprocess,mach saprocess,machine,articleof ine,articleofmanufacture,or manufacture,or compositionofmatter, 2. Designpatents,suchasane Designpatents,suchasanew,original,an w,original,andornamental dornamentaldesignforana designforanarticleof rticleof manufacture;and 3. Plantpatents,suchasadistin Plantpatents,suchasadistinctandnewva ctandnewvarietyofplan rietyofplant(“Whatisp t(“Whatispatent?n.d). atent?n.d).

Intellectual Property & Copyrights, Research Paper, 4 Furthermore,thepurposeofcopy Furthermore,thepurposeofcopyrightsistoprote rightsistoprotecttheexpressio cttheexpressionofideas.In nofideas.In otherwords,itprotectstherightsof otherwords,itprotectstherightsoftheauthorsand theauthorsandcreatorsinan creatorsinanyfield,suchasli yfield,suchasliterary, terary, dramatic,musical,artistic,andcert dramatic,musical,artistic,andcertainotherinte ainotherintellectualworks,bo llectualworks,bothpublishedand thpublishedand unpublished.AsJenningsM.(2006), unpublished.AsJenningsM.(2006),states:“Acopyr states:“Acopyrightgivesthe ightgivestheholderofthecopyr holderofthecopyright ight theexclusiverighttosell,control,or theexclusiverighttosell,control,orlicensethecop licensethecopyrightedwork.” yrightedwork.”(p.624) (p.624) AccordingtotheSection106ofthe1976 AccordingtotheSection106ofthe1976CopyrightAct,the CopyrightAct,theholderofthecop holderofthecopyright, yright, orinotherwords,therightsholderha orinotherwords,therightsholderhasthetotalcontrol sthetotalcontrolovertheuseof overtheuseofthecopyrighted thecopyrighted work,suchastheexclusiverightt work,suchastheexclusiverighttoreproducethe oreproducethecopyrightedwork copyrightedwork,toprepare ,topreparederivative derivative works,todistributecopiesorphon works,todistributecopiesorphonorecordsofthecopyr orecordsofthecopyrightedwork(“W ightedwork(“Whatiscopyright” hatiscopyright” 2005). Also,rightsrelatedtocopyrightin Also,rightsrelatedtocopyrightincludethoseofper cludethoseofperformingartistsin formingartistsintheir their performances,producersofphonog performances,producersofphonogramsintheir ramsintheirrecordings,andt recordings,andthoseofbroadcaster hoseofbroadcastersin sin theirradioandtelevisionp theirradioandtelevisionprograms.Theseclo rograms.Thesecloselyassociatedfie selyassociatedfieldofrightsrela ldofrightsrelatedto tedto copyrightarecalledrelated copyrightarecalledrelatedrights.Therela rights.Therelatedrightssometime tedrightssometimesaremore saremorelimitedandof limitedandof shorterdurationthanthecopyri shorterdurationthanthecopyrights(“CopyrightsBa ghts(“CopyrightsBasics”2006).Moreove sics”2006).Moreover,afterJanua r,afterJanuary1, ry1, 1978thecreatorholdsthecopyrightfr 1978thecreatorholdsthecopyrightfromthedateit omthedateithasbeencre hasbeencreateduntil70ye ateduntil70yearsafter arsafter hisdeath(AppendixA).Also, hisdeath(AppendixA).Also,theCopyrightOff theCopyrightOfficeoftheLib iceoftheLibraryofCongress raryofCongressregisters registers copyrights(“Whatiscopyright”n.d). Inaddition,thetermfairuse Inaddition,thetermfairuseisrelatedtocop isrelatedtocopyrights.Fairuse yrights.Fairuse,infact,isthe ,infact,istherightto rightto occasionallyandinareasona occasionallyandinareasonablemanne blemannerusethecopyr rusethecopyrightedmateria ightedmaterial(“Fairuse” l(“Fairuse”2006). 2006). Accordingtosections107through118ofthe Accordingtosections107through118oftheCopyrightAct,“ CopyrightAct,“oneofthemost oneofthemostimportant important limitationsisthedoctrineoffai limitationsisthedoctrineoffairuse.”(App ruse.”(AppendixA).The endixA).Thedoctrinewasn doctrinewasnotmentionedin otmentionedin previouscopyrightlawuntilit previouscopyrightlawuntilitwasdevelope wasdevelopedthroughasubstan dthroughasubstantialnumberof tialnumberofcourt court

Intellectual Property & Copyrights, Research Paper, 5 decisionsovertheyearsand decisionsovertheyearsandcodifiedinsection codifiedinsection107ofthecopyrig 107ofthecopyrightlaw(Appe htlaw(AppendixB). ndixB). BasedonSection107,thereare BasedonSection107,therearefourfactorsthatde fourfactorsthatdetermineofw termineofwhetherornota hetherornotanactivityis nactivityis withinfairuse: 1. Thepurposeoftheuse, 2. Thenatureoftheworkbeingused, 3. Theamountoftheworkused,and 4. Theeffectoftheuseonthem Theeffectoftheuseonthemarketfororv arketfororvalueoftheori alueoftheoriginal,copyrighte ginal,copyrighted,work d,work (“Fairuse”2006). Inthetwocasesthatwewill Inthetwocasesthatwewilldiscussinthispap discussinthispaperwewill erwewillexaminethe examinethecourt’sanalysis court’sanalysisof of thesefourfactors. CASESTUDYI:A&MRecords,Inc.v CASESTUDYI:A&MRecords,Inc.vs.Napster,Inc. s.Napster,Inc. Introduction ShawnFanning,a19‐yea ShawnFanning,a19‐year‐oldstudentatN r‐oldstudentatNortheasternUn ortheasternUniversity,Boston,cre iversity,Boston,createda ateda peer‐to‐peermusicfilesh peer‐to‐peermusicfilesharingservice aringservice.Thepurpose .Thepurposeofthisservicew ofthisservicewastoenable astoenablepeople people copyanddistributeMP3musicfi copyanddistributeMP3musicfileswitheachoth leswitheachother.Shawncoope er.Shawncooperatedwithhis ratedwithhisfriends friends andhisuncle.Infact,hisuncle andhisuncle.Infact,hisunclewasacofounder wasacofounderandthechairm andthechairmanofNapste anofNapster.Hisunclewa r.Hisunclewas s alsothelargestshareholder(Spe alsothelargestshareholder(Spencer,2000).They ncer,2000).Theynamedthese namedtheserviceNapste rviceNapsterafter rafter Fanning’snickname.Itis Fanning’snickname.ItistruethatNap truethatNapsterwasap sterwasapioneerservi ioneerservicethatwasre cethatwasreleasedinJun leasedinJune e 1999andoperatedinthisforma 1999andoperatedinthisformatuntilJuly2001.Howev tuntilJuly2001.However,Napster er,Napsterhadtofaceleg hadtofacelegal al challengesrelatedtointellectu challengesrelatedtointellectualproperty alpropertyandcopyrights.Toda andcopyrights.Today,Napsterop y,Napsteroperatesunder eratesundera a newpolicyandphilosophy.Befor newpolicyandphilosophy.Beforewefurther ewefurtheranalyzethisca analyzethiscasestep‐by‐ste sestep‐by‐step,itwouldbe p,itwouldbe usefultodefinethefollowingkey‐terms:

Intellectual Property & Copyrights, Research Paper, 6 •

MP3:Isthenameofthefile MP3:Isthenameofthefileextensionan extensionandalsothename dalsothenameofthetype ofthetypeoffileforMP offileforMPEG, EG, audiolayer3.Layer3isone audiolayer3.Layer3isoneofthethree ofthethreecodingschemesfor codingschemesforthecompressiono thecompressionof f audiosignals.Layer3usespe audiosignals.Layer3usesperceptualaudiocodi rceptualaudiocodingandpsychoacou ngandpsychoacoustic stic compressiontoremoveallsuper compressiontoremoveallsuperfluousinformation,e fluousinformation,especiallythe speciallytheredundantan redundantand d irrelevantpartsofasoundsi irrelevantpartsofasoundsignal.Also,itadds gnal.Also,itaddsaModifiedDiscr aModifiedDiscreteCosineTr eteCosineTransform ansform (MDCT)thatimplementafi (MDCT)thatimplementafilterban,incr lterban,increasingthefr easingthefrequencyresoluti equencyresolution18times on18times higherthanthatoflayer2.W higherthanthatoflayer2.Withsimplywords,it ithsimplywords,itmakesana makesanaudiofilesmaller udiofilesmallerandas andas aresulteasytotransferove aresulteasytotransferovertheInterne rtheInternet(“MP3”,2001). t(“MP3”,2001).

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Peer‐to‐Peer(P2P)techn Peer‐to‐Peer(P2P)technology:Isthetechnolog ology:Isthetechnologythatindividua ythatindividualscanuseinor lscanuseinorderto derto connectwitheachotherdirectlyw connectwitheachotherdirectlywithoutthenee ithouttheneedofacentral dofacentralpointofmana pointofmanagement. gement. Therearethreedifferen TherearethreedifferenttypesofP2P ttypesofP2P: : 1. PureP2P.Inthefirsttype PureP2P.Inthefirsttypethereisno thereisnocentralserve centralserverorrouteran rorrouterandtheusers dtheusers functionasbothclientsandser functionasbothclientsandserversofthesyste versofthesystem, m, 2. HybridP2P.InthehybridP2P HybridP2P.InthehybridP2Pthereisa thereisacentralserve centralserver,butusershav r,butusershavethe ethe responsibilityforhostinginform responsibilityforhostinginformation,forsharin ation,forsharingfiles,andfor gfiles,andfordownloading, downloading, andfinally, 3. MixedP2P.Thethirdtype MixedP2P.Thethirdtypehassomecommoncha hassomecommoncharacteristicswith racteristicswithboth both systems(Crosseetal.,2003).

NapsterisahybridP2Pnetwork. Napster’sOperation Napsterwasapioneer Napsterwasapioneerserviceand serviceandapowerfultool apowerfultoolforsharinginfor forsharinginformationthatwon mationthatwon anotablesuccessduetoitsnetw anotablesuccessduetoitsnetworkstructurean orkstructureanditscostlessservice ditscostlessservice.Inthefollowing .Inthefollowing

Intellectual Property & Copyrights, Research Paper, 7 paragraphswewillpre paragraphswewillpresenttheopera senttheoperationofNapste tionofNapsterinorderto rinordertorealizehowthe realizehowthenetwork network worked. Fann Fannin ing gcr crea eate ted dhi his sso soft ftwa ware reb bas ased edo on nth the efo foll llow owin ing gth thre ree eob obje ject ctiv ives es: : 1. Asearchenginethatwas Asearchenginethatwasabletofindon abletofindonlyMP3files, lyMP3files, 2. TheMP3searchengineshould TheMP3searchengineshouldhavetheab havetheabilitytotradeM ilitytotradeMP3filesdirectly P3filesdirectly,without ,without theuseofacentralizedserve theuseofacentralizedserverforstorage,a rforstorage,and nd 3. Aneffectivewayofonline Aneffectivewayofonlineinteraction interactionbetweenthe betweentheusersoftheM usersoftheMP3searcheng P3searchengine. ine. Thesethreeobjectiveswe Thesethreeobjectiveswerethebasic rethebasicprinciplesofN principlesofNapstersoftwar apstersoftware.Inorderfor e.InorderforFanning Fanning tocreatethissoftware,hehad tocreatethissoftware,hehadtolearnWin tolearnWindowsprogramming dowsprogrammingandUNIXse andUNIXservercode.The rvercode.The factthatthesoftwarewasallow factthatthesoftwarewasallowingcomputeru ingcomputeruserstoswapfile serstoswapfilesdirectly,reduced sdirectly,reducedserver server problems.Also,onlyNapsterin problems.Also,onlyNapsterindexanddirector dexanddirectorywereuploa ywereuploadedonNapste dedonNapster’sserver,all r’sserver,all theMP3filesweretransfe theMP3filesweretransferredacrossthe rredacrosstheInternetusing InternetusingseveralWin severalWindowsprotocols dowsprotocols directlyfromoneusertotheothe directlyfromoneusertotheother(Giesler&P r(Giesler&Pohlmann,“The ohlmann,“Theanthropologyoffi anthropologyoffilesharing: lesharing: ConsumingNapsterasagift,”2003). TheusersofNapsterhadtoa TheusersofNapsterhadtoappropriately ppropriatelyinstallNapst installNapster’sfreesoftwa er’sfreesoftwareintheir reintheir computer,andthen,theyhadto computer,andthen,theyhadtoconnecttotheIn connecttotheInternetinorde ternetinordertoconnectwi rtoconnectwithNapster’s thNapster’s centralserver.Next,theyha centralserver.Next,theyhadtorequesta dtorequestafilefromNa filefromNapster’ssystem.T pster’ssystem.Then,thesoftware hen,thesoftware wassearchingallcomputerstha wassearchingallcomputersthatwereconne twereconnectedtotheNap ctedtotheNapstersystem,locate stersystem,locatedthe dthe requestedfile,andsentall requestedfile,andsentallfilesfromalldiff filesfromalldifferentcomputer erentcomputersthatmatchedto sthatmatchedtotheuser.Also, theuser.Also, userswereabletoloadfiles userswereabletoloadfilesintotheircomp intotheircomputersand,bycon utersand,byconnectiontotheN nectiontotheNapstersystem, apstersystem, allowanyotheruserinan allowanyotheruserinanyplaceofthe yplaceoftheworldtoretriev worldtoretrievethatfileon ethatfileondemand.Thefa demand.Thefactthat ctthat userswereabletoquitesi userswereabletoquitesimplyuploadan mplyuploadanddownloadsevera ddownloadseveralfileswithre lfileswithrelativelylittle lativelylittle

Intellectual Property & Copyrights, Research Paper, 8 effort,madeNapsterreally effort,madeNapsterreallypopularacross popularacrosstheglobe(Giesle theglobe(Giesler&Pohlmann, r&Pohlmann,“Thesocialform “Thesocialform ofNapster:Cultivatingthepa ofNapster:Cultivatingtheparadoxofconsumer radoxofconsumeremancipati emancipation,”2003). on,”2003). Basedontheabove,itbecome Basedontheabove,itbecomesobviousthatitw sobviousthatitwasfairlyea asfairlyeasytopeersto sytopeerstousethis usethis friendlyusernetworksince friendlyusernetworksincetheyonlynee theyonlyneededtohaveba dedtohavebasiccomputerskill siccomputerskillsandanInte sandanInternet rnet connection.Moreover,thefactt connection.Moreover,thefactthattheservice hattheservicewasfree,m wasfree,madeNapster adeNapsterevenmore evenmore compelling.Napsterclaimed compelling.Napsterclaimedthatoneyea thatoneyearafterther rafterthereleaseofthe eleaseoftheserviceitsun serviceitsuniqueusers’ iqueusers’ accountsweremorethan20milli accountsweremorethan20millions,makingN ons,makingNapsterthela apsterthelargestfileshari rgestfilesharingcommunity ngcommunity (“Napster:20millionusers,”2000).U (“Napster:20millionusers,”2000).Usersweree serswereexcitedaboutthe xcitedaboutthequalityandcr qualityandcredibilityof edibilityof thisservice.Theywereab thisservice.Theywereabletohearan letohearanddownloadthemusi ddownloadthemusictheylikeda ctheylikedatnocost.However, tnocost.However, peopleinvolvedinthemusi peopleinvolvedinthemusicindustrysuchasmu cindustrysuchasmusiccompaniesa siccompaniesandartists,counter ndartists,counter Napsterabigthreatfor Napsterabigthreatfortheirintellectua theirintellectualpropertya lpropertyand,ofcourse,their nd,ofcourse,theirprofits.There profits.Thereare are examplesoffamoussingerstha examplesoffamoussingersthatopposedtoNa topposedtoNapster.Forexa pster.Forexample,thefam mple,thefamousheavymeta ousheavymetal l bandMetallica,suedNapste bandMetallica,suedNapsterin2000sincei rin2000sinceitreleasedthe treleasedtheirsongseven irsongsevenbeforetheoffi beforetheofficial cial releaseoftheirCD(Jones,2000).He releaseoftheirCD(Jones,2000).Hence,itwasob nce,itwasobviousthatmusicin viousthatmusicindustryhadtodeal dustryhadtodealwith with numerousproblemsarisingby numerousproblemsarisingbythisnewrea thisnewreality. lity. LegalIssues In2000,A&MRecordsalongwith18othe In2000,A&MRecordsalongwith18otherrecordcompan rrecordcompaniessuedNap iessuedNapster.Under ster.Under theUSDigitalMillenniumCo theUSDigitalMillenniumCopyrightAct(DM pyrightAct(DMCA),A&Maccuse CA),A&MaccusedNapsterfor dNapsterforcontributory contributory andvicariouscopyrightinfringe andvicariouscopyrightinfringement(Brann ment(Brannen,2008).Beforew en,2008).Beforewefurtheran efurtheranalyzethelega alyzethelegal l issuesofthiscase,wewillbrie issuesofthiscase,wewillbrieflydiscussthebasi flydiscussthebasictopicscoveredb ctopicscoveredbytheDMCA.Ba ytheDMCA.Basedon sedon theU.S.CopyrightOffice,theDM theU.S.CopyrightOffice,theDMCAwassigned CAwassignedin1998andconsists in1998andconsistsoffivemajor offivemajortitles. titles. Thesetitlesare:

Intellectual Property & Copyrights, Research Paper, 9 1. “WIPOCopyrightandPerforma “WIPOCopyrightandPerformancesandPhon ncesandPhonogramsTreati ogramsTreatiesImplemen esImplementationAct tationAct of1998.” 2. “OnlineCopyrightInfringem “OnlineCopyrightInfringementLiability entLiabilityLimitationA LimitationAct.” ct.” 3. “ComputerMaintenanceC “ComputerMaintenanceCompetitionAssura ompetitionAssuranceAct.” nceAct.” 4. Titlefourconsistsofsixmiscellaneou Titlefourconsistsofsixmiscellaneousprovisions.These sprovisions.Theseprovisionsre provisionsregardissues gardissues suchasCopyright’sOfficeoperati suchasCopyright’sOfficeoperationsanddistance onsanddistanceeducation. education. 5. “VesselHullDesignProtectionA “VesselHullDesignProtectionAct.”(“TheDi ct.”(“TheDigitalMillenn gitalMillenniumCopyrightA iumCopyrightActof ctof 1998”,1998). UnderDMCAAct,A&Maccuse UnderDMCAAct,A&MaccusedNapsterfor dNapsterforthreemajor threemajorinfringemen infringements: ts: 1. Itsusersweredirectlyinfringi Itsusersweredirectlyinfringingplaintiff’ ngplaintiff’scopyright scopyright 2. Napsterwasliableforcontr Napsterwasliableforcontributoryinfringe ibutoryinfringementofplai mentofplaintiff’scopyright,a ntiff’scopyright,and nd 3. Napsterwasalsoliablefor Napsterwasalsoliableforvicariousinfrin vicariousinfringementofpla gementofplaintiff’scopyrigh intiff’scopyright(Brannen, t(Brannen, 2008). WithsimplywordsA&MaccusedNa WithsimplywordsA&MaccusedNapsternotofv psternotofviolatingcopyrigh iolatingcopyrightitself,butof titself,butof contributingtoandfacilitating contributingtoandfacilitatingotherpeople otherpeople’sinfringeme ’sinfringement. nt. Ontheotherhand,Napsterde Ontheotherhand,Napsterdefineditselfa fineditselfasasearchen sasearchengineandclai gineandclaimedthatmany medthatmany peersuseditinordertohea peersuseditinordertohearsamplemusi rsamplemusicbeforethey cbeforetheybuytheactual buytheactualCD.Furthermore, CD.Furthermore,the the defenseofNapsterwasba defenseofNapsterwasbasedonthefollowi sedonthefollowingthreema ngthreemajorpoints: jorpoints: 1. TheAudioHomeRecordingActof1992, 2. TheDigitalMillenniumCopy TheDigitalMillenniumCopyrightAct(DMCA rightAct(DMCA)of1998,and )of1998,and 3. Misuseofcopyrightandimpliedlicense. Tobemorespecific,Napste Tobemorespecific,NapsterusedtheAudio rusedtheAudioHomeRecordingA HomeRecordingActthatprotectsuse ctthatprotectsusers rs onthegroundsofnon‐commercial onthegroundsofnon‐commercialuse,andespe use,andespeciallythecase ciallythecaseofSonyvs.Unive ofSonyvs.Universal rsal

Intellectual Property & Copyrights, Research Paper, 10 Studios,whichisbestknownasthe Studios,whichisbestknownastheBetamaxcase Betamaxcase.Napsterstate .Napsterstatedthatitwasa dthatitwasaservicetob servicetobe e usedfor“spaceshifting”ofsoun usedfor“spaceshifting”ofsoundrecordingsand drecordingsandNapsterrefe Napsterreferredtotheca rredtothecaseofSonyvs. seofSonyvs. UniversalStudioswheretelev UniversalStudioswheretelevisionshowswere isionshowswererecordedtobe recordedtobeviewedata viewedatalatertime latertime (“SonyCorp.ofAmericavs.Un (“SonyCorp.ofAmericavs.UniversalCityStu iversalCityStudiosInc.”,1984).Howeve diosInc.”,1984).However,Napsterdi r,Napsterdidnot dnot onlymovecontentintoamore onlymovecontentintoamoreusableformat, usableformat,butalsoheldcopie butalsoheldcopiessothatfilescould ssothatfilescouldbe be sharedamongNapster’susers. More Moreov over er,,ba base sed don ont the heD DMC MCA Ath that atp pro rote tect cts sIn Inte tern rnet etS Ser ervi vice ceP Pro rovi vide ders rs( (IS ISPs Ps) )on ont the he groundsof“safeharbor”prov groundsof“safeharbor”provisions,Napster isions,Napsterstatedthatisw statedthatiswasusedasase asusedasaserviceforusers rviceforusers tosamplemusicbeforetheyp tosamplemusicbeforetheypurchasedane urchasedanentirealbum.A ntirealbum.Although,theDistrict lthough,theDistrictCourtstated Courtstated thatifNapsterwasusedonly thatifNapsterwasusedonlytosamplemusic tosamplemusicfilesitwouldonly filesitwouldonlyneedtorequ needtorequirelimited irelimited usageofsongsandnottheent usageofsongsandnottheentiresongoralb iresongoralbumgivingthe umgivingthecapabilitytouse capabilitytousersdownloadthe rsdownloadthe MP3files(“A&MRecords,Inc.vs. MP3files(“A&MRecords,Inc.vs.Napster,Inc.,” Napster,Inc.,”2001). 2001). Furt Furthe herm rmor ore, e,N Nap apst ster ers sta tate ted dth that ats sin ince cet the hel lau aunc nch hof ofN Nap apst ster er,,mu musi sic csa sale les swe were re increased.Though,theDistrictCourt increased.Though,theDistrictCourtstatedthatNap statedthatNapsterdidnotpr sterdidnotprovideenoughev ovideenoughevidence idence tosupportthatnotionandthatth tosupportthatnotionandthattheplaintiff’s eplaintiff’spresentedan presentedanincrediblea incredibleamountofeviden mountofevidence ce thatNapsteractuallycausedh thatNapsteractuallycausedharmtooverall armtooverallmusicsales(Crew musicsales(Crews,2001). s,2001). However,inJulyof2000,theDistrictC However,inJulyof2000,theDistrictCourtfortheNorthe ourtfortheNorthernDistrictofCa rnDistrictofCalifornia lifornia decidedthatNapsterwasguilty decidedthatNapsterwasguiltyfortheabove fortheabovethreeinfri threeinfringements.Nap ngements.Napsterwasnot sterwasnot satisfiedwiththisoutcome,hence,i satisfiedwiththisoutcome,hence,itappealed tappealedtotheU.S.A.Court totheU.S.A.CourtofAppealsf ofAppealsfortheNinth ortheNinth Circuit,whichonFebruary12,2001,con Circuit,whichonFebruary12,2001,confirmedtheDistri firmedtheDistrict’sCourtdecision ct’sCourtdecision(“A&M (“A&M Records,Inc.vs.Napster,Inc.,”2001). Tobemorespecific,theNin Tobemorespecific,theNinthCircuitCourtofA thCircuitCourtofAppealsconfir ppealsconfirmedthatNap medthatNapsterwas sterwas liableforrepeatedinfri liableforrepeatedinfringementsofcop ngementsofcopyrightlawsince yrightlawsincetheusersuploa theusersuploadedand dedand

Intellectual Property & Copyrights, Research Paper, 11 downloadedcopyrightedmusic.Inother downloadedcopyrightedmusic.Inotherwords,Napster words,Napsterprovidedtousers providedtousersthechanceto thechanceto listenandtransfermusicwithout listenandtransfermusicwithoutpayingan payinganyroyaltiestomu yroyaltiestomusicindustry,whichis sicindustry,whichisillegal illegal andisbeyondthemeansof andisbeyondthemeansoffairuse.Rega fairuse.Regardingthepurp rdingthepurposeofuse,theCour oseofuse,theCourtdecidedthat tdecidedthat theuseofmusicwasnottransform theuseofmusicwasnottransformative.Toillustra ative.Toillustrate,songswere te,songswereintheirorigi intheiroriginalformnot, nalformnot, forinstance,aparody(“A& forinstance,aparody(“A&MRecords,Inc.vs.N MRecords,Inc.vs.NapsterInc.,”2001). apsterInc.,”2001). Moreover,peerswereusin Moreover,peerswereusingNapsterfor gNapsterfortheircommercia theircommercialbenefit.The lbenefit.TheCourt Court justifiedthisdecisionnotbasedon justifiedthisdecisionnotbasedonthefactthat thefactthatpeerswouldsell peerswouldsellthesongs,butba thesongs,butbasedon sedon thefactthatthey“repea thefactthatthey“repeatedandexploi tedandexploitativecopying tativecopying,”andhence, ,”andhence,theysavedmone theysavedmoneyfrom yfrom payingroyaltiestothemusic payingroyaltiestothemusicindustry.Further,re industry.Further,regardingthea gardingtheamountofworkuse mountofworkused,the d,the CourtfoundthatNapsterwaslia CourtfoundthatNapsterwasliablefor“whole blefor“wholesalecopying” salecopying”whichisagai whichisagainstfairuse. nstfairuse. Anotherfactoroffairuse,as Anotherfactoroffairuse,asthesearesp thesearespecifiedinSe ecifiedinSection107oftheCopy ction107oftheCopyrightAct,isthe rightAct,isthe effectonthemarket.Onthis effectonthemarket.OnthisissuetheCourtcon issuetheCourtconcludedthatNap cludedthatNapsternegative sternegativelyaffected lyaffected musicindustrysincemusicindustrylostsa musicindustrysincemusicindustrylostsales(Crews,2001). les(Crews,2001). In2001,theNapstercasewas In2001,theNapstercasewassettled,thus,Napste settled,thus,Napsterhadtopay rhadtopay$26millionto $26millionto creatorsandcopyrightersforusin creatorsandcopyrightersforusingtheirmusicwi gtheirmusicwithoutauthorization thoutauthorizationandanother$10 andanother$10 millionforfuturelicensingroya millionforfuturelicensingroyalties.Inthefollow lties.Inthefollowingyear,Na ingyear,Napsterhadtode psterhadtodealwithsevere alwithsevere financialdifficulties.Inthesp financialdifficulties.Inthespringof2002,Nap ringof2002,Napstertriedtoconv stertriedtoconvertitsfree ertitsfreeservicetoa servicetoa subscriptionservicewhereuse subscriptionservicewhereuserswouldpay$4.95a rswouldpay$4.95amonth.Howeve month.However,Napsterha r,Napsterhad d significanttroubleobtaining significanttroubleobtaininglicensestodistrib licensestodistributemajor‐lab utemajor‐labelmusic.InAp elmusic.InAprilofthesame rilofthesame year,theassetsofNapster year,theassetsofNapsterwereabout$ wereabout$8million,whilei 8million,whileitsliabilitiesw tsliabilitieswereslightlyove ereslightlyover r $100million(“Swansong:Bankrup $100million(“Swansong:BankruptcyforNapster tcyforNapster,”2002).InMay ,”2002).InMay2002,Napster 2002,Napster announcedthatBertelsmann,a announcedthatBertelsmann,aGermanmedi Germanmediafirm,boughtit afirm,boughtitfor$85million.In for$85million.InJuneofthe Juneofthe sameyear,Napsterfiled sameyear,NapsterfiledforChapter11b forChapter11bankruptcyin ankruptcyinordertobep ordertobeprotectedbythe rotectedbythetake take

Intellectual Property & Copyrights, Research Paper, 12 overfromBertelsmann.InSep overfromBertelsmann.InSeptember2002,an tember2002,anAmericanb Americanbankruptcyjudge ankruptcyjudgeblockedthesa blockedthesale le toBertelsmannandforcedNap toBertelsmannandforcedNapstertoliquidate stertoliquidateitsassetsunde itsassetsunderChapter7of rChapter7oftheU.S. theU.S. bankruptcylaws(“Napste bankruptcylaws(“Napster’shighandlow r’shighandlownote”,2000). note”,2000). Conclusion Napsterstillexists,butitoper Napsterstillexists,butitoperatesundera atesunderanewstructurea newstructureandanewp ndanewpolicy.Today olicy.Today Napster’soperationsare Napster’soperationsarebothlegalan bothlegalandethical.AtNa dethical.AtNapster’sofficial pster’sofficialwebpage, webpage,underterms underterms andconditions,membersmustsign andconditions,membersmustsignalegalcontact alegalcontact,whichstatesthe ,whichstatesthestandardsofusing standardsofusingthis this software.Amongthese,oneca software.Amongthese,onecanseetheag nseetheagerequireme erequirements.Also,atthe nts.Also,atthedescriptionofse descriptionofservice rvice itisclearlystated,thattheser itisclearlystated,thattheserviceisonlyfor viceisonlyforpersonal,non‐ personal,non‐commercialan commercialandnon‐ dnon‐ transferableuse.Moreover transferableuse.Moreover,permanent ,permanentdownloadisonlya downloadisonlyavailablewh vailablewhenmembers enmembershave have purchasedthesong(“Napster purchasedthesong(“Napstersubscriptionser subscriptionserviceandmusicstor viceandmusicstoretermsand etermsand conditions,"2008).OnSeptember15,2008,N conditions,"2008).OnSep tember15,2008,NapsterInc.a apsterInc.andBestBuyCo.infor ndBestBuyCo.informedthe medthe publicthattheyagreedtome publicthattheyagreedtomerge(“Bestbuy rge(“BestbuytoacquireN toacquireNapster”,2008). apster”,2008). Toconclude,webelievethatF Toconclude,webelievethatFanning’sidea anning’sideaforcreating forcreatingthissoftwarewa thissoftwarewas s innovativeandhighlycreat innovativeandhighlycreative.However,i ive.However,itlackedthele tlackedthelegalandethica galandethicalbaseitshouldh lbaseitshouldhave ave inordertosuccessfullyprotectinte inordertosuccessfullyprotectintellectualproper llectualpropertyrightsofcrea tyrightsofcreators.Infact,thestr tors.Infact,thestructure ucture ofthesoftwaremadeitinev ofthesoftwaremadeitinevitabletoprote itabletoprotecttheserights,a cttheserights,aspeerswer speerswerefreetodown efreetodownload load andextensivelyusemusicfile andextensivelyusemusicfileswithoutpayin swithoutpayingroyaltiestothe groyaltiestothemusicindustry.Fi musicindustry.Finally,we nally,we considerthatNapster,asitfu considerthatNapster,asitfunctionstoday,noton nctionstoday,notonlyproteststhese lyproteststheserights,butalso rights,butalso promotesmusicitselfandmusicindust promotesmusicitselfandmusicindustrysinceitgiv rysinceitgivesthechance esthechancetouserstolisten touserstolisten numerousmusicsampleswhich,late numerousmusicsampleswhich,later,theycanbu r,theycanbuy.Atthesame y.Atthesametime,theycan time,theycanhaveaccess haveaccess toolderorraresongsthatcann toolderorraresongsthatcannotbeeasily otbeeasilyfound.Butmostimp found.Butmostimportantly,intelle ortantly,intellectual ctual propertyrightsofcreatorsare propertyrightsofcreatorsarerespecteda respectedandprotectedby ndprotectedbyallmeans,a allmeans,astheyshould. stheyshould.

Intellectual Property & Copyrights, Research Paper, 13 CASESTUDYII:Metro‐Goldwyn‐M CASESTUDYII:Metro‐Goldwyn‐MayerStudios,Inc. ayerStudios,Inc.vs.Grokster,Ltd vs.Grokster,Ltd Introduction LedbyMetro‐Goldwyn‐Mayer LedbyMetro‐Goldwyn‐MayerStudios,Inc.(MGM), Studios,Inc.(MGM),28majorenter 28majorentertainment tainment companiessuedGrokster,aP2P companiessuedGrokster,aP2Pfilesharing filesharingserviceformusic serviceformusicandmovies,for andmovies,forintellectual intellectual propertyandcopyrightsinfri propertyandcopyrightsinfringements.Though ngements.ThoughitseemsthatM itseemsthatMetro‐Goldwyn‐M etro‐Goldwyn‐MayerInc. ayerInc. (MGM)vs.Grokster,LTDcaseha (MGM)vs.Grokster,LTDcasehasmanysimilar smanysimilaritieswiththep itieswiththepreviouscase,a reviouscase,aswewill swewill discuss,theyhavesignificantdiffe discuss,theyhavesignificantdifferences.Infa rences.Infact,Grokster’soper ct,Grokster’soperationsarediff ationsaredifferentin erentin structurethanNapster’s,leadi structurethanNapster’s,leadingjusticestoa ngjusticestoadilemmaonwhe dilemmaonwhetherGrokster’sop therGrokster’soperations erations wereillegalornot.Thiscase wereillegalornot.Thiscase,likeA&MRe ,likeA&MRecords,Inc.vs.Napst cords,Inc.vs.Napster,Inc.,wentto er,Inc.,wenttotheCourtof theCourtof Appealsandfinally,tothe Appealsandfinally,totheSupremeCourt SupremeCourtwhichdecidedthat whichdecidedthatGroksterwaslia Groksterwasliablefor blefor copyrightinfringements.Inthe copyrightinfringements.Inthenextsessions, nextsessions,wewilldiscussGrokste wewilldiscussGrokster’soperation r’soperations,the s,the legalissues,andfinallyourconclusions. Grokster’sOperations Grokster’soperations,incontrast Grokster’soperations,incontrastwithNapster withNapster,didnotuseace ,didnotuseacentralizedfile‐ ntralizedfile‐sharing sharing network,infact;Groksterwasm network,infact;Groksterwasmoresophisticated oresophisticatedsoftware.Them software.Themaincharacte aincharacteristicsof risticsof Groksterarethat: 1. Itdoesnothaveaccesstothesource Itdoesnothaveaccesstothesourcecodeforthea codefortheapplication, pplication, 2. ItusesFastTracknetworking ItusesFastTracknetworkingtechnology,whichGrok technology,whichGroksterdoesnotown sterdoesnotown. . 3. Atthestartpageuserssee Atthestartpageusersseeadvertisemen advertisementsthatarere tsthatareretrievedbyGr trievedbyGrokster’sclient okster’sclient software. TobetterillustrateGrokster’sop TobetterillustrateGrokster’soperations,we erations,weshouldexplainthe shouldexplaintheFastTrack FastTrack networkingtechnology.FastTrack networkingtechnology.FastTrackismoredyna ismoredynamicthanP2P.T micthanP2P.Thisnetworkte hisnetworktechnology chnology consistsofnodesandsupernodes.Node consistsofnodesandsupernodes.Nodeis“anen is“anendpointonthe dpointontheinternet,typ internet,typicallyauser’s icallyauser’s

Intellectual Property & Copyrights, Research Paper, 14 computer,”whilesupernode“ computer,”whilesupernode“isanodethat isanodethathasaheighte hasaheightenedfunction,accum nedfunction,accumulating ulating informationfromnumerousother informationfromnumerousothernodes”(Unite nodes”(UnitedStatesDistrictCou dStatesDistrictCourt,2003).The rt,2003).The individualnodeisfreetosele individualnodeisfreetoselectitssupernode ctitssupernodestatus.Forexamp status.Forexample,basedoni le,basedonitsownneeds tsownneeds andthenetwork’savailab andthenetwork’savailability,thenodecou ility,thenodecouldchangefromn ldchangefromnodetosupernode odetosupernode,andvice ,andvice versa.Theone‐nodesare versa.Theone‐nodesaregatheredtogethe gatheredtogetheraroundasu raroundasupernode.The pernode.Theuserhastoconne userhastoconnect ct toarootsupernode,whichthenw toarootsupernode,whichthenwilldirecttheuse illdirecttheusertosupernodes. rtosupernodes.Onceusersare Onceusersare connectedtothesupernode,they connectedtothesupernode,theycansearch,loca cansearch,locate,andfinally te,andfinallydownloadthedesi downloadthedesiredfile, redfile, fromotherusers’computer.AsSa fromotherusers’computer.AsSamsonmentions,“ msonmentions,“Manyofthe Manyofthe"rootsupernodes"a "rootsupernodes"are, re, however,operatedbyKazaa however,operatedbyKazaaBV/Sherman BV/Sherman,whichlicensesi ,whichlicensesitsKazaasoftware tsKazaasoftwaretoGrokster” toGrokster” (Samson,2004). Moreover,userscantransfer Moreover,userscantransferfilesusingGrokste filesusingGrokster,butinfact, r,butinfact,Groksterhasne Groksterhasneither ither ownershipnorcontroloverthese ownershipnorcontroloverthesefiles.Thepr files.Theprocedureoflocating ocedureoflocatingandconnectin andconnectingtoa gtoa supernodeistotallyindepen supernodeistotallyindependentfromGrokster. dentfromGrokster.InAppen InAppendixC,thereisa dixC,thereisagraphical graphical representationofGrokster,a representationofGrokster,andacomparison ndacomparisonwithNapste withNapster. r. LegalIssues InOctober2001,Metro‐Goldwyn‐May InOctober2001,Metro‐Goldwyn‐MayerStudios,Inc.alon erStudios,Inc.alongwithsevera gwithseveralmajor lmajor musicandmoviefirmssuedGrokste musicandmoviefirmssuedGroksterwiththeaccusa rwiththeaccusationofcontributory tionofcontributoryandvicarious andvicarious copyrightinfringement.The copyrightinfringement.Thecompaniescomp companiescomplainedthatGrok lainedthatGroksterwasacting sterwasactingillegallyand illegallyand thatmusicandmovieindustrywe thatmusicandmovieindustrywerelosingsignif relosingsignificantprofitsdue icantprofitsduetoGrokster’sope toGrokster’soperations rations (Samson,2004).Ontheotherhand,def (Samson,2004).Onthe otherhand,defensesupporte ensesupporteditsarguments ditsargumentsusingtheAudioH usingtheAudioHome ome RecordingAct,andtobemoresp RecordingAct,andtobemorespecifictheBeta ecifictheBetamaxcase(Son maxcase(SonyvsUniversa yvsUniversalStudios).Inthe lStudios).Inthe MGMvs.Grokstercase,thecourtre MGMvs.Grokstercase,thecourtrejectedthea jectedtheaccusationofMGM.T ccusationofMGM.Thereasoning hereasoningofthis ofthis

Intellectual Property & Copyrights, Research Paper, 15 decisionwasthat“file‐sharin decisionwasthat“file‐sharingsoftwarecouldb gsoftwarecouldbeusedforlegiti eusedforlegitimatepurpose matepurposes,andassuch s,andassuch wasprotectedunderthe1984Beta wasprotectedunderthe1984Betamaxruling” maxruling”(“TheBetama (“TheBetamaxCase”,n.d.). xCase”,n.d.). Tobemorespecific,inthe Tobemorespecific,intheBetamaxcase Betamaxcasethecourtdecided,in thecourtdecided,in1984,thatVCR 1984,thatVCR manufacturer“wasnotliab manufacturer“wasnotliableforcreating leforcreatingatechnologytha atechnologythatsomecustomersma tsomecustomersmayusefor yusefor copyrightinfringingpurposes, copyrightinfringingpurposes,solongasthete solongasthetechnologyiscapa chnologyiscapableofsubstantia bleofsubstantialnon‐ lnon‐ infringinguses”(McGuire,2005).T infringinguses”(McGuire,2005).Thelogicbehin helogicbehindthisdecisionwas dthisdecisionwassimple:electron simple:electronic ic firmsshouldnotbeaccusediftheir firmsshouldnotbeaccusediftheirproductscouldbeuse productscouldbeusedtocommitpira dtocommitpiracy. cy. Moreover,Groksterwasnotlia Moreover,Groksterwasnotliablesincether blesincetherewasnocen ewasnocentralserver,a tralserver,andtherefore, ndtherefore, ithadneithertherightnor ithadneithertherightnortheabilityto theabilitytocontroloveritsuse controloveritsusers(“MGMv.Grok rs(“MGMv.Grokster,”n.d.).On ster,”n.d.).On theotherhand,entertainme theotherhand,entertainmentindustryprov ntindustryprovedthat90%ofthe edthat90%ofthedailyillegaldow dailyillegaldownloading nloading washappeningthroughGrokste washappeningthroughGrokster.Also,Groksterw r.Also,Groksterwasearning asearningprofitthroughadve profitthroughadvertising rtising becausepeopleusedthissoftwa becausepeopleusedthissoftwaretoillegally retoillegallydownloadmusican downloadmusicandmovies.Grokster dmovies.Groksterwasan wasan “infringementdependen “infringementdependent”business,that t”business,thatitsearnings itsearningsweredepen weredependedoncopyright dedoncopyright infringement.Thoughthebotha infringement.Thoughthebothargumentswer rgumentswerestrongenough, estrongenough,Court’sdecisionwa Court’sdecisionwasin sin favorofGrokster.Itistruethat favorofGrokster.Itistruethatthemusicandmov themusicandmoviefirmswere iefirmswerenotsatisfiedb notsatisfiedbythis ythis decision,andwenttotheNin decision,andwenttotheNinthCircuitCourtofA thCircuitCourtofAppeals.Howev ppeals.However,Groksteralso er,Groksteralsowonthis wonthis caseforthesamereasons. Furthermore,thecasewentto Furthermore,thecasewenttotheSupreme theSupremeCourtin2005.TheSu Courtin2005.TheSupremeCourt premeCourt unanimouslydecidedthatGroksteri unanimouslydecidedthatGroksterisliableforin sliableforinducingcopyrighti ducingcopyrightinfringement. nfringement.Thefinal Thefinal decisionoftheCourtwas,“One decisionoftheCourtwas,“Onewhodistributesa whodistributesadevicewiththe devicewiththeobjectofprom objectofpromotingits otingits usetoinfringecopyright,asshow usetoinfringecopyright,asshownbycleare nbyclearexpressionorothe xpressionorotheraffirmativ raffirmativestepstake estepstakento nto fosterinfringement,goingbe fosterinfringement,goingbeyondmeredistr yondmeredistributionwithkn ibutionwithknowledgeof3rdpa owledgeof3rdpartyaction,is rtyaction,is liablefortheresultingactsof liablefortheresultingactsofinfringemen infringementby3rdpartie tby3rdpartiesusingthedev susingthedevice,regardlessof ice,regardlessof

Intellectual Property & Copyrights, Research Paper, 16 thedevice’slawfuluses.”(“Ca thedevice’slawfuluses.”(“CaseArchives”, seArchives”,n.d.).Afterthisde n.d.).Afterthisdecision,Groksterhad cision,Groksterhadtopay topay $50milliontotherecordingindustry $50milliontotherecordingindustryandwasalsofor andwasalsoforcedtoshutdownits cedtoshutdownitsoperation operation (“MGMv.Grokster,”2003).TheCourt (“MGMv.Grokster,”2003).TheCourtdidnotreexam didnotreexaminetheBeta inetheBetamaxcase,nor maxcase,normadeany madeany decisionsregardingtechnologycomp decisionsregardingtechnologycompaniesandthe aniesandtheirproducts.Howev irproducts.However,itaddedone er,itaddedone doctrine,whichcalled“inducemen doctrine,whichcalled“inducement”andregar t”andregardscopyrightinfri dscopyrightinfringementliab ngementliability(“The ility(“The Betamaxcase”,n.d.). Conclusion Metro‐Goldwyn‐MayerInc.vs.Grok Metro‐Goldwyn‐MayerInc.vs.Grokster,Ltdwasa ster,Ltdwasacomplicatedcase complicatedcase,sincecourts’ ,sincecourts’ decisionswerecontradictory.We decisionswerecontradictory.Webelievethat believethatthemainissue themainissuesinthiscase sinthiscasearetwo.Thef aretwo.Thefirst irst oneiswhetherGroksterwasli oneiswhetherGroksterwasliableforcopyr ableforcopyrightinfringem ightinfringement,andthese ent,andthesecondiswhether condiswhether decisionsliketheabove,hurt decisionsliketheabove,hurtcreativityan creativityandtechnologicalinn dtechnologicalinnovation.Itistrue ovation.Itistruetosaythat tosaythat theoutcomeofBetamaxcase,ga theoutcomeofBetamaxcase,gavethechance vethechancetoothercompan toothercompaniestoproduceCD iestoproduceCDrecorders, recorders, musicplayers,anddigitalvideo musicplayers,anddigitalvideorecorders,withoutth recorders,withoutthefearthat efearthattheypromotecop theypromotecopyright yright infringement.However,Supr infringement.However,Supreme’sCourtdecisi eme’sCourtdecisionmadeele onmadeelectronicindustrytob ctronicindustrytobelievethat elievethat itwillblocktheinnovationof itwillblocktheinnovationofdeviceslikei deviceslikeiPod.Onesolutionto Pod.Onesolutiontothisunpleasan thisunpleasantsituation tsituation wouldbetheintroductionofnew wouldbetheintroductionofnewregulationore regulationoreventhearr venthearrestofindividual estofindividualpirates.We pirates.We supportSupreme’sCourtdecision supportSupreme’sCourtdecisionbutwesuggestt butwesuggestthatfurtherreg hatfurtherregulationregardi ulationregardingthis ngthis issueshouldbeissuedinordertop issueshouldbeissuedinordertoprotecttechnologyi rotecttechnologyinnovationand nnovationandcreativity. creativity.

Intellectual Property & Copyrights, Research Paper, 17 ETHICALISSUES Thepurposeofthispaper Thepurposeofthispaperistoexamine istoexamineintellectualp intellectualpropertyandcop ropertyandcopyrightsby yrightsby studyingtwocases.Sofar,wehav studyingtwocases.Sofar,wehave,indepth,a e,indepth,analyzedtheleg nalyzedthelegalaspectsofb alaspectsofbothcases. othcases. However,ourstudywouldbeincomp However,ourstudywouldbeincompleteifwew leteifwewouldnotexamine ouldnotexaminetheethicala theethicalaspectsof spectsof thisissue,sincewealreadyk thisissue,sincewealreadyknowthatlega nowthatlegalthingsaren lthingsarenotalwaysethica otalwaysethicalandviceve landviceversa. rsa. Theethicalaspectswillbe Theethicalaspectswillbediscussedinthefollow discussedinthefollowingparagra ingparagraphs. phs. Down Downlo load adin ing gmu musi sic can and dmo movi vie efi file les sus usin ing gth the eme meth thod ods sde desc scri ribe bed din int thi his spa pape per ris isn not ot onlyillegal,butalsounethical.I onlyillegal,butalsounethical.Itistruetosay tistruetosaythatcreatorsha thatcreatorshavespentef vespenteffort,time,and fort,time,and moneyinordertocreatesome moneyinordertocreatesomethingvaluable thingvaluabletooursociety.Th tooursociety.Then,theypubli en,theypublishtheirpiece shtheirpiece ofartinordertogetcreditsfor ofartinordertogetcreditsfortheirwork,a theirwork,andofcoursetoea ndofcoursetoearnmoney.Use rnmoney.Users,byillegally rs,byillegally downloading,neithergivecre downloading,neithergivecreditstotheartistsn ditstotheartistsnormoney.Inour ormoney.Inouropinion,illeg opinion,illegal al downloadingequalstheft.Wewou downloadingequalstheft.Wewouldnotexaggera ldnotexaggerateifwefurt teifwefurthercomparei hercompareitwithslavery, twithslavery, meaningthatcreatorswork meaningthatcreatorsworkforus,butwedon forus,butwedonotrewardthem otrewardthem.Itistotallyuna .Itistotallyunacceptablein cceptablein ourcivilizedsocietytotakeadva ourcivilizedsocietytotakeadvantageofother ntageofotherpeople’sef people’seffortandcreati fortandcreativity. vity. More Moreov over er,,it iti is sun unet ethi hica cal lbe beca caus use eil ille lega gal ldo down wnlo load adin ing gdo does esn not oth hur urt ton only lya art rtis ists ts,,bu but t theglobaleconomyaswell.Ma theglobaleconomyaswell.Manypeopledow nypeopledownloadfilesbeca nloadfilesbecausetheybeli usetheybelievethatfam evethatfamous ous artistsarealreadyrichen artistsarealreadyrichenough,hence,they ough,hence,theydonotneedmor donotneedmoremoney.Unfo emoney.Unfortunately,they rtunately,they donotconsideremployeesinthe donotconsideremployeesintheindustrysuchas industrysuchasworkers,technicia workers,technicians,andeconomi ns,andeconomists. sts. Theirsalaryandtheircar Theirsalaryandtheircareeraretota eeraretotallydepending llydependingonsales.Since onsales.Sinceillegaldownloadin illegaldownloading g decreasessales,entertainm decreasessales,entertainment’sindustryp ent’sindustryprofitsdeclinean rofitsdeclineand,hence,peop d,hence,peoplelosetheirj lelosetheirjobs. obs. Inotherwords,peoplelosethei Inotherwords,peoplelosetheirjobsandsocie rjobsandsociety’swelfaresu ty’swelfaresuffers,justbecause ffers,justbecausesome some peopleprefertoenjoy peopleprefertoenjoyotherpeople’ otherpeople’sworkwithoutpa sworkwithoutpayingthecost. yingthecost.

Intellectual Property & Copyrights, Research Paper, 18 Furthermore,somepeopledown Furthermore,somepeopledownloadillegallymusic loadillegallymusicandmoviesin andmoviesinorderto orderto financiallyexploitotherpe financiallyexploitotherpeople’swork.To ople’swork.Toillustrate,somep illustrate,somepeopledownloadth eopledownloadthe e copyrightedfilesandthen,they copyrightedfilesandthen,theysellthemata sellthematalowerthant lowerthanthemarket’sp hemarket’sprice.Thisise rice.Thisiseven ven moreunethicalandimmoralsin moreunethicalandimmoralsincetheyexp cetheyexploitotherpeople loitotherpeople’sworkandcr ’sworkandcreativitywithout eativitywithout compensatingthem.Instead,the compensatingthem.Instead,theyillegallyma yillegallymakemoneyfor kemoneyforthemselves.They themselves.Theynotonlysteal notonlysteal moneyfromtheentertainin moneyfromtheentertainingindustrybutfr gindustrybutfromthegovernme omthegovernmentaswellsin ntaswellsincetheypay cetheypayno no taxes. Toconclude,basedonasurveyb Toconclude,basedonasurveybytheInstitute ytheInstituteforPolicyInnova forPolicyInnovation(IPI)due tion(IPI)dueto to piracycopyrightedmaterial, piracycopyrightedmaterial,economyoftheU economyoftheU.S.losses$58billione .S.losses$58billioneveryyear, veryyear,373,375 373,375 U.S.’sworkerslosetheirjobs,work U.S.’sworkerslosetheirjobs,worker’searnin er’searningisdecrease gisdecreasedby$16.3billione dby$16.3billioneveryyear, veryyear, andgovernmentlosses$2.6billion andgovernmentlosses$2.6billionintaxreve intaxrevenuesannually nuesannually(Fitch,2007). (Fitch,2007). People,andmostlystudents,committhi People,andmostlystudents,committhiscrimefora scrimeforavarietyofre varietyofreasons,forinstance asons,forinstance: : •

Itisfree,

•

Itiseasy,

•

Itisalowriskcrime,

•

Theyareunawareofthe Theyareunawareoftheconsequencesi consequencesinindustryand nindustryandinthesocietya inthesocietyasawhole, sawhole,

•

Theybelievethateveryb Theybelievethateverybodyelsedoesit. odyelsedoesit. Governmentandentertainm Governmentandentertainments’industryrole ents’industryroleistoinformci istoinformcitizensaboutthe tizensaboutthe

consequencesofthiscrime.Rega consequencesofthiscrime.Regardingtheethica rdingtheethicalperspectiv lperspectivethereisa ethereisaguidelinewe guidelinewe shouldfollowinordertobesuretha shouldfollowinorder tobesurethatweactin tweactinanethicalma anethicalmannerandwi nnerandwillguideustomak llguideustomake e therightchoice,evenifwe therightchoice,evenifweareunawa areunawareofregulation reofregulationsandlaws.The sandlaws.Thesequestionsa sequestionsas s Jenningspresentthemare: •

Isitlegal?Isitbalanced? Isitlegal?Isitbalanced?Howdoesthismak Howdoesthismakemefeel? emefeel?(BlanchardandP (BlanchardandPeale) eale)

Intellectual Property & Copyrights, Research Paper, 19 •

Howwouldareporterdescribe Howwouldareporterdescribemyactiononthe myactiononthefrontpage frontpageofanewspa ofanewspaper?(The per?(The Front‐Page‐of–the‐NewspaperTest)

•

HowwouldIviewthissituationif HowwouldIviewthissituationifIstoodontheother Istoodontheotherside?Or,wouldI side?Or,wouldIfeel feel comfortabletodiscusswithmypare comfortabletodiscussw ithmyparentsaboutmyact ntsaboutmyaction?(LauraN ion?(LauraNashand ashand Perspective)

•

Ismyactionincompliancewi Ismyactionincompliancewiththelaw?Wh ththelaw?Whataretheco ataretheconsequences?( nsequences?(TheWall TheWall StreetJournalModel)(p.45‐47). Fromourperspective,theab Fromourperspective,theabovequestionsshould ovequestionsshouldleadourperso leadourpersonaland naland

professionaldecisions.

Intellectual Property & Copyrights, Research Paper, 20

References A&M Record Inc vs Napster Inc. (2001) U.S. Retrieved October 23, 2008, from the Court of  Appeals for the Ninth Circuit http://cyber.law.harvard.edu/~wseltzer/napster.html Best buy to acquire Napster. (2008). Retrieved October 20, 2008, from Napster  http://investor.napster.com/releasedetail.cfm?ReleaseID=334474 Brannen, T. (2008). Napster Case Study. Retrieved October 20, 2008, from http://www.wiziq.com/educational-tutorials/presentation/7640-Napster-Case-Study Case Archives. (n.d.). North Carolina Carolina State University. Retrieved Retrieved October 22, 2008 from http://www.law.duke.edu/publiclaw/supremecourtonline/certGrants/2004/mgmvgro Crews, K. (2001). Summary of A&M Records, Inc. v. Napster, Inc.: Implications for the digital  20 08, from Indiana University Digital Music music library. Retrieved October 20, 2008, Library http://www.dml.indiana.edu/pdf/AnalysisOf http://www.dml.indiana.edu/pdf/AnalysisOfNapsterDecision.pdf  NapsterDecision.pdf  Crosse, S., Wilson, E., Walsh, A., Coen, D., & Smith, C., (2003). Napster . Retrieved October 20, 2008, from http://ntrg.cs.tcd.ie/undergrad/4ba2.02-03/p4.html Fitch, E. (2007). “$58 billion in economic damage and 373,000 jobs lost in U.S. due to copyright  piracy.” Institute Policy Innovation. Retrieved Retrieved on October 22, 2008, from from http://www.ipi.org/ Giesler, M., & Pohlmann, M. (2003). The anthropology of file sharing: Consuming Napster as a  gift . Retrieved October 21, 2008, from

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Intellectual Property & Copyrights, Research Paper, 23 http://books.google.com/books?hl=en&id=n7DkfPpwLbEC&dq=what+is+intellectual+pr  operty&printsec=frontcover&source=web&ots=Yhf-y77pkm&sig=wOGQ-BD1LZdw p6R-gFgmMyZn9o&sa=X&oi=book_result&resnum=8&ct=result Woellert, L. (2004). Why the Grokster case matters. Business Week. Retrieved October 22, 2008 from http://www.businessweek.com/magazine/content/04_52/b3914038_mz011.htm World Intellectual Property Organization. (n.d.) What is intellectual property? Retrieved September 27, 2008, from

http://www.wipo.int/freepublica http://www.wipo.int/freepublications/en/intp tions/en/intproperty/450/wi roperty/450/wipo_pub_450.pdf po_pub_450.pdf World Intellectual Property Organization. (n.d.) What is patent? Retrieved September 27, 2008, from http://www.wipo.int/freepublications/en/intproperty/450/wipo_pub_450.pdf  World Intellectual Property Organization. (n.d.) What is copyright? Retrieved September 27, 2008, from http://www.wipo.int/freepublications/en/intproperty/450/wipo_pub_450.pdf 

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AppendixA

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Intellectual Property & Copyrights, Research Paper, 26

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Intellectual Property & Copyrights, Research Paper, 28 AppendixB

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AppendixC

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©

2008

Christopher Pappas