made of binary code). The difference between copying and reading, or copying and understanding, had changed because of the technology. The context had changed because the law was being stretched to cover new types of products, whose economics were very different from those of novels. Rather than let the dominant software companies use copyright to stop others from making interoperable software, the courts used an escape hatch--fair use--to prevent that danger and to uphold the basic goal of copyright: encouraging progress in science and the useful arts.

55

This long story is told to make a simple point. The variegated and evolving limitations on intellectual property are as important as the rights they constrain, curtail, and define. The holes matter as much as the cheese.

56

What does this have to do with the Sony case? In that case, remember, the Supreme Court had said that copying TV shows in order to time-shift was fair use. The Court could simply have stopped there. It could have said, "since most of what consumers do is legal, there can be no claim of contributory or vicarious infringement. Sony is not contributing to infringement since consumers are not infringing copyright by copying shows in the first place." Interestingly, though this is the heart of the ruling, the court went further. It quoted some seemingly unrelated patent law doctrine on contributory infringement: "A finding of contributory infringement does not, of course, remove the article from the market altogether; it does, however, give the patentee effective control over the sale of that item.

Indeed, a finding of contributory infringement is normally the functional equivalent of holding that the disputed article is within the monopoly granted to the patentee." Clearly, the Justices were concerned that, by using copyright law, the movie studios could actually get control of a new technology.

57

The fact that the Court expressed this concern through an a.n.a.logy to patent law was, at first sight, fairly surprising.

Courts do not normally look at copyrights in quite the same way as they look at patents. For one thing, patent rights are stronger, though they are harder to obtain and last for a shorter period of time. For another, while courts often express concern about the dangers of a patent-driven monopoly over a particular technology, it is strange to see that concern in the context of copyright law. An unnecessary monopoly over a plow or a grain elevator may, as Jefferson pointed out, slow technological development. But a monopoly over Snow White or "Ode on a Grecian Urn"? We do not normally think of rights over expression (the realm of copyright) threatening to sweep within their ambit an entire new technological invention (the realm of patent).

58

But in the Sony case, the Supreme Court quite clearly saw that, in a world where technological developments made copying easier, the idea of contributory infringement in copyright could be used to suppress or control entire technologies that seemed, in the logic of 20/20 downside vision, to pose a threat to the copyright holder. Indeed, in some sense, the logic behind the Internet Threat--"cheaper copying requires greater control"--demands this result, though the Sony case antedates the World Wide Web by a considerable time. If it is cheap copying itself that poses the threat, then the content owners will increasingly move to gain control over the technologies of cheap copying, using copyright as their stalking horse. That is why the Sony Court went beyond the simple ruling on fair use to explain the consequences of the movie companies' claim. In a footnote (the place where judges often bury their most trenchant asides) the Court was almost snide: 59

It seems extraordinary to suggest that the Copyright Act confers upon all copyright owners collectively, much less the two respondents in this case, the exclusive right to distribute VTR's [Video Tape Recorders] simply because they may be used to infringe copyrights. That, however, is the logical implication of their claim. The request for an injunction below indicates that respondents seek, in effect, to declare VTR's contraband.

Their suggestion in this Court that a continuing royalty pursuant to a judicially created compulsory license would be an acceptable remedy merely indicates that respondents, for their part, would be willing to license their claimed monopoly interest in VTR's to Sony in return for a royalty.23

60

The real heart of the Sony case is not that "time-shifting" of TV programs is fair use. It is an altogether deeper principle with implications for all of the holes in the intellectual property cheese. The Sony Court declared that because video recorders were capable of substantial noninfringing uses, the manufacturers of those devices were not guilty of contributory infringement. If the rights of copyright holders were absolute, if they had the authority to prohibit any activity that appeared to pose a threat to their current business model, then it is quite possible that video recorders would have been guilty of contributory infringement. It is because we have, and need, multiple exceptions and limitations on intellectual property that the Supreme Court was able to resist the claim that copyright itself forbids technologies of cheaper copying. To put it another way, without a robust set of exceptions and limitations on copyright, the idea that cheaper copying requires greater control will inexorably drive us toward the position that the technologies of cheaper reproduction must be put under the governance of copyright holders.

61

Thus we have a corollary to the Jefferson Warning--call it the Sony Axiom: cheaper copying makes the limitations on copyright more rather than less important. Without those limitations, copyright law will bloat and metastasize into a claim of monopoly, or at least control, over the very architectures of our communications technology. And that is exactly where the logic of the Internet Threat is taking us today.

62

FROM NAPSTER TO GROKSTER 63

Seventeen years after the Sony decision, another court had to deal with a suit by outraged copyright holders against the creators of a technology that allowed individuals to copy material cheaply and easily. The suit was called A&M Records v.

Napster.24 Napster was a "peer-to-peer" file sharing system. The files were not kept on some huge central server. Instead, there was a central directory--think of a telephone directory--which contained a constantly updated list of the addresses of individual computers and the files they contained. Anyone who had the software could query the central registry to find a file's location and then establish a direct computer-to-computer connection--anywhere in the world--with the person who had the file they desired. This decentralized design meant the system was extremely "robust," very fast, and of nearly infinite capacity. Using this technology, tens of millions of people around the world were "sharing" music, an activity which record companies quite understandably viewed as simple theft. In fact, it would be hard to think of a situation that ill.u.s.trated the Internet Threat better. The case ended up in front of the U.S.

Court of Appeals for the Ninth Circuit, which hears cases in an area that includes California and thus has decided a lot of copyright cases over the years.

64

There was an irony here. When the Supreme Court decided the Sony case, it was on appeal from the Ninth Circuit Court of Appeals.

Sony, with its rule about reproductive technologies with substantial noninfringing uses, reversed the appeals court decision. The Supreme Court was, in effect, telling the Ninth Circuit that it was wrong, that its ruling would have required the "extraordinary" (legal shorthand for "stupid") conclusion that copyright law gave copyright holders a veto on new technology. In the process, the Supreme Court told the Ninth Circuit that it also did not understand the law of fair use, or the freedom that should be given to individuals to make "noncommercial" private copies. The ident.i.ties of the judges had changed, but now, seventeen years later, the same Circuit Court had another high-profile case on exactly the same issues. In case any of the judges might have missed this irony, it took David Boies, the lawyer for Napster, about ninety seconds to remind them in his oral argument. "This court," he said, adding as if in afterthought, "in the decision that the Supreme Court ultimately reversed in Sony. . . ."25 To the laypeople in the audience it probably just seemed like another piece of legal droning. But to the lawyers in the room the message was quite clear. "The last time you got a case about a major new technology of consumer reproduction, you really screwed it up.

Hope you can do better this time." The judges' mouths quirked--not entirely in pleasure. The point had been registered.

65

Think for a moment of the dilemma in which the court had been placed. On the one hand, you had tens of millions of people "sharing" music files and Napster was the service that allowed them to do it. If this was not contributory copyright infringement, what was? On the other hand, Napster seemed to fit very nicely under the rule announced in the Sony case.

66

The argument went like this. Like the VCR, the Napster service had substantial noninfringing uses. It allowed bands to expose their music to the world through the "New Artists" program. It made it easy to share music which was no longer under copyright.

These uses clearly do not infringe copyright. There were also the claims that it permitted "s.p.a.ce-shifting" by consumers who already owned the music or "sampling" of music by listeners as they decided whether or not to buy. One could argue that s.p.a.ce- shifting and sampling were fair use (though in the end the court disagreed). But since we have two clear noninfringing uses, the technology obviously does have substantial uses that do not violate copyright. Thus, Napster cannot be liable as a contributory infringer, just as Sony could not be liable for the Betamax. Supreme Court precedent covers this case. The Ninth Circuit is bound by that precedent. All the judges can do, goes the argument, is to apply the words of the rule laid down in Sony, say that Napster wins, and move on to the next case. If Congress wants to make services like Napster illegal, it is going to have to pa.s.s a new law. The boundaries of the Sony rule are clear and Napster fits within them. (Of course, the last point is subject to argument, but the argument for Napster on this issue was a good one. Not overwhelming--there were more noninfringing uses in the Sony case because the normal way consumers used the technology in question was found to be a fair use--but certainly powerful.) 67

A more daring strategy was to suggest that all the copying done over Napster was fair use, or at least presumptively fair. In Sony, the Supreme Court had said that the law presumes that noncommercial private copying--such as taping a show at home for future viewing--is a fair use. This presumption shifts the burden to the copyright holder to prove that the practice caused harm to them. Copying on Napster was done by private individuals. No money was exchanged. Does this mean we must presume it was fair use and require the music companies and songwriters to show clear evidence of "market harm" if they want to convince us otherwise?

68

It sounds as though proving market harm would be pretty easy.

How could millions of people exchanging hundreds of millions of songs not be causing harm? But it is more complicated. Remember the Jefferson Warning. We are not talking about swiping shoes from a shoe store. There one merely has to show the theft to prove the loss. By contrast, music files are copied without being "taken" from their owner. The record companies would have to show harm to their market--the people downloading who do not purchase music because it is available for free. Those who download, but would not have purchased, do not count. And we have to balance those who are deterred from purchasing against those who purchase a whole CD because they are exposed to new music through Napster. One very interesting empirical study on the subject indicates that the result is a wash, with hardly any measurable effect on sales; the overall drop in CD purchases results from larger macroeconomic issues.26 This study, however, has been subject to detailed methodological criticism.27 Another study shows a weak effect on sales, though rather woundingly it seems to suggest that the result is economically efficient--fewer people end up with music they do not like.28 Other studies, by contrast, support the record company position--suggesting that illicit file sharing does indeed undercut sales of both CDs and authorized digital downloads.29 Given the complexities of the issue, the record companies did not want to engage in a war of dueling empirical studies.

69

So, if Napster's users were not infringing copyright law in the first place--at least until the record companies came up with convincing evidence of market harm--because their copying was noncommercial, then Napster could hardly be guilty of contributory infringement, could it? There would be no infringement at all!

70

You could see Mr. Boies's arguments as simple equations between the cases.

71

* Noninfringing uses such as recording public domain films and "time-shifting" programs are equivalent to noninfringing uses such as the New Artists program or sharing public domain music (and maybe "s.p.a.ce-shifting" one's own music?); or * Private noncommercial videotaping is equivalent to private noncommercial file sharing. Both are presumptively fair uses.

* Either way, Sony=Napster and Napster wins.

72

Napster did not win, of course, though when the judges handed down their decision it was clear they had been paying attention to Mr. Boies, at least enough to make them very wary of tampering with Sony. They claimed that they were upholding that case, but that Napster could be liable anyway. How? Because there was enough evidence here to show that the controllers of Napster had "actual knowledge that specific infringing material is available using its system, that it could block access to the system by suppliers of the infringing material, and that it failed to remove the material." There was indeed evidence that Napster knew how its system was being used--an embarra.s.sing amount of it, including early memos saying that users will want anonymity because they are trading in "pirated music." Then there were nasty circ.u.mstantial details, like the thousands of infringing songs on the hard drive of one particular Napster employee--the compliance officer tasked with enforcing the Digital Millennium Copyright Act! (The recording company lawyers waxed wonderfully sarcastic about that.) 73

But despite the ludicrously dirty hands of Napster as a company, lawyers could see that the appeals court was making a lot of new law as it struggled to find a way to uphold Sony while still making Napster liable. The court's ruling sounded reasonable and clear, something that would only strike at bad actors while paying heed to the Sony Axiom and the a.s.surance of safety that the rule in Sony had provided to technology developers for the previous twenty years. But hard cases make bad law. In order to accomplish this piece of legal legerdemain, the court had to alter or reinterpret the law in ways that are disturbing.

74

The first thing the court did was to reject the argument that the "sharing" was private and noncommercial. As to the idea that it is not private, fair enough. Sharing one's music with fifty- four million people does not sound that private, even if it is done for private ends, in private s.p.a.ces. What about noncommercial? Embracing some earlier rulings on the subject, the court said a use was "commercial" if you got for nothing something for which you would otherwise have to pay. On the surface this sounds both clever and reasonable--a way to differentiate home taping from global file sharing--but the argument quickly begins to unravel. True, the Betamax owners could get TV shows for free just by watching at the regular time. But they could not get a copy of the show for free at the moment they wanted to watch it. That was why they taped. One could even argue that Napster users would have access to most songs over the radio for free. But lawyers' quibbling about which way the rule cuts in this case is not the point. Instead, we need to focus on the change in the definition of "commercial," because it ill.u.s.trates a wider shift.

75

Remember, a finding that a use is "noncommercial" makes it more likely that a court will find it to be legal--to be a fair use.

The old test focused mainly on whether the motive for the copying was to make money. (A different stage of the inquiry concerned whether there was harm to the copyright holder's market.) The Napster court's test concentrates on whether the person consuming the copy got something for free. Instead of focusing on the fact that the person making the copy is not making money out of it--think of a professor making electronic copies of articles for his students to download--it focuses on the presumptively dirty hands of those who are "getting something for nothing." But lots of copyright law is about "getting something for nothing."

76

To put it differently, one central goal of copyright is to limit the monopoly given to the copyright owner so that he or she cannot force citizens to pay for every single type of use. The design of the law itself is supposed to facilitate that. When "getting something for free" comes to equal "commercial" in the a.n.a.lysis of fair use, things are dangerously out of balance.

Think back to Jefferson's a.n.a.logy. If I light my candle at yours, am I getting fire for free, when otherwise I would have had to pay for matches? Does that make it a "commercial" act?

77

Having dismissed the claim that this was noncommercial sharing, the court then reinterpreted the Sony decision to allow liability when there was "actual knowledge" of specific copyright violations, an ability to block access by infringers, and a failure to do so. Neither side was entirely happy with this ruling, but the record companies believed--rightly--that it would allow them effectively to shut Napster down. Yet the Napster ruling only postponed the issue. The next set of file sharing services to be sued after Napster were even more decentralized peer-to-peer systems; the Napster court's reinterpretation of Sony would not be able to reach them.

78

The peer-to-peer file sharing service called Grokster is a relatively typical example. Unlike Napster, Grokster had no central registry. The system was entirely run by the individual "peer" computers. Because the system was designed this way, the people who made and distributed the software had no knowledge of specific infringing files. The users were doing the searching, indexing, and storing, and Grokster had no ability to control their behavior. For those reasons, a court of appeals held that Grokster was not liable. As in Sony, the system had substantial noninfringing uses. Lots of interesting content was traded on Grokster with the copyright holder's consent. Other material was in the public domain. Grokster made money by streaming advertis.e.m.e.nts to the users of its software. The movie companies and record companies saw this as a flagrant, for-profit piracy ring. Grokster's response was that like the makers of the VCR, it was simply providing a technology. Its financial interest was in people using that technology, not in using it for illicit purposes--though, like the VCR manufacturer, it would profit either way. The court of appeals agreed. True, the majority of the material traded on Grokster was illicitly copied, but the court felt that it could not give the recording or movie companies control over a technology simply because it allowed for easier copying, even if most of that copying was illegal. As I tried to point out in the section on the Sony Axiom, that line of thought leads to copyright holders having a veto over technological development.

79

It was at this point that the Supreme Court stepped in. In the case of MGM v. Grokster,30 the Supreme Court followed the line of the Napster court, but went even further. The Court created a new type of contributory copyright infringement--while apparently denying it was doing so. Grokster and its fellow services were liable because of three different kinds of evidence that they had "intended" to induce copyright violation. First, they were trying "to satisfy a known demand for copyright infringement."

This could be shown by the way that they advertised themselves as alternatives to the "notorious filesharing service, Napster."

Second, the file sharing services did not try to develop filtering software to identify and eliminate copyrighted content--though this alone would not have been enough to make them liable. Finally, their advertising-supported system clearly profited by high-intensity use, which they knew was driven in the most part by illicit copying. This too would not have been enough by itself, the Court added, but had to be seen in the context of the whole record of the case.

80

Let me be clear. I wept no tears for Napster, Grokster, and their ilk. I see no high-minded principle vindicated by middle- cla.s.s kids getting access to music they do not want to pay for.

It is difficult to take seriously the sanctimonious preening of those who cast each junior downloader of corporate rock as a Che Guevara, fighting heroically to bring about a new creative landscape in music. (It is almost as hard to take seriously the record industry executives who moralistically denounce the downloading in the name of the poor, suffering artists, when they preside over a system of contracts with those same artists that makes feudal indenture look benign.) The file sharing companies themselves were also pretty unappealing. Many of the services were bloated with adware and spyware. True, some of their software engineers started with a dewy-eyed belief that this was a revolutionary technology that would break the record companies and usher in a new era of musical creativity. Whether one agrees or disagrees with them, it is hard--for me at least--to doubt their sincerity. But even this quality did not last long.

For most of the people involved, the words "stock options"

worked their normal, morally debilitating magic. In internal company correspondence, attacks on the hypocrisy of the music companies and defenses of a democratic communications structure imperceptibly gave way to discussions of "customer base," "user experience," and "saleable demographics." I care little that Napster and Grokster--as individual companies--lost their specific legal battles. There are few heroes in this story. But if we had to rely on heroes, nothing would ever get done.

81

I do care about the technology behind Napster and Grokster--about the kind of decentralized system it represents. I also care about the principle I identified as the Sony Axiom--a principle that goes far beyond music, peer-to-peer systems, or the Internet as a whole. The Supreme Court's decision in Grokster could have been much worse. But it still offers a modest threat both to that technology and to that axiom.

82

What is so great about peer-to-peer systems? We talk about "cheap speech" on the Internet, but bandwidth is actually expensive. If one is talking about music or video files, and one wishes to speak to many people in a short period of time, one vital way to have cheap speech is over peer-to-peer networks. If many of your viewers or listeners are willing to become broadcasting stations as they watch, you can cheaply reach a million people in a short period of time with your video of abuse in Abu Ghraib or your parody of political leaders. You do not need to rely on a broadcasting station, or even on the continued existence of ent.i.ties such as YouTube, which face their own legal worries. By making your listeners your distributors, you can quickly reach the same number of ears that the payola-soaked radio waves allow the record companies to reach.

83