NAPSTER AND METALLICA: A THIRD WAY

By RANDY PICKER


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Once upon a time, the means of music distribution were controlled by the five leading record companies. That era is over. Now that we have the MP3 format for storing music files and the Internet to transmit those files to others, anyone with a computer can play record company executive. And new artists can reach their audiences directly, without having to squeeze through the bottleneck of the record companies' selection process.

The Internet, in short, is God's gift to the fledgling garage band -- and to the music pirate, since the Internet facilitates theft on an unparalleled scale. That's because bandwidth is agnostic: it doesn't and can't separate the wanna-be Nirvana from the wanna-be thief.

Judges, however, can and do make this distinction -- as two recent decisions, involving Beam-it and Napster software, have shown. But as those decisions also demonstrate, rapidly evolving online technology can make it difficult, if not impossible, for judges to draw the line between what's allowed and what's not.

The Beam-it Decision

On May 4, a federal district court ruled that MP3.com's Beam-it online music service infringed copyrights of the major record companies. Beam-it lets you build a personal, online library of music, allowing you to listen to your CD collection anywhere you can access the Internet, without having to lug the CDs around.

Here's how Beam-it works: you stick a CD into your computer, click the Beam-it button, and 40 seconds later, the songs on the CD have been added to your online library at My.MP3.com. But despite appearances, your CD has not been copied. Instead, you've just accessed MP3.com's copy of the same song from a CD that MP3.com bought. Beam-it simply checks to see that your drive contains the CD you said it contains, and then gives you a copy of that CD from MP3.com's library.

That last fact -- that when you use Beam-it you are not actually listening to music from the CD you bought, but rather to music from MP3.com's CD -- convinced the court that Beam-it infringes song copyrights. But is the court right? When I buy a CD, do I buy the right to listen to that music on whatever device, and in whatever format I choose? Or do I just get the right to listen to the music on the CD itself? If I only get the right to listen to the CD, then a lot of people are infringing a lot of copyrights when, for instance, they tape their CDs on cassette and use the tape version in their car stereo's tape deck. Yet no one is suing them.

Of course, the record companies' problem with Beam-it is that it lets me borrow CDs that I beam to my online library, thereby amassing an online collection derived from the kindness of my friends. After borrowing a CD for one minute, I can "own" it forever online. The phenomenon is similar to the cassette-swapping that used to occur in the old days. But it turns that copying (in Internet parlance, "ripping") and swapping into an art form.

A Better Beam-it

so that they can be beamed only once. This way, the user may put his or her own CD online, but constant borrowing and beaming of friends' music cannot occur. This might be achieved by requiring the entry of a serial number on the back of each CD sold, and having My.MP3.com track whether the CD has been beamed online before. The result: a user could create a personal, online library made up of music he bought, but not of music his friends bought. His friends, naturally, would use their one-beam allowance to put their own CDs in their own libraries instead.

The Napster Decision

That brings us to Napster, a clever and hugely successful system for music sharing and, in some cases, music pirating. Napster is an Internet intermediary -- a matchmaker for individuals who want to swap songs. Napster tells users what songs other Napster users have on their computers. The songs are swapped, in MP3 format, among users without Napster's intervention.

On May 5, a second federal court ruled that this swapping was not covered by an online distribution "safe harbor" in the Digital Millennium Copyright Act. (The "safe harbor" provision of the act was meant to protect Internet service providers such as America Online from the illegal actions of their users.) Napster relied heavily on its passivity and neutrality -- particularly the fact that it plays no role in the ultimate music swap -- but these facts were not enough to convince the court.

A Niftier Napster

Napster has an obvious, innocuous use: to swap music that the copyright-holder (perhaps a garage band looking for exposure) wants to distribute. It also has an obviously illegal use: to copy music without the copyright holder's permission.

But now let's morph Napster into what I will call "Neo-Napster." As with Napster, online users can share MP3 files that they've copied onto their computers from CDs. But they cannot copy other users' songs and store them on their own computers. Instead, they can only listen to a desired song that is on someone else's computer -- someone who legitimately bought the music.

And to do that, of course, they must find another Napster user somewhere on earth who isn't listening to that song on his or her computer at that particular moment. It amounts to playing a stranger's CD on your stereo when that person isn't using it, then handing it back to the stranger when you're done.

A user's experience with Neo-Napster would be very similar to the experience with Napster. Except for the most popular songs, a user will almost always be able to find an unused copy of the song the user wants to hear. Only mega-hits may frustrate the Neo-Napster user -- and force him or her to buy the CD rather than waiting for an unused MP3 file. Yet this dynamic is hardly unusual in the music business, which has always depended on consumers rushing out to buy the latest big single.

But while in practice Napster and Neo-Napster may be identical, in theory -- and in law -- they might differ dramatically. After all, Neo-Napster is merely the virtual equivalent of inviting a friend over to listen to your CDs -- a practice that no one has ever argued to be illegal.

Indeed, one similarity between the modifications I have proposed -- Beam-it plus CD serial numbers, and Neo-Napster -- is that they simply "virtualize" offline practices that have flourished for years. If Beam-it is combined with CD serial numbers, it's the equivalent of cassette-taping your CDs. If Napster is replaced with Neo-Napster, it's the equivalent of lending CDs to your friends.

This "virtualizing" is not different in kind from the taping and lending that preceded it, but it is vastly more efficient. It dramatically reduces the costs of making copies, distributing copies and finding friends with whom to share the music. The choice we now face is whether to carry over accepted practices offline into their perfected form online.

Randy Picker is the Paul and Theo Leffmann Professor of Law at the University of Chicago Law School.

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