1

Pepperdine Entertainment Law Class

Spring 2001

Article

THE DIGITAL ONSLAUGHT IN ENTERTAINMENT: THE MUSIC &

MOVIE INDUSTRY’S FEAR OF NEW DIGITAL TECHNOLOGIES
Joseph S. Ford, Jr.1

Copyright © 2001 Pepperdine School of Law; Joseph S. Ford, Jr.

Introduction
While it publicly remains silent, movie executives
privately admit that they are terrified that Hollywood will be
“Napsterized.”2 Picture a college student sitting in front of a
desktop computer while several of his friends are hanging out on
the dorm room couch. After a few mouse clicks, the student
joins his friends. The lights are dimmed, the radio silenced
and the television turned off as all eyes in the room turn to
the computer monitor. As the screen fades from black,
excitement fills the room as the words Crouching Tiger, Hidden
Dragon appear on the computer screen. For the next few hours,
these students get to enjoy a free private screening of a major

1
A second-year law student at Pepperdine University School of Law and Fellow of the Center of Entrepreneurship
& Technology Law Program (2002), the author plans on working in the entertainment industry in some area of
urban content and programming following graduation. The author, who has a computer science degree, is fascinated
by all the new digital technologies that appeared in the last few years.
2
See Roger Ebert, Tinseltown for the Taking, Yahoo! Internet Life, Apr. 2001, at 92. The fear that the movie
industry will be “Napsterized” refers to the fear that some college kid will post a movie-swapping program that will
explode in popularity, swiftly creating a ravenous audience of millions of users who will expect free access to
Hollywood blockbusters, see id. See infra Part III (discussing the Napster file swapping program that has recently
been the subject of much litigation). See also Melissa J. Perenson, Insecure Seas, HOLLYWOOD REPORTER, Sept. 25,
2000, available in WESTLAW 2000 WL 25250501 (“At 10 a.m. on a recent Friday morning – a time when most
workers should be ensconced in the office and students should be in class – this reporter hopped online and, with
some educated surfing, quickly found copies of such summer films as “Chicken Run,” “Gladiator,” “The Patriot,”
“Scary Movie,” “Space Cowboys” and “X-Men. Most of these films are still in theaters, but digital copies of all of
them – many on par with the quality of VHS tapes – can be downloaded in as little as one to three hours.”).
 2

motion picture that everyone else has paid to see at a theater. 3

If this seems like something out of a not-so distant digital
future, then it appears that the future is now.4
Digital technology represents an increasingly dangerous, if
not already realized, threat to the protection of copyrights in
the global marketplace.5 While there is protection in copyright,
throughout history the law has been slow to adapt to the issues
presented by new technologies.6 Digital technologies pose even
more issues than prior analog technologies because these digital
technologies reduce the cost of making "perfect" copies and
allow these copies to be distributed quickly, easily and
cheaply.7
Going back as far as the Middle Ages, the development of a
new technology usually caused people to fear that the technology
would rob people of their rights as well as destroy well-
established business models.8 “Every new reproduction

3
See S.E. Oross, Fighting the Phantom Menace: The Motion Picture Industry’s Struggle to Protect Itself Against
Digital Piracy, 2 Vand. J. Ent. L. & Prac. 149, 149 (2000) (analyzing the movie industry’s responses to online
piracy).
4
In January 2001, Apple introduced a new G4 desktop computer that includes iDVD software and DVD-R/CD-RW
drives that enables users to digitize movies and burn them into DVDs. Compaq has a similar desktop on the way.
The $3,500 computer incorporates a Pioneer drive that itself was priced at $5,000 weeks earlier. See Ebert, supra
note 2, at 92. The enormous size of feature-film files makes wide-scale piracy impractical for anyone without a T1
line and a lot of storage capacity. See id. BEARSHARE (last visited Apr. 17, 2001) <http://www.bearshare.com> and
IMESH (visited Apr. 17, 2001) <http://www.imesh.com/index.cfm> are just a couple of the numerous free programs
available that allow users to swap movie files – many illegally.
5
See Oross, supra note 3, at 150. (discussing the many novel and complex copyright issues confronting the motion
picture industry as new technologies are developed).
6
See Ronald B. Standler, Response of Law to New Technology (last visited Apr. 17, 2001)
<http://www.rbs2.com/lt.htm> (examining the ways that new technologies have revolutionized society).
7
Digital technologies inherently facilitate copyright piracy. For instance, while both analog and digital taping
facilitate piracy allowing for easy reproduction, digital copying excaberates this problem, because unlike analog
copies, digital copies do not degrade in quality with subsequent generations of copies. Media for storing digital
information, such as CDs, floppy disks, or DVDs, also benefit pirating enterprises because these media are generally
less expensive to manufacture and store than their analog equivalents of paper, records or cassettes. See CARL
SHAPIRO & HAL R. VARIAN, INFORMATION RULES: A STRATEGIC GUIDE TO THE NETWORKED ECONOMY 101 (1999).
8
See id. at 94.
 3

technology, from the printing press to the videocassette

recorder (“VCR”) has brought forth dire predictions that it
would destroy an industry, but this has never come to pass.9 In
the last few years there have many new digital technologies
developed, but none of these have sparked as much debate as the
introduction of the MP3 and the DVD. The motion picture and
music industries have filed and argued numerous lawsuits over
the introduction of these technologies.10
The focus of this article is to discuss how the MP3 and DVD
have affected the current copyright laws. This article will
also show that while most innovations appear to threaten their
respective industries, in most cases these innovations vastly
expand it. The history of these various innovations and
technologies that have threatened industries will be explored as
well as the novel problems presented by the digital
technologies. While this article does not propose to endorse
any particular solution, the article shows that the motion
picture and music industry's problems cannot be solved solely by
the legal process, but rather in developing solutions through a
combination of legislation, technology and competition to
protect their intellectual property interests and to expand
their respective industries.

9
See id. at 84.
10
See Sony Corp. v. Universal City Studios, Inc., 464 U.S. 417 (1984) [hereinafter Sony]; Recording Industry
Association of America v. Diamond Multimedia Systems, Inc., 29 F.Supp. 2d 624, 632 (C.D. Cal. 1998), aff’d, 180
F.3d 1072 (9th Cir. Ct. of Appeals 1999) [hereinafter Rio]; A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th
Cir. Ct. of Appeals 2001) [hereinafter Napster]; Universal City Studios, Inc. v. Reimerdes, 111 F.Supp.2d 294
(S.D.N.Y. 2000) [hereinafter Reimerdes]; UMG Recordings, Inc. v. MP3.com, Inc., 92 F.Supp.2d 349 (S.D.N.Y.
2000) [hereinafter MP3.com].
 4

I. Overview of Copyright Law (Title 17)

Copyright law attempts to balance the interests and needs
of the public and authors by granting certain exclusive rights,
but limiting these exclusive rights in both in duration and
scope.11 Although the immediate effect of copyright protection
is to secure a fair return for an author’s creative input and
labor, the ultimate goal of copyright protection is “to
stimulate artistic creativity for the general public good.”12. A
major, ongoing challenge for both legislators and the courts is
how to maintain this balance in the face of rapid technological
innovations.13
The United States Constitution, Article I, Section 8,
Clause 8, empowers Congress to legislate copyright and patent
statutes.14 Over the last 225 years, Congress has passed several
copyright acts pursuant to this constitutional authority, the
most current being the Copyright Act of 1976.15 Assuming a
copyright exists, the copyright owner has a bundle of exclusive
rights that empower the copyright owner to exclude others from
certain uses of his work.16 The exclusive rights of

11
See Benton J. Gaffney, Notes & Comments, Copyright Statutes That Regulate Technology: A Comparative
Analysis of the Audio Home Recording Act and the Digital Millennium Copyright Act, 75 Wash. L. Rev. 611, 613
(2000) (analyzing the Audio Home Recording Act and the Digital Millennium Copyright Act- two copyright statutes
that regulate technology).
12
See id.
13
The day may soon be upon us when copyrighted works reside predominately in electronic networks, rather than in
material form and when owners of these informational products will no longer have to look to traditional copyright
law for protection. In place of traditional copyright law, a combination of technological restrictions, contractual
arrangements, and criminal sanctions may well provide sufficient protection to copyright owners who will largely
ignore traditional copyright law as the basis of enforcing their rights. See MARSHALL LEAFFER, UNDERSTANDING
COPYRIGHT LAW 25-26 (3d ed. 1999).
14
See U.S. Const. art. I, §8, cl. 8 (“Congress shall…Promote the Progress of Science and useful Arts, by securing for
limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries…”).
15
See H.R. Rep. No. 94-1476, 94th Cong., 2d Sess. 47-50 (1976).
16
See 17 U.S.C. §106 (2000).
 5

reproduction, adaptation, distribution, performance, display,

and the digital sound recording transmission right define the
boundaries of copyright ownership, and the violation of any of
these rights constitutes copyright infringement.17
While each violation of an exclusive right constitutes a
copyright infringement, the main rights endangered by the new
digital technologies in the movie and music industries are the
rights of reproduction and distribution.18 Although these
digital technologies are new, the rights of copyright holders
have been challenged in the past by the introduction of non-
digital technologies (“analog”). The introduction of the
printing press, the library system, the copy machine and the VCR
are just some of the past technologies that appeared to threaten
their respective industries, but ended up vastly expanding it.19

II. Analog vs. Digital Technologies

Digital technology and the effect of this digital
technology on copyright law can best be understood by comparing
it to the various analog technologies that preceded it.20 Analog
and digital formats can be distinguished because whereas analog
formats simulate the original work directly, digital formats
copy the original work by translating it into a language of ones
and zeros.21

17
Copyright infringement occurs when a third party violates one or more of the copyright owner’s exclusive rights.
See 17 USC §501(a) (2000); 17 USC §106 (2000); Leaffer supra note 13, at 92.
18
See SHAPIRO, supra note 7, at 84.
19
See Standler, supra note 6.
20
See Gaffney, supra note 11, at 615.
21
Copyright piracy in digital technologies stems from the ease of copying and ease of distribution inherent in these
technologies. See id.
 6

While analog works degrade in quality with each successive

generation of copies, digital copies are perfect copies of the
original work.22 However, when digital copies are made, even if
there are small physical differences between the original and
the copy, the copied digital sequence of ones and zeros usually
remains the same despite these physical differences.23 Because a
digital copy is an extraordinarily detailed description in ones
and zeros of a work, it can be rapidly reconstructed or
manipulated by electronic means much quicker than an analog
copy.24 “To alter the texture of the background or the shape of
a foreground object in an analog record of photographic image
might take a skilled retoucher hours or days, involving as it
does the painstaking alteration of every affected portion of the
picture.”25 Whereas, it only takes a few simple mouse clicks on
a computer to edit this same object when stored as a digital
file.26 Thus, while the rights of reproduction and distribution
for analog formats have, in part, been established by the
limitations of the technology, the digital revolution allows
people to store, manipulate, and transmit data in ways that
greatly transcend previous techniques of replication and
dissemination.27 To understand how to deal with these digital
technologies, it is important to understand past responses to

22
See id. at 616 (stating that, “[b]ecause no technology yet allows the making of exact physical replicas, the slight
variations that result each time a work is copied mean that analog works degrade in quality with each successive
generation of copies.” For instance, if a page from a book is photocopied and copies made from each successive
new copy, the quality of each new copy will be inferior to its predecessor.”).
23
See id.
24
See LEAFFER, supra note 13, at 22.
25
See id.
26
See id.
27
See id.
 7

the analog technologies that reduced the cost of making

reproductions and allowed these reproductions to be distributed
quickly, easily and cheaply.28

Photocopier
The photocopier is an example of an analog technology that
threatened the established order of the time when it was first
introduced.29 The photocopier was supposed to be the death knell
for the publishing industry, but in fact cheap photocopying
increased the demand for printed content such as for academic
journals and other library materials.30 The availability of
photocopying allowed the producers of the materials to charge
more for the content they produced, and the ease of copying made
the materials more valuable to their ultimate users.31

VCR
Another example of a technology that threatened the
established order of the time was the introduction of the video
cassette recorder (“VCR”). When video tape recorders began to
be sold to individual people, there was an initial fear by the
movie and television industry that: (1) people would tape
broadcasts and then fast forward through the commercials; and
(2) copies of movie tapes would reduce income for movie

28
See SHAPIRO, supra note 7, at 93.
29
For examples of court rulings on the issue of photocopying. See Williams & Wilkins Co. v. United States, 487
F.2d 1345 (Ct. Cl. 1973), aff’d by an equally divided Court, 420 U.S. 376 (1975); American Geophysical Union v.
Texaco, Inc., 60 F.3d 913 (2d Cir. 1994).
30
See SHAPIRO, supra note 7, at 94.
31
See id.
 8

theaters.32 The entertainment industry feared what had happened

in the music industry a few years prior when the introduction of
audio cassette recorders allowed pirates to undersell the
original producers of the works, who as a result were unable to
recoup their production investments.33
In the landmark case of Sony Corp. v. Universal City
Studios, 464 US 417 (1984), two movie studios (Walt Disney
Productions and Universal City Studios) sued a VCR manufacturer
for contributing to copyright infringements by the users of
VCRs. The Supreme Court held that copying by homeowners with a
VCR was fair use under the copyright law.34 When the case was
filed, VCRs were not that common, but by the time the case was
argued there were more than ten million VCRs in homes.35 As a
result of the ruling and the VCR's widespread popularity, it
became politically impossible for the legislature to enact a
statute that would provide royalties to broadcasters and movie
producers by placing a tax on blank videotapes and VCRs.36
However, the widespread use of VCRs introduced new ways for
movie producers to make money.37 Producers realized that people

32
See Standler, supra note 6.
33
At the time of the introduction of audio cassette recorders, sound recordings were not recognized by federal
copyright law. The need at the time for nationally uniform protection under copyright law was critically important
to the music industry because pirates were inflicting significant losses on the industry with unauthorized recordings.
Sound recordings were not formally recognized by federal law for the first time until the Sound Recording Act of
1971. See Leaffer, supra note 13, at 137.
34
In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall
include: (1) the purpose and character of the use, including whether such use is of a commercial nature or is for
nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the
portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market
for or value of the copyrighted work. See 17 U.S.C. §107 (2000).
35
See Standler, supra note 6.
36
See id.
37
See id.
 9

would actually buy a movie on video if the price was

reasonable.38 While the VCR created a new market for prerecorded
videos of movies and classic television shows, movie theaters
continued to make money, not only by showing new releases that
were unavailable on videotape or television, but also by showing
old releases with higher visual resolution and better sound than
a home television could provide.39 Far from being the death
knell of the movie industry, the VCR has been its savior
creating a huge new market in the renting and buying of
prerecorded movies.40
The photocopier and the VCR are just two of the many
examples of non-digital formats that introduced cheap
reproduction and distribution mechanisms which were supposed to
destroy well-established industries.41 While it is easy to see
the threats inherent in new media, it is sometimes hard to see
the potential.42 When confronted with disputes involving new
technologies, courts will use restraint in evoking industry-wide
solutions best left to Congress. However where Congress does
not speak on the point, the key is to maximize the value of the
intellectual property involved, and not to protect it for the
sake of protection.43

38
See SHAPIRO, supra note 7, at 96.
39
See Standler, supra note 6.
40
See SHAPIRO, supra note 7, at 96.
41
See id. (lending library); Standler, supra note 6 (printing press).
42
See SHAPIRO, supra note 7, at 97 (stating that, “[t]he key issue is how to exploit economies of scale: a thousand
consumers paying a dollar a piece to download a piece of software that costs pennies to produce and distribute is a
lot more profitable than 100 consumers paying $10 a piece for software that costs $5 to produce and distribute.).
The challenge of intellectual property management lies in trading off these two effects: in choosing the terms and
conditions that maximize the value of your property. The more generous the terms on which you offer your
intellectual property, the more you can charge, but the less you sell. See id. at 98.
43
See id. at 97; Gaffney, supra note 11, at 619-20.
 10

III. The New Digital Technologies

As the digital issue involves computers and technologies
with which many are unfamiliar, it is useful to begin by
defining some of the vocabulary.44 The compact disc (“CD") was
one of the first digital technologies introduced to the public.45
CD technology meant significantly better audio quality and
reproducibility than was possible with analog techniques, but
required large amounts of storage space, which was not conducive
for high-speed transmission over computer networks. The answer
to this problem came in 1988 when in response to the growing
need for manageable digital audio-visual standards, the
International Organization for Standardization formed a group
known as the Moving Picture Coding Experts Group (“MPEG”).46 The
group’s goal was to create a universal way to deliver high-
quality digital audio and video in as small a space as
possible.47
The ISO’s solution to this goal was the MPEG-1, which used
a simple technique to compress the size of the audiovisual file
without compromising the quality of the data contained in the
file.48 However it is Layer III, a component of MPEG-1 developed

44
See Reimerdes, supra note 10, at 305.
45
See Charles L. Simmons, Jr., Feature, Digital Distribution of Entertainment Content…The Battle Lines Are
Drawn, 33-AUG Md. B.J. 31, 32 (2000) (tracing the development of the dispute over control of digital content as
well as analyzing the groundbreaking test cases brought by content owners in an effort to stop the unauthorized
copying and distribution of copyrighted music and video content).
46
The International Organization for Standardization (ISO) is a non-governmental entity comprised of some 130-
member states that develops and implements uniform technological standards. See International Organization for
Standardization Homepage (last visited Apr. 17, 2001) < http://www.iso.ch/>.
47
See Oross, supra note 3, at 150.
48
Essentially, MPEG compression standards discard redundant information without the user’s ever knowing. The
result is dramatic in that digital audio/video files can be reduced to as little as 1/50 of their original size. See id. at
151.
 11

to accommodate audio portions of the MPEG standard, that first

opened the doors for legal and technological debate.49 MPEG-1,
Layer III files (more commonly known as “MP3s”) offer CD-quality
sound in relatively small files.50
Although digital technologies impacted the music industry
first, the motion picture industry has been affected as well.51
Based on the newer MPEG-2 standard, Digital Versatile Discs
(“DVDs”) offer better compression of pictures and sounds than
the MPEG-1 standard.52 Both the MP3 and the DVD represent two of
the most significant advances the entertainment industry has
encountered in recent years.53

IV. Reactions to New Digital Technologies – Music

Of all the entertainment content industries affected by the
digital environment, the music industry was the first industry
significantly impacted – mainly due to the introduction of the
MP3.54 In anticipation to the threat that digital technologies

49
See id.
50
Digitized music on a standard CD requires about 10 megabytes per minute of music and about 1 megabyte per
minute for MP3. For example with a 56K modem (which provides a sustained transfer rate of about 5K
bytes/second), a 5-minute song from a standard CD takes about 170 minutes (almost 3 hours) to download.
However, it only takes about 17 minutes to download this same 5-minute song in the MP3 format. See Simmons,
supra note 45, at 33. See also Marshall Brain, How MP3 Files Work, (last visited Apr. 17, 2001)
<http://www.howstuffworks.com/mp3.htm>.
51
Although not that big of a problem in America, pirates aboard saw the potential of compressed digital video in the
form of Video Compact Discs (VCDs). VCDs took existing audio CD formats and, with the help of MPEG-1,
added full-motion video that could then be viewed by anyone with a personal computer equipped with a CD-ROM
drive and the necessary video software components. One of the disadvantages of the VCD format is the limited
storage space. Just as audio CDs are limited to approximately 74 minutes of audio recordings, VCDs can hold no
more than 70 minutes of video. Thus, feature-length films require two or three VCDs. See Oross, supra note 3, at
151.
52
See id. at 152.
53
See Simmons, supra note 45, at 32.
54
See Committee on Intellectual Property Rights and the Emerging Information Infrastructure, Music: Intellectual
Property’s Canary in the Digital Coal Mine (last visited Apr. 17,
2001)<http://bob.nap.edu/html/digital_dilemma/ch2.html> [hereinafter Digital Coal Mine].
 12

presented, Congress enacted the Audio Home Recording Act of 1992

(“AHRA”).55 In addition to the legislative actions, the
Recording Industry Association of America (“RIAA”) began to push
for industry wide standards for playing, storing and
distributing digital music files.56 This effort became known as
the Secure Digital Music Initiative (“SDMI”).57 Despite the goal
of SDMI to establish a digital music format with some form of
encryption technology (such the CSS in DVDs) to prevent the
unrestricted copying and transferring of digital music, the MP3
file format continues to be the de facto standard for playing
digital music.58 The case of Recording Industry of America v.
Diamond Multimedia Systems, Inc., was the first case that
attempted to define the scope of the AHRA and stop the
distribution of copyrighted music content in the MP3 format as
the RIAA first focused its attention on the hardware
manufacturers.59

55
The AHRA prohibits legal actions for copyright infringement based on the manufacture, importation, or
distribution of a digital audio recording device for private non-commercial audio recording. See 17 U.S.C. §1008
(2000). The AHRA allows original works to be copied without limit, but requires digital recording machines to be
equipped with the Serial Copy Management System (“SCMS”) that blocks second-generation digital copying – that
is making copies from copies. See 17 U.S.C. §1002(a) (2000). The AHRA requires manufacturers and importers of
digital hardware and blank digital software to pay compensatory royalties to copyright owners and music creators.
See Leaffer, supra note 13, at 371. For further information on the AHRA, see 17 U.S.C. §§1003-1007 (2000).
56
The RIAA is an association consisting of the major players in the recording industry. The RIAA’s members
include UMG Recordings, Inc, Sony Music Entertainment, Inc., Arista Records, Inc., BMG, Capitol Records, Inc.,
Atlantic Recording Corporation, Interscope Records, Warner Bros. Records, Inc. The RIAA’s member companies
are responsible for approximately 92% of all music sales in the United States. See Simmons, supra note 45, at 32.
The RIAA’s digital enforcement efforts occur on four battlefields: (1) individuals engaged in digital copyright
infringement; (2) manufacturers of the machines that can play MP3 files; (3) web site operators that post
copyrighted music without permission; and (4) web sites and others that assist users in locating and obtaining MP3
files. See Maggie A. Lange, Digital Music Distribution Technologies Challenge Copyright Law, 45-APR B. B.J. 14,
15 (2001) (reviewing two recent legal battles waged in the area of digital music distribution).
57
See Jennifer Burke Sylva, Symposium, Digital Delivery and Distribution of Music and Other Media: Recent
Trends in Copyright Law; Relevant Technologies; and Emerging Business Models, 20 Loy. L.A. Ent. L. Rev. 217,
233-34 (2000) (examining whether existing copyright law is effective in enabling copyright holders to regain and
retain control over the dissemination of their properties).
58
See Simmons, supra note 45 at 33.
59
See Rio, supra note 10.
 13

RIAA v. Diamond Multimedia Systems, Inc.

Diamond Multimedia Systems developed a portable music
player called the Rio PMP 300 (“Rio”) that allowed a user to
download MP3s to the device by attaching the device to a
computer.60 In Diamond, the RIAA sought an injunction against
the sale and manufacture of the Rio player on the grounds that
the Rio violated the AHRA because the device did not contain a
Serial Copy Management System (“SCMS”).61 The district court
denied the RIAA’s request for an injunction, determining that
although the Rio was a digital recording device under the AHRA,
the Rio’s lack of a digital output capability made it impossible
to copy music serially from a Rio to another device.62 While the
9th Circuit Court of Appeals affirmed the lower court’s denial
of a preliminary injunction, it rejected the lower court’s
preliminary finding that the Rio was a “digital audio recording
device” within the meaning of the AHRA, signifying the first
defeat in the music industry's battle to control the MP3.63
Following its defeat in the Diamond case, the RIAA shifted its
focus from hardware manufacturers to the providers of MP3 file
transfers over the Internet.64

60
See Tracy Collins, I Want My MP3: The Record Industry, Legal Experts and Performers and Their Fans Struggle
With the Implications of the Digital Music Revolution, Pitt. Post-Gazette, March 12, 2000, at G3, available in
WESTLAW 2000 WL 10886908 (discussing the effect of digital music delivery on the.record industry).
61
See Digital Coal Mine, supra note 54.
62
See Rio, supra note 10 (concluding that granting an injunction was unnecessary because “the Rio adequately
prohibit[s] unauthorized serial copying” and “incorporating an SCMS into the Rio appears an exercise in futility.”).
63
A device falls within the Act’s provisions if it can indirectly copy a digital music recording by making a copy
from a transmission of that recording. The Rio is not a digital audio recording device because the Rio cannot make
copies from transmissions, but rather it can only make copies from a computer hard drive. See id. at 1081.
64
See Napster, supra note 10; MP3.com, id.
 14

A&M Records, Inc. v. Napster, Inc.

Less than six months after the decision in Diamond, the
RIAA filed another suit in its battle over the MP3 – this time
against a small start-up company known as Napster, Inc.65
Napster facilitates the transmission of MP3 files between and
among its users through a peer-to-peer file sharing process that
allows Napster users to: (1) make MP3 files stored on individual
computer hard drives available for copying by other Napster
users; (2) search for MP3 files stored on other users’
computers; and (3) transfer copies of the contents of other
users’ MP3 files from one computer through the Internet.66 As
millions of users utilized Napster to exchange unauthorized
copies of copyrighted music content, the RIAA sought to stop the
music piracy that was occurring because of Napster.67
In Napster, the defendant Napster appealed from a district
court order enjoining Napster “from engaging in, or facilitating
others in copying, downloading, uploading, transmitting, or
distributing plaintiffs’ copyrighted musical compositions and
sound recordings, protected by either federal or state law,
without express permission of the rights owner.68 In February
2001, the 9th Circuit Court of Appeals ruled for the plaintiff-
appellee record companies despite the fact that the preliminary

65
See Simmons, supra note 45 at 34.
66
Napster’s network servers and its MusicShare software, which is available free of charge from Napster’s web site
(last visited Apr. 15, 2001) <http://www.napster.com> makes these functions possible. See Napster, supra note 10,
at 1011. For further analysis of how Napster works, see id. at 1011-12.
67
See Simmons, supra note 45, at 35.
68
See Napster, supra note 10, at 1011.
 15

injunction required modification.69 Napster was not shut

completely down, but was required to remove and block access to
any copyrighted MP3 sound recordings provided by the
plaintiffs.70

UMG Recordings, Inc. v. MP3.com, Inc.

In a similar issue relating to the MP3 technology, the
owners of copyrights in musical recordings filed suit against
the Internet company MP3.com because of the service offered by
MP3.com, known as “My.MP3.com.”71 The service permitted
subscribers to save, customize and listen to the recordings
contained on their CDs at any time from any place from which
they had an Internet connection.72 To allow its subscribers to
replay the recordings, MP3.com purchased tens of thousands of
popular CDs in which the plaintiffs held the copyrights, and
copied their recordings onto its computer servers without
authorization.73 In order to access such a recording, a
subscriber either had to prove he owned the CD version of the
recording by inserting his copy of the commercial CD into his

69
Some of the things that the Court of Appeals held were that: (1) the plaintiffs established a prima facie case of
copyright infringement; (2) users’ activities did not amount to fair use of the copyrighted works; (3) plaintiffs
demonstrated likelihood of success on merits of their contributory infringement claim; (4) plaintiffs demonstrated
likelihood of success on merits of vicarious infringement claim; (5) plaintiffs raised sufficiently serious questions,
and established that balance of hardships tipped in its favor, as to Napster’s claim that it was entitled to safe harbor
under the Digital Millennium Copyright Act; (6) the Audio Home Recording Act was inapplicable; (7) preliminary
injunction was overbroad; and (8) Napster did not establish defenses of waiver, implied license, or copyright misuse.
See id. at 1004.
70
See A & M Records, Inc. v. Napster, Inc., 2001 WL 227083 (N.D. Cal. 2001) (order granting preliminary
injunction).
71
See MP3.com, supra note 10.
72
See id.
73
See id.
 16

computer’s CD drive or the subscriber had to purchase the CD

from one of MP3.com’s cooperating online retailers.74
While MP3.com managed to secure out-of-court settlements
with most of the major record labels, the Universal Music Group
refused to settle.75 At trial, MP3.com contended that the
creation of its music database was protected under the fair use
defense of the Copyright Act.76 The court rejected MP3.com’s
fair use defense finding that: (1) MP3.com’s actions were
commercial and transformative in nature; (2) the material copied
was deserving of strong copyright protection because the
material was highly creative; (3) the entirety of the
copyrighted works at issue had been copied; and (4) MP3.com had
violated the plaintiffs’ statutory right to license their
copyrighted sound recordings to others for reproduction. As a
result, the court denied MP3.com’s fair use defense and ruled
that MP3.com infringed the plaintiffs’ copyrights.77
As evidenced by the rulings in Napster and MP3.com, it
appears that in terms of MP3s, courts will continue to protect
the traditional principles of reproduction and distribution
rights as granted by the Copyright Act.78 In any copyright
infringement case, it is important to determine just who the
infringer is, because the copyright holder knows whom to

74
See id.
75
After a preliminary injunction was granted against the continued operation of MP3.com’s services, MP3.com
settlement agreements (with all but one of the plaintiff record companies) agreeing to pay the plaintiff record
companies approximately $80 million in damages and an additional $30 million in licensing fees for plaintiffs’
copyrighted works to be streamed from the MP3.com site for three years. See Lange, supra note 56, at 30.
76
See Simmons, supra note 45, at 36.
77
See MP3.com, supra note 10, at 352.
78
See Lange, supra note 56, at 31.
 17

pursue.79 However, as the court rulings come down and the

technologies advance, the peer-to-peer file sharing system using
a centralized server is slowly being replaced by one that is
decentralized such as Gnutella and Freenet where it is nearly
impossible to determine the identity of users.80 Whether the
court’s order will stop the rampant illegal, online exchange of
copyrighted MP3s through the peer-to-peer model is unknown.81

V. Reactions to New Digital Technologies – Film

The film industry has faced fewer problems than the music
industry mainly because the digital transfer of video requires a
significantly greater amount of disk space and transfer speed
than audio.82 Until recently the film industry has been
protected by the amount of time needed to download a full-length
motion picture and the lack of unprotected digital copies of the
works.83 However, the increased availability of broadband
connections such as cable and digital signal lines (“DSL”) in
the last couple of years has reduced the length of time needed
to download large files, and as the DVD format has become more
popular, many of Hollywood's films have been introduced in this
digital format, thus solving a pirate's primary problem of lack

79
See Perenson, supra note 2.
80
Even though Napster has been limited by a court ruling, the Napster software lives on thanks to Napigator and
Open-Nap. Napigator and Open-Nap allow anyone to run a Napster server. While Freenet makes it almost
impossible to track file transfers, because the service encrypts the file not only while in transit, but also at the file’s
origination and destination. See id.
81
Immediately after the Napster, supra note 70, order was filed, the author using Napigator, was able to find over 4
million copyrighted recordings with little to no effort.
82
See Simmons, supra note 45, at 33.
83
See Jack Valenti, Valenti Warns the Dangers of Internet Piracy Before Congressional Subcommittee (MPAA
Press Release) (last updated October 28, 1999) <http://www.mpaa.org/jack/99/99_10_28a.htm>.
 18

of access to digital copies of a film.84 As a result of

balancing the needs of consumers with the threat of piracy, the
movie industry adopted the Content Scramble System (“CSS”) – an
encryption method designed to protect a DVD from unauthorized
copying.85

Universal City Studios, Inc. v. Reimerdes

Criticized by experts as an inferior encryption method, the
protection offered by CSS proved to be short-lived when a 16-
year-old Norwegian hacker named Jon Johansen reverse engineered
a licensed DVD player and discovered the CSS encryption
algorithm and keys.86 Johansen used the information to create
DeCSS, a program capable of decrypting or “ripping” encrypted
DVDs, thus allowing the copying of decrypted files to computer
hard drives as well as playback on non-compliant computers87.
Johansen posted the executable code on his personal web site and
informed members of an Internet mailing list that he had done
so.88 The film industry responded quickly by filing suit both in
New York and California seeking to enjoin individuals and

84
See Oross, supra note 3, at 151 (“Users with high-end broadband connections can download the latest films in
about the same amount of time it would take them to drive to the nearest theater.”); Movies are being issued on
DVD at a rate of over 40 new titles per month in addition to re-releases of classic films. See Reimerdes, supra note
10, at 310.
85
CSS involves encrypting according to an encryption algorithm, the digital sound and graphics files on a DVD that
together constitute a motion picture. A CSS-protected DVD can be decrypted by an appropriate decryption
algorithm that employs a series of keys stored on the DVD and the DVD player. In consequence, only players and
drives containing the appropriate keys are able to decrypt DVD files and thereby play movies stored on DVDs. See
id. at 309.
86
See id. at 311.
87
See id. (Johansen stated that he created DeCSS in order to make a DVD player that would operate on a computer
running the Linux operating system.).
88
See id.
 19

corporate entities from publishing DeCSS on their websites.89

The district court granted the injunction enjoining the
defendants from posting the DeCSS software or hyperlinking to
other sites that made the DeCSS available.90 Reimerdes was one
of the first cases to interpret the circumvention provision of
the Digital Millennium Copyright Act.91

Digital Millennium Copyright Act

The advent of digital technologies has inspired recent
changes in United States Copyright law such as the Audio Home
Recording Act, but the global aspect of the Internet and its
effect on copyright infringement has also become apparent.92
Internationally in 1996, the World Intellectual Property
Organization (“WIPO”) adopted two treaties, the WIPO Copyright
Treaty and the WIPO Performance and Phonograms Treaty to deal
with the digital dilemma.93 While back in the United States,
lobbyists for both online service providers (“OSPs”) and
entertainment industry content providers rallied in Washington,
D.C. to devise a means by which to insulate the OSPs from
liability for acts of copyright infringement originating from
their users, while at the same time protecting the valuable

89
See Simmons, supra note 45, at 37; See also Universal City Studios, Inc. v. Reimerdes, 111 F.Supp.2d 346
(S.D.N.Y. 2000) (amended final judgment) (ruling enjoining computer hacker Eric Corley and the hacker web site
2600.com from posting or linking to the DeCSS program).
90
See Reimerdes, supra note 10.
91
See Oross, supra note 3, at 155.
92
See Sylva, supra note 57, at 223.
93
The treaties strengthen copyright protection for original works f authorship published online and require member
nations to protect intellectual property against piracy by providing legal remedies against circumvention of
technological measures utilized to protect copyrighted works, and tampering with copyright management
information in connection with copyrighted works. See id. For further information on WIPO, see WIPO Web Page
(last visited on Apr. 17, 2001) < http://www.wipo.org/ >.
 20

intellectual properties of the entertainment industry.94 After a

long battle, the 105th Congress passed the Digital Millennium
Copyright Act (“DMCA”), which President Clinton signed into law
on October 28, 1998.95 The DMCA implemented the two WIPO
treaties into U.S. copyright law while providing even greater
protection for copyrights than afforded under the WIPO
treaties.96
Of the five titles in the DMCA, Title I dealing with the
circumvention of copyright management systems has been the
entertainment industry’s best weapon.97 Under Title I of the
DMCA, it is illegal, barring certain exceptions, “to descramble
a scrambled work, to decrypt an encrypted work, or otherwise to
avoid, bypass, remove, deactivate, or impair a technological
measure, without the authority of the copyright owner.”98 While
the DMCA is significant legislation aimed at the challenges
presented by digital technologies, there are many potential
problems with the DMCA.99 These problems fall into two
categories such that: (1) on one hand the DMCA fails to
adequately protect copyright holders because it narrowly defines
circumvention technology and does not protect copyrighted works
already distributed without technological protection measures

94
See Sylva, supra note 57, at 224.
95
See id.
96
See Digital Millennium Copyright Act, P.L. 105-304, 112 Stat. 2860 (1998); Sylva, supra note 57, at 224.
97
See Oross, supra note 3, at 155.
98
See 17 U.S.C. §1201(a)(3)(A) (2000). See also Leaffer, supra note 13, at 374 (“As to the act of circumvention in
itself, the provision prohibits circumventing technological measures that impede access, but not those that prevent
copying. This distinction was adopted to ensure that the public will have the continued ability to make fair use of
copyrighted works. Because copying a copyrighted work may be a fair use under appropriate circumstances, §1201
does not prohibit the act of circumventing a technological measure that prevents copying. Alternatively, the fair use
defense is not a defense to the act of gaining unauthorized access to a work such that the act of circumventing a
technological measure to gain access is prohibited.”).
99
See Gaffney, supra note 11, at 633.
 21

(e.g., MP3s), while (2) on the other hand, it may harm the
public interest by allowing copyright owners to expand their
rights beyond those protected by copyright law.100 Legislation
such as the AHRA and DMCA are needed, but what must the
entertainment industry do in the future to adequately protect
its intellectual property rights when legislation does not keep
pace with technology?101

Future Concerns & Possible Solutions

The problem with legislation alone is that technology
quickly outpaces the law.102 For a law to be effective, the law
must regulate the technology as opposed to regulating uses. 103
Statutes that regulate technology are more easily enforced than
statutes that regulate uses of copyrighted works.104 The solution
to the digital dilemma is to utilize the laws in connection with
the available technologies along with various industry self-help
methods, such as implementing anti-piracy technology,
introducing secure digital formats and offering a better product
than the digital pirates.105 It is important for the
entertainment industry to adopt strategies that will utilize the
rapid changing technology to the industry's advantage, just as
digital pirates have used technology over the last few years to

100
See id.
101
See Oross, supra note 3, at 156.
102
See Robert T. Baker, Article, Finding a Winning Strategy Against the MP3 Invasion: Supplemental Measures the
Recording Industry Must Take to Curb Online Piracy, 8 UCLA Ent. L. Rev. 1, 18 (2000) (discussing how MP3
technology has led to new trends in music piracy).
103
See Gaffney, supra note 11, at 630.
104
See id.
105
See Baker, supra note 102, at 18-24.
 22

gain an advantage over the industry.106 One such strategy is the

Secure Digital Music Initiative.
The Secure Digital Music Initiative (“SDMI”) is an
extensive pan-industrial anti-piracy measure started by
information technology firms, consumer electronics companies and
members of the recording industry to develop technology
specifications for protected digital music distribution.107 While
the initiative’s ultimate goal is limiting piracy, the
initiative is attempting to bring a technical standard to the
industry and to develop a system that will allow secure
distribution and management of copyrights.108 The problem with
the SDMI is the demands of the different parties involved in the
SMDI development.109 The only way that a new format will be
successful is if consumers adopt the new format.110 It remains to
be seen whether the SDMI will be accepted by consumers or

106
See id. at 18.
107
The executive director of the SDMI is ironically Dr. Leonardo Chiarlglione, the digital engineer and original
developer of the MP3 compression format. See Sylva, supra note 57, at 235. For more information on SDMI, see
SDMI Website (last visited on Apr. 15, 2001) <http://www.sdmi.org/FAQ.htm>. Electronics manufacturers will
soon release two new audio disc formats: Digital Versatile Disc Audio (“DVD-A”) and Super Audio Compact Disc
(“SACD”). These discs are capable of storing 4.7 GB and this large amount of space will be used to increase sound
quality far beyond that of any CD. The discs will employ sophisticated digital water-marking and encryption
technology to protect against piracy. If marketed properly, these discs could present a solution to the piracy problem
mainly because the files are too large to pipe through current broadband lines, employ anti-piracy technology, must
be sold or transferred tangibly and sounds better than MP3s and CDs. See Baker, supra note 102, at 24.
108
See Sylva, supra note 57, at 235.
109
Software companies and hardware manufacturers have opposed the music industry’s demand that future players
only accommodate SDMI-compliant, watermarked files, as it would force these companies to abandon the MP3
enthusiasts in their consumer base. See Baker, supra note 102, at 20.
110
To remedy some of the fears circulating about SDMI, Chiariglione issued an open letter to the digital community
clearing up some misconceptions about the SDMI. Chiariglione stated that: (1) the SDMI specification will allow a
user to make unlimited personal copies of CDs if in possession of the original CD, (2) SDMI-compliant players will
play music already contained in a user’s library, (3) users will have access to even more music, because copyright
holders will be able to distribute their music online without fear of piracy, and (4) users will be able to play music
that he/she already owns. See Leonardo Chiariglione, An Open Letter to the Digital Community (last visited Apr.
15, 2001) <http://www.sdmi.org/pr/OL_Sept_28_2000.htm>.
 23

whether they will continue to use non-secure formats such as the

MP3.111
As the SDMI sets standard for online music distribution,
several copy-protection schemes designed to thwart the wholesale
duplication of copyrighted materials such as the Content
Protection for Recordable Media (“CPRM”) are about to appear. 112
The CPRM technology will make it more difficult for consumers to
duplicate copyrighted files such as music and movies without the
permission of the companies that own the rights, by building a
copy-protection scheme into every hard drive and memory card. 113
Opponents of the CPRM argue that the CPRM provides protection
for copyright owners’ that expand the owners’ exclusive rights
beyond traditional copyright law as well as threatens the
ability of individuals to use copyrighted works in ways that
“Promote the Progress of Science and useful Arts.”114 Expect many
battles to be waged in the next few years over the
constitutionality of the SDMI and other anti-piracy
technologies.115
Another possible strategy to combat digital piracy lies not
in technology, but rather in competition.116 Digital piracy
exists because there is an over-whelming demand for digital
entertainment content coupled with a serious lack of supply. 117

111
See Baker, supra note 102, at 20.
112
See Dawn C. Chmielewski, New Attack on Digital Piracy, Mercury News (Dec. 29, 2000)
<http://www0.mercurycenter.com/svtech/news/indepth/docs/copy122900.htm> (discussing new computer storage
technologies designed to combat piracy by building copy-protection schemes into hard drives).
113
The CPRM technology is the product of IBM, Intel, Toshiba and Matsushita. See id.
114
See id; U.S. Const, supra note 14.
115
See Gaffney, supra note 11, at 634.
116
See Baker, supra note 102, at 21.
117
See Oross, supra note 3, at 157.
 24

The music and movie industry have been slow to deliver digital
entertainment content to the masses because of the threat of
piracy, and ironically as a result, digital pirates have filled
the void.118 Users turn to the pirate, because the pirate’s
illegitimate Internet web site offers content that a legitimate
site does not.119 The entertainment industry can combat the
pirate by making a legitimate site more appealing than its
pirate counterpart.120 Consumers who know that they can legally
obtain digital files at a reasonable price may not bother
searching through unreliable pirate sites for content.121 The
legitimate site can also offer official ancillary content that
the pirate site cannot.122 As a result, the consumer may be
willing to forgo the marginal savings of pirate sites in
exchange for the legitimate site’s superior convenience and
service.123

Conclusion
As a new technology is developed, an understanding of the
new technology’s relationship to the current business models and
copyright laws must be formulated. It is generally feared that
a technology will destroy the models and laws that are in place
at the time of the technology’s introduction. However in the
past with analog technologies instead of destroying the markets,
the technology usually created a profitable, unforeseen market
118
See id.
119
See id.
120
See Sylva, supra note 57, at 240.
121
See Baker, supra note 102, at 23.
122
See Sylva, supra note 120.
123
See Baker, supra note 121.
 25

such as the video rental market, which stemmed from the

introduction of the VCR. Digital technologies offer certain
advantages such as ease of copying and distribution that analog
ones do not. As a result, the music and movie industry are
fearful that they may lose control over their tightly controlled
content. However by examining the current laws, adopting self-
help regulations and offering a better product than a pirate,
both the music and movie industries will be able to develop new
markets, protect their copyrights, and thus survive the digital
onslaught.