You are on page 1of 24

No.

534 February 17, 2005 Routing

Peer-to-Peer Networking
and Digital Rights Management
How Market Tools Can Solve Copyright Problems
by Michael A. Einhorn and Bill Rosenblatt

Executive Summary

The term “peer to peer” (P2P) refers generally contend that DRM is harmful to consumers
to software that enables a computer to locate a because it tilts the balance of control in favor of
content file on another networked device and copyright holders. For their part, rights owners
copy the encoded data to its own hard drive. P2P respond that DRM merely offsets grave dangers
technology often attracts people who use it to made possible by digitization and Internet distri-
reproduce or distribute copyrighted music and bution.
movies without authorization of rights owners. This study argues that the basic functions of
For that reason, the short history of P2P tech- DRM and P2P can be quite complementary and
nology has been one of constant controversy and that innovative market mechanisms that can
calls by many in the content industry to regulate help alleviate many copyright concerns are cur-
or even ban P2P-based networks or software. rently blossoming. Government should protect
As a general preventive measure against copy- the copyrights of content owners but simultane-
right infringements through digital technologies ously allow the free market to determine poten-
including P2P, copyright owners often use digi- tial synergies, responses, and outcomes that tap
tal rights management (DRM) techniques to different P2P and DRM business models. In par-
encrypt content or otherwise restrict access. ticular, market operations are greatly preferable
Depending on the access or compensation to government technology controls, on the one
arrangement, content owners may differentiate hand, or mandatory compulsory licensing
prices and limit use by the number of plays, schemes, on the other. Recent court decisions
duration of access, temporary or partial uses, regarding the liability of P2P networks or soft-
lending rights, and the number of devices on ware providers may force the Supreme Court to
which the file may be accessed. The potential revisit its own precedents in this area. In the
level of use control may go beyond the expecta- absence of an efficient resolution by the Court,
tions of consumers accustomed to a broader Congress may pass legislation that may interfere
range of uses enabled by analog technology. with both technological evolution and free-mar-
Consequently, many consumer advocates now ket processes.

_____________________________________________________________________________________________________
Michael A. Einhorn is the author of Media, Technology, and Copyright: Integrating Law and Economics
(2004) and senior adviser to an international consulting firm. Bill Rosenblatt is president of GiantSteps Media
Technology Strategies (www.giantstepsmts.com), managing editor of the newsletter DRM Watch
(www.drmwatch.com), and author of Digital Rights Management: Business and Technology (2001).
By preserving Introduction contributory or vicarious copyright infringer.
property rights Thus, at least for the time being, and con-
This study examines how digital rights trary to the wishes of industry, decentralized
made possible management (DRM) may complement peer- P2P operations remain in business and free
through new to peer (P2P) technology and help solve many of contributory and vicarious liability for
of the intellectual property problems now copyright infringement.
market hotly contested in the current policy arena. Meanwhile, the industry continues to
techniques, From a popular vantage point, Napster— look to DRM technologies to stem the tide of
DRM encourages though not a pure P2P network (because it unauthorized file sharing. Legally different
relied on a central server to direct users to from copyright itself,7 digital rights manage-
producers to sought content)—illustrated the mass appeal ment refers to technological tools and capa-
innovate because of P2P file sharing.1 The Napster phenome- bilities that monitor content use and shield
they are more non gave rise to networks built on FastTrack, against unauthorized uses or distributions.
Gnutella, and other software, which have DRM can then go some way toward protect-
certain of been designed without central servers and ing intellectual property by helping content
eventual reward. have so far avoided Napster’s legal fate. owners to stop copying, enforce use restric-
P2P services are potentially beneficial for a tions, and otherwise assert property rights to
number of reasons. They allow users to copyrighted material. In contrast to the views
search for and download content files locat- of many critics, DRM is an important facili-
ed anywhere in the network. That could tating mechanism for protecting copyrights
make it much easier to find works in the pub- in a free market.
lic domain, assist new artists who can publi- Moreover, by preserving property rights
cize their abilities, and widen the audience made possible through new market tech-
for political speech otherwise confined to a niques, DRM encourages producers to inno-
few listeners. However, the costs are sobering; vate because they are more certain of eventual
most users simply engage the software in reward. That facilitates the process of “cre-
order to find music and movies that have ative destruction”—the new ideas, products,
been “ripped” and uploaded to network processes, and organizational modes that are
nodes for free taking by others.2 That threat- hallmarks of dynamic capitalism.8 Govern-
ens the content industries by displacing unit ment intervention in this competitive proc-
sales and licensing opportunities, and there- ess could be harmful.
by undermines their business models for
delivering content.
Though the content industries prevailed Digital Rights Management
in litigation against Scour3 and Aimster,4 and Versioning
industry attempts in California to close
down Grokster and Streamcast failed in dis- DRM technology includes encryption and
trict and circuit courts.5 In the Grokster and other content controls that limit how users
Streamcast cases, the courts ruled in summary may make and distribute copies of digital
judgment that the particular programs in files and physical media (e.g., CDs, DVDs)
question had significant, noninfringing uses they may have purchased. While critics fear
that qualified for legal protection under the the loss of consumer uses due to DRM,9 they
Supreme Court’s 1984 landmark decision in often fail to consider the effect of mitigating
Sony v. Universal City Studios, which upheld the market forces. That is, economic analysis
legality of the videocassette recorder.6 The informs us that content providers who heed-
district and circuit courts also found that lessly hinder customer control actually
neither software provider had the requisite reduce the value of the product that they are
knowledge of actual infringement or the abil- selling in the market. Doing so will reduce
ity to curtail immediate use to qualify as a market demand, prices, and profits.10

2
The ability of content owners to restrict from high-end users. Content distributors
reuse of their works may lead to a greater may also use personalization techniques to
number of specialized or personalized identify prospective first-time customers and
options and a wider range of consumer extend to them free previews, time-limited
choices. With DRM, content owners may rentals, and low-price introductory offers.
offer different rights by designing menus of By contrast, the more intense and devoted
diverse services and charging a different price users of any product generally pay more
for each. For example, the ability to down- under versioning; producers charge higher
load, burn, and lend a legally accessed movie prices for enhanced service features without
would be priced differently than the ability worrying about attrition at the lower end.
simply to view the work without making fur- Despite the higher prices, those high-end
ther transmissions or reproductions. The customers may be better off, as suppliers now
ability to design different services enables have greater incentives to develop innovative
producers to price discriminate with regard features and to take other steps to expand the
to buyer tastes, potentially enabling greater capabilities of the network.
revenue recovery.11
The concept of “versioning” is not new in
market economies.12 Magazine publishers The Music Services The ability of
make printed content available both by sub- content owners to
scription and as single copies, and studios Nowhere is the market potential of ver- restrict reuse of
make film available in first-run theaters, sioning more evident than in the evolving
video stores, and television and cable pro- market for digital music services. Since Apple their works may
grams. Versioning allows consumers to first launched its iTunes Music Store in April lead to a greater
choose among a number of service options 2003, the constellation of suppliers and ser-
instead of being confined to any one. The vices has reordered considerably. Specifically,
number of
prospective use of different versions and the market for digital music content has specialized or
prices is particularly appropriate for content moved well beyond first-generation business personalized
industries, where vast production costs are models of the major label services.
sunk up-front. Those investments must be The two original major label services options and a
recovered from the subsequent sale of subse- (MusicNet and Pressplay),13 which were wider range of
quent product. launched in December 2001, allowed full consumer
That said, resale or arbitrage between low- library access through streams and down-
and high-end markets needs to be avoided if loads but ended a buyer’s access to previous- choices.
versioning is to operate effectively. For exam- ly downloaded music when he or she termi-
ple, if magazine subscribers could resell nated the service (although Pressplay did
copies at higher prices on neighborhood come to permit a limited number of burns
newsstands, subscription prices would neces- for an additional fee). The services also
sarily increase to reflect the value of likely attempted to divide the customer spectrum
resale. That would clearly harm readers who by offering alternative service versions that
did not resell magazines. Therefore, DRM depended on contract duration or usage
protections that stop the resale or redistribu- level, or both.14 Four major alternative service
tion of content from one market segment to versions came to market in 2003.
another enable producers to develop more
versions and enhance consumer choice. Downloads Plus Hardware
The effect of versioning on individual In April 2003 Apple Computer launched
users is bifurcated. Smaller users generally an innovative Internet Music Store, called
gain, as producers and distributors lower iTunes, which sold more than 125 million
prices for “no frills” services to basic cus- downloads in the next 18 months and
tomers without worrying about revenue loss claimed 75 percent of the download mar-

3
ket.15 Individual songs at the Music Store, ommended compositions with friends
which are encoded with the MPEG-4 (described below). The prospective fortunes of
Advanced Audio Coding compression tech- the MusicMatch platform may increase con-
nology, cost 99 cents apiece. With Apple’s siderably as the result of a prospective merger
proprietary networking technology, with the complementary search platforms of
Rendezvous, several Mac users on a wireless Yahoo!, which also owns the leading Internet
network can share collections through radio service, Launch.24
streaming.16 The Music Store has no sub-
scription fee; it does not enable full track Downloads Plus Interactive Radio
streaming, but 30-second samples are avail- Napster, which was relaunched as a copy-
able for free.17 The average iTunes user right-respecting service (using the Pressplay
appears to download an album per month; infrastructure) in October 2003, features a
the typical teenage shopper in a record store different combination of downloading and
buys one CD every two months. Nearly half streaming services.25 For 99 cents a track,
(45 percent) of purchased songs on iTunes Napster users may download and burn indi-
were purchased as part of an album.18 vidual songs; an “all you can eat” subscription
The key innovation of Apple is its light- service is available at $9.99 per month.26 That
handed DRM system, called FairPlay, which fee includes on-demand streaming of music
allows buyers to transfer tunes to Apple iPod from Napster’s library and commercial-free
players, burn unlimited numbers of CDs, music from 50 interactive online radio sta-
and transmit downloaded songs to three tions.27 Complementary services for all
other hard drives.19 The next generation of Napster users include music videos, 30-sec-
Apple’s Music Store also contains a number ond samples, online articles, Billboard charts,
of new features, including iMix, which is a interuser e-mail, and playlist browsing.28
new way for users to publish and comment
on playlists recommended by fellow fans. Interactive Streaming Plus Burning
The leading subscription service (550,000
Downloads Plus Software subscribers), RealNetwork’s Rhapsody, offers
MusicMatch, a service that competes with an alternative model to downloading à la
iTunes, provides downloads to complement carte.29 Its key competitive feature is “all-you-
its popular music management jukebox that can-eat” on-demand streaming, which is
is now installed on more than 60 million made available for a subscription fee of $9.95
PCs.20 With jukebox software that can be per month, and its present compatibility
paid for by user fees, advertising, and data with Apple’s iPod, made possible by reverse
The percentage of resale, basic users of MusicMatch may buy engineering that may yet be legally contest-
99-cent downloads, while deluxe users can ed.30 Individual burns are generally available
U.S. downloaders pay $19.99 per month for an upgraded ser- at 79 cents but were sold for as little as 49
who actually paid vice with faster burn speeds and no advertise- cents during an August promotion.31 The
for a song at one ments.21 Rhapsody service also offers access to 50
MusicMatch also offers a complete person- commercial-free stations.32
point or another alization service (which Apple now lacks) that As of April 2004, 3 percent of Internet
increased from 8 tracks an individual’s selected downloads in users and 17 percent of music downloaders
percent to 22 order to make subsequent recommenda- used paid music services.33 The percentage of
tions.22 In addition, MusicMatch fully tracks U.S. downloaders who actually paid for a
percent in the user preferences to compose interactive “radio song at one point or another increased from
first 12 months stations” with personalized content.23 More- 8 percent to 22 percent in the first 12 months
over, MusicMatch now offers a subscription after the launch of iTunes.34 Moreover, 30
after the launch service (250,000 subscribers) that permits on- percent of those downloads were from inde-
of iTunes. demand streaming and playlist sharing of rec- pendent labels not owned by the five major

4
music companies, in contrast to 20 percent Branson’s Virgin Group (and thus a sister busi- A number of
in offline markets .35 ness to the Virgin Megastores entertainment competitive
To summarize, a number of competitive product retailers), launched in September
music services that incorporate digital rights 2004 a competitive “all-you-can-eat” streaming music services
management emerged in 2003 and early service that will operate similarly to the exist- that incorporate
2004. Each has some interesting features that ing Rhapsody and MusicMatch subscription
are attracting the interest of a segment of the services.40 Virgin subscribers will pay $7.99 per
digital rights
buying public. When applied in any of those month to access a catalog of more than one management
services, DRM stops users from copying con- million songs; service will be coupled with emerged in 2003
tent in a manner that would displace market Virgin Electronics’ new music player, which
demand. Those protections help preserve has more capacity and weighs less than a simi- and early 2004.
some commitment to avoiding expropria- larly priced iPod.41 Microsoft launched a music
tion of investments in content and distribu- download service around the same time and
tion services. expects to add a subscription streaming service
to it soon.42 Microsoft has also released a new
rights management system (called Windows
New Services Media DRM for Portable Devices) that will
enable listeners to make copies to portable
With the potential for more innovation in players that observe the same rights restric-
2004–05, some content providers and dis- tions controlled on the PC; that will also allow
tributors may again transform the market the transfer to players of temporary down-
with new offerings of digital music services. loads. Microsoft will derive revenue in the com-
In addition to extending and refining the petitive music space through the sale of players
core services described above, providers will from Creative, Samsung, and other vendors
combine music services with other brand and the licensing of Windows Media software
products, such as airline tickets, retail mer- needed for operation. The new streaming ser-
chandise, food, and cable services. vices will increasingly provide a major test of
the relative appeal of music streaming and
Downloads Plus Hardware downloading, as well as alternative sources of
Following the iTunes model, Sony now revenue.
markets a competitive download service called
Connect.36 As in iTunes, Sony tracks are com- Downloads Plus Merchandise
pressed with a proprietary technology From 1994 to 2004, Wal-Mart, Circuit
(ATRAC); most songs are available for 99 cents City, Best Buy, and Target stores deeply dis-
and albums for $9.99.37 All downloaded songs counted popular CDs in order to attract peo-
can be transferred to Sony MiniDisc or ple to shop at their establishments.43 In light
Memory Stick portable devices that contain of their considerable success in “brick-and-
Sony’s proprietary OpenMG DRM technolo- mortar” retailing, each chain now plays a
gy, as well as high-end Sony computers now related strategy in the digital marketplace.
sold in the company’s retail stores.38 Sony also Wal-Mart now offers online downloads at 88
recently launched in Finland a “personalized cents apiece.44 Circuit City recently bought
radio service” that plays music directly through up the digital music platform MusicNow
mobile phones; a personal playlist feature (formerly FullAudio). Target has a distribu-
adapts to consumers’ tastes by enabling them tion deal with Napster, and Best Buy distrib-
to press a button that indicates approval or dis- utes music services from Rhapsody and
approval of a song.39 Napster.45 Amazon should soon launch a
similar strategy to combine music and mer-
Downloads Plus Streaming chandise retailing online.46
Virgin Digital, a division of Sir Richard Some food distributors use downloads in

5
partnership with the music services as promo- transfers to portable devices, and sharing
tional tools to stimulate product sales. Pepsi (within reasonable limits)—features enabled
instituted a promotional program to give yet controlled by underlying DRM technolo-
away 100,000 iTunes in bottlecap coupons; gies.
Heineken, Miller Brewing Company, McDon- Third, with distribution platforms that
ald’s, and Coca-Cola plan respective service are now proving their adaptability to con-
ventures with Rhapsody, Napster, Sony, and sumer tastes, the potential gains for indepen-
Europe’s OD2 (now owned by Loudeye).47 dent labels (indies) are considerable. As the
Starbucks now allows customers at its Santa market leader in downloads, Apple’s iTunes
Monica location to make customized CDs. It now targets niches of indie fans with catalog
is distinctly possible that brand building for rights to more than 600 labels;50 Microsoft
corporations can begin if they can activate now offers content from 3,000 independent
their own music downloading or streaming labels.51 Recent launches by eMusic and
services using infrastructure now available Audio Lunchbox respectively feature catalogs
from Loudeye and Microsoft48 or from whole- of 3,500 and 4,200 labels.52 Digital distribu-
sale provider MusicNet. tion has worked to the clear benefit of pro-
As a final possibility, cable operator RCN ducers and distributors astute enough to
Actual market introduced in 2004 a bundled music service capitalize on the new technology. For exam-
experience proves with MusicNet.49 Subscribers would have the ple, indie label Black Rain and distributor
that the use of opportunity to access both services for one INgrooves pushed artist Kieran to number-
monthly fee. MusicNet’s present catalog tops one rankings at Rhapsody and iTunes in the
DRM indeed one million tracks. summer of 2004.53
responds to There are three general points to be made The potential alliance of the music ser-
regarding the state of competition in this vices and the independent labels may be vital
consumer tastes. market. First, the spectrum of services is now to the future success of digital music in two
quite wide; focused shoppers locate favored key respects. First, independent labels offer
songs through à la carte downloads, listeners different sounds from fresher and less well-
at large are attracted to noninteractive known talent, avoiding the need to promote
streaming, and more dedicated browsers to major retail stores and mainstream radio
insist upon the full browsing capabilities of platforms. In addition, while major label
interactive streaming. Differentiated versions business financially suffered in 2001–03, a
imply diverse ownership rights, service length, number of independent labels did very well.54
pricing, personalization, and complementary That suggests that music from independent
components. With no abiding certainty of labels may gain in market share as alternative
where buyer tastes reside in the market, rival distribution methods improve. The music
providers “learn by doing” those features that services should then be seen as enabling
consumers want most. agents of emerging competition between
Second, actual market experience proves incumbent big labels and the hard-charging
that the use of DRM indeed responds to con- independent upstarts.
sumer tastes. MusicNet and Pressplay at their Finally, downloading may be superseded
outset did not support permanent down- by streaming in the years to come. A major
loads, burns, or any sort of sharing, and their label receives 65 cents from online down-
fee structures were dauntingly complex. As loads that sell for 99 cents.55 The remaining
subscriptions trailed and illegal file trading 34 cents of an online purchase pays distribu-
continued, the importance of permanent tion costs—bandwidth, credit card use, and
ownership, portability, and sharing became distributor service and overhead. According-
evident to all. Later music services then ly, if an online album costs $9.99, the label
implemented simpler pricing structures and receives $6.50. Accounting for differences in
allowed permanent downloads, CD burns, distribution expenses, a label makes a similar

6
margin in store sales.56 redistribution of content, protects the
The margin of $6.50–$7.00 goes to cover integrity of each system. Relaxing access pro-
mechanical royalties, artist advances, unre- tection, or otherwise enabling alternative
couped expenses, and general promotion technologies to take copyrighted work with-
expenses needed to find talent and distribute out compensation, harms both content own-
materials to radio stations and record stores. ers and the emerging services.
With requisite payments to talent and recov-
ery of costs, it is consistent with hard-nosed
management and competition that a produc- Fair Use and Reasonable
er should recover the same profit margin Usage Expectations
from any new distribution channel that it
does from its incumbent alternatives. For if The notion of reasonable usage bears
labels fail to recover the requisite margin, some discussion, especially because it has
profitability in the emerging market declines been confused with the legal concept of fair
as customers migrate. So too does the incen- use. Fair use is the “privilege in other than the
tive to record and promote new acts. owner of a copyright to use the copyrighted
That said, downloads do not now appear material in a reasonable manner without his
to present the requisite consumer value. For consent, notwithstanding the monopoly
example, a survey by research firm Ipsos- granted to the owner.”59 When properly
Insight found that consumers believed that established, fair use must conform to specif-
$7.99 was the best price for digital music ic legal guidelines and careful economic con-
albums.57 If that amount is an accurate mea- siderations of type and nature of use.60
sure of the median buyer’s valuation, a label Although case precedents exist for specif-
would receive no more than $4.50 from the ic types of uses, a judge or jury must ulti-
sale of an album online. That would fail to mately make decisions about whether partic-
recover the costs of royalties, production, and ular contested uses conform to the fairness
promotion. guidelines specified in Section 107 of the
The industry may be better off in the long Copyright Act. Moreover, the protection of
run with streaming, where profit margins fair use is only defensive; that is, fair use is
can be made considerably higher through not a standard for inalienable consumer
licensing fees that can be adjusted more read- rights but is only a defendant’s protection
ily. From the perspective of distributors, against an otherwise valid claim of copyright
streaming appears now to be more prof- infringement. Some uses, such as noncom-
itable. At present, the online music market mercial copying of content, are presumptive-
generates $271 million annually in revenues, ly fair, meaning that plaintiffs must present
which are split 60/40 between downloads additional evidence that would bolster an
and streaming subscriptions.58 Those num- infringement claim.61 That being the case, it
bers may change substantially in the next few is impossible to create any kind of automat- The number of
years as the streaming services come to offer ed system that determines whether a particu- music services is
the primary features—“all-you-can-eat” lar use is fair or not, because the stipulations
access to the “celestial jukebox”—that digital in Section 107 are guidelines, not specific growing, and the
technology is capable of. rules. market is testing
The basic points of the previous section new business
must now be reaffirmed and extended. The Consumer Expectations
number of music services is growing, and the In addition to fair use, consumers have models and
market is testing new business models and other reasonable expectations about how they technologies that
technologies that may displace incumbents. can use purchased content. For example, if a
Once again, digital rights management, user buys an album, he or she may expect to be
may displace
which disallows the copying, resale, and able to sell it, record a digital cassette for later incumbents.

7
An overly use in her car, or make duplicate tape copies to schemes were fully interoperable with one
protective system sell to her friends and acquaintances. The another. That would enable a prospective
legality of the first use would be covered by the buyer to build up a catalog from different
of copyright is a first sale doctrine,62 while the second would be services without worrying about later obso-
detriment in the covered under the home taping exemption of lescence.
the Audio Home Recording Act.63 The third is Chief among the challenges is standardiza-
eyes of consumers a copyright infringement. tion of identification schemes for both users
who have grown Although meeting every consumer expec- and devices. Currently, and with few excep-
accustomed to a tation might not be a legal obligation of any tions, each DRM scheme has its own notion of
producer, he would nonetheless be wise to identity and its own way of authenticating
range of copying take steps to heed expectations so as to identities. A user’s identity in one scheme (e.g.,
capabilities, increase the value of his service. Moreover, he for an Adobe e-book) is only coincidentally
legally fair or not. can price particular features incrementally in related to her identity in another scheme (e.g.,
order to increase the monetary recovery of for an online music subscription service based
the property or service. That may allow him on Microsoft Windows Media). Attempts to
to offer a basic service at relatively low cost. create universal online identification schemes
The situation here may be likened to that of have been thwarted by a combination of tech-
a restaurant owner who offers an à la carte nical complexity and concerns over privacy. A
menu. By pricing appetizers and deserts sep- DRM scheme for integration with P2P net-
arately, the owner can afford to keep prices works should at least offer some degree of
down for the basic entrées. identity interoperability among popular for-
Accordingly, whether “space shifting” or mats, devices, and services.
“burning” is a fair use or not, a content pro- Unilateral solutions may exist. In its pre-
ducer unwilling to provide consumers a sent Harmony service, RealNetworks enables
means of moving music tracks off a hard the compatibility of its RealPlayer Music
drive will surely lose customers and revenues Store tracks with both Apple’s iPod players
in the long run. Harsh economic reality will and players compatible with Windows Media
prevail over narrow copyright law; an overly Audio (WMA).67 RealNetworks accom-
protective system of copyright is a detriment plished that by producing WMA files and
in the eyes of consumers who have grown integrating Windows Media Player on the
accustomed to a range of copying capabili- user’s PC (both of which are permitted by
ties, legally fair or not.64 Consequently, the Microsoft) and by reverse engineering
ability to monetize the value of each service Apple’s FairPlay DRM file format (which
may lead producers to offer a great number Apple may yet legally contest). In another
of consumer rights that legal “fair use” does potential solution, RapidSolution Software
not cover.65 of Germany now offers software (called
Tunebite) that allows users to re-record any
Interoperability file played on a PC by simple loopback
Before buying into digital music in any through the PC’s audio card; songs are stored
big way, many consumers may need greater in an open format for later use.68 Parties dif-
assurances that DRM systems will interoper- fer as to whether the technology legally
ate with one another. The industry has breaches access protection.69
already made strides toward interoperability It now seems likely that the market will
of so-called rights expressions, which consolidate to two or three major platforms
describe the rights that a content owner for each major media type. A plausible sce-
grants a consumer and under what condi- nario is that by the end of 2005 the market will
tions; however, standardization in this area is converge on the Microsoft, Apple, and Open
not complete.66 Even if it were, additional Mobile Alliance’s Download and DRM stan-
challenges would remain before DRM dards for audio; Adobe, eReader (frequently

8
known as Palm Digital Media), and mons” where users can transmit and modify
MobiPocket for e-books; and Microsoft and content.75 Accordingly, P2P is quite attractive
RealNetworks for video downloads.70 Al- to many users and academics who broadly
though the number of platforms is a bit high- approve of the easy information exchange that
er than that which consumers have been P2P makes possible.
accustomed to for analog media,71 it is—inter-
estingly enough—consistent with the number The Benefits and Harms of P2P
of platforms in many other technology mar- There are a number of specific capabilities
kets (personal computer architecture and of P2P that bear consideration. First, P2P
operating systems being a notable excep- technology may facilitate the distribution
tion).72 Content producers and distributors and discussion of full literary works76 and
here would be challenged to enable some form films77 that are in the public domain.
of interoperability in a multistandard market. Recipients can comment on or adapt certain
Otherwise, they may compete to find one works to provide new insights and features,
industry standard or until a number of differ- thereby creating a stream of criticism that
ent systems coexist, albeit inefficiently.73 users may sequentially adapt. Second, P2P
Yet market standardization for DRM— allows listeners to sample unprotected music
whether open, de facto, or somewhere in that they otherwise might not hear and
Market
between—seems preferable to government- develop interests in bands and songs that standardization
enforced guidelines, as Sen. Ernest Hollings might otherwise not evolve. Third, though for DRM—
(D-SC) proposed in the Consumer Broadband not commonly acknowledged, major labels
and Digital Television Promotion Act of 2002. themselves use research from P2P networks whether open,
Had it passed, the act would have imposed to track which songs are traded in local areas, de facto, or
government-selected DRM standards on the which can suggest new spins or modifica-
content and electronics industries if those tions in local airplay and retailing.78 Fourth,
somewhere in
industries failed to agree on standards on their P2P can be melded with personalization between—seems
own within 18 months of passage.74 However, technology that tracks consumer choices; preferable to
the bill set out inadequate corrective measures; musicians and labels can use that informa-
that is, procedures for moving away from infe- tion to present music and related material to government-
rior or ineffective standards. Among other a group of potential buyers. enforced
things, the CBDTPA’s provisions for allowing Unsigned acts—which earn income main- guidelines.
standards to evolve in order to keep up with ly from live performances—may find P2P an
new technologies, potential security threats, invaluable means of building audience inter-
and changing consumer preferences were est. Many “jam bands” (such as Phish,
unworkably slow and cumbersome. Widespread Panic, and moe.) permit fans to
tape and trade copies of live concerts, as long
as they do not profit from it.79 Through P2P
Integrating P2P and DRM marketing, a popular band named Wilco
landed a record deal after its original label
As a practical matter, P2P networks are well discontinued their engagement.80
suited for distribution of unprotected files, However, well over 90 percent of files now
regardless of their legal status. P2P software is traded on P2P networks appear to be nothing
available to all takers on the Internet. P2P does more than unchanged copyrighted tracks
not require that the source of a file actually and movies that were previously ripped and
send a file or even know the identity of the uploaded without authorization.81 There is
recipient, and it allows files to be copied virtu- no legal or economic reason to relax copy-
ally instantaneously with maximum automa- right protection for full-length tracks that
tion and without physical media. Some argue are taken and passed on without contexts
that P2P helps facilitate an “information com- that typically merit fair use defenses, such as

9
criticism or parody. Such unauthorized tested and vie for market share. We shall now
downloading can potentially displace sales describe a number of those services.
and licensing of legitimate products and fur-
ther reduce the chances for success of com- Business Models
petitive service applications; illegitimate file Four current business models enable
sharing grabs a substantial center of the dis- Superdistribution.
tribution space that interferes with the antic- Paid Access Plus Controlled Sharing.
ipated success of any neighboring service. MusicMatch’s new On Demand service,
The dimensions of the problem are now which launched in July 2004, now allows pay-
severe; while iTunes has sold more than 100 ing monthly subscribers to send e-mail
million tracks, estimated unauthorized file playlists to nonsubscriber friends. Friends
sharing exceeds 2.5 billion tracks per can play the first 20 tracks on each received
month.82 playlist up to three times before being asked
to pay for them as individual downloads or
P2P and Superdistribution to subscribe to the On Demand service. For
A capability related to P2P is “Superdistri- additional revenue recovery, MusicMatch
bution,”83 which refers to technology that obtains the e-mail addresses of each contact
allows copyrighted content to be distributed and uses them for marketing purposes. That
multiple times. While P2P implies free file capability uses an existing function in
sharing among peers, Superdistribution Microsoft Windows Media DRM that issues
implies that the process starts with a “publish- to the friend a license for each track that
er” and includes some kind of commercial expires after three plays.
transaction at each step. Depending on the Unlimited Sharing of Approved Content for a
technical details, Superdistribution of a work Fixed Fee. Wippit, based in the UK, includes
can provide revenues to content owners from over 60,000 tracks from about 200 record
each downstream transaction.84 labels, including some of the majors, as well as
Superdistribution has been mentioned in numerous audiobook, game, and software
the same breath as DRM since the mid- titles.87 It allows unlimited downloads for $90
1990s, when a few DRM vendors attempted per year or $23 per month. Users who down-
to support it.85 Yet true Superdistribution load tracks can potentially share them with
requires complex technology that is notori- other subscribers, depending on the wishes of
ously difficult to implement; thus, copyright- the content owner.88 Some downloads are
respecting online content services have available in unprotected MP3 format; others
implemented only partial approximations to are in protected Windows Media format with
Superdistribution.86 DRM. To determine whether a file has been
Superdistribution can be integrated into P2P approved for sharing, Wippit uses the
networks if rights are specifically defined, moni- MusicDNA waveform system from Canta-
A number of tored, and licensed. Generally speaking, legiti- metrix, which is a technology that analyzes the
entrepreneurs mate P2P can be used in innovative business content of each file, produces a “fingerprint,”
models much like other music services—à la and compares the fingerprint with those in a
have built or are carte service for individual plays, a subscription database provided by Cantametrix’s owner,
continuing to fee for unlimited downloads, and additional fees Gracenote.89
combine different for enhanced services. A number of entrepre- Downloads with Alternate Compensation.
neurs have built or are continuing to combine Hong Kong–based Singwell International has
service different service capabilities into legitimate P2P launched Qtrax, which like Morpheus is based
capabilities into services. Although their usage figures are on the Gnutella open-source file-sharing net-
dwarfed by the likes of iTunes and Napster—to work software.90 Qtrax offers owner-approved
legitimate P2P say nothing of P2P networks like KaZaA—there files in a DRM-protected format that is per-
services. is no reason why such services should not be manently attached to unprotected MP3 files.

10
The DRM reports file uses to collection agen- features borrowed from P2P, has been court Popular artists
cies such as BMI. SingWell derives revenue decisions that have helped perpetuate the exis- may generate
from advertising and pays royalties to IBM. tence of P2P software, thereby ensuring P2P’s
Qtrax users can download files at no charge in continuing influence on the online content strings of
exchange for viewing advertisements targeted markets. One recent decision in particular has secondary
to their revealed tastes in music. Users must bolstered claims that P2P software file sharing
pay for burns to optical discs. is a legitimate service with “significant nonin-
purchases as
Distributed Agencies. Providers on Shared fringing uses,” a key benchmark set in the Sony their works
Media Licensing’s Weed technology network v. Universal Supreme Court decision to deter- are resold
can create e-mails and blogs to recommend mine the legality of a device that has some
tunes from independent musicians to friends potential uses that may infringe copyright.95 sequentially
and acquaintances.91 Network users can buy While prevailing against Napster96 and through different
music that is protected by Microsoft DRM Aimster,97 the content industries received a e-mails or blogs.
technology. Distributors on Weed receive a first jolt in April 2003 when a federal district
35 percent commission for each track sold court (Central District of California) dismissed
directly through them, as well as smaller a complaint brought by the movie and record
amounts for works resold through their buy- industry against peer-to-peer networks Grok-
ers. Popular artists may generate strings of ster and Morpheus (operated by Streamcast
secondary purchases as their works are resold Networks).98 The Ninth Circuit upheld the
sequentially through different e-mails or summary judgment under appeal in August
blogs. That use, which is similar to what 2004.99 The U.S. Supreme Court has been
Amazon.com does with its Amazon Affiliates asked by industry to hear the case.100
and Listmania programs, also is somewhat The Ninth Circuit in Grokster made key
like a P2P version of the “shared playlist” fea- distinctions from its previous Napster deci-
ture of Napster and MusicMatch. sion, which held that Napster was guilty of
A final creative business model is P2P contributory and vicarious infringement and
streaming, which has been introduced by which led eventually to a complete shutdown
Grouper92 and Mercora.93 Now providing a of the service.101 While Napster stored on its
test version of a P2P radio service, Mercora servers information about site locations of
claims that its prospective uses adhere to infringing material, Grokster and Streamcast
guidelines that qualify for a statutory license simply distributed software and therefore
established in the Digital Millennium had no immediate knowledge of the sites and
Copyright Act of 1998.94 Even if that assess- facilities where infringement resulted.102
ment of statutory privilege is incorrect, record The circuit court upheld the district court,
labels may look more favorably upon licensing which found that the distributed software pro-
a P2P service that permits sampling much like grams had significant noninfringing uses sim-
a subscription service. The service provider ilar enough to home video recorders that
would need to continue to take all possible sometimes could be used to infringe copy-
steps to prevent redistribution of any accessed rights but were legal nonetheless.103 Contribu-
tracks. Nonetheless, protective publishers and tory liability did not result because Grokster
artists may reject positive overtures to distrib- and Streamcast had no actual knowledge of
ute through digital technology musical works infringement at the moment of its occur-
that are now under their control. rence.104 Moreover, although they were finan-
cial beneficiaries of file sharing, the two
providers lacked the requisite monitoring abil-
P2P and the Courts ity to prove vicarious liability.105
From a legal perspective, the outcome
An important factor in the launch of ser- raised some eyebrows. The Ninth Circuit’s
vices like the above, which use DRM along with decision apparently differs from the previous

11
Napster decision, where the same courts ruled However, citing the Sony v. Universal precedent,
that contributory infringers knew, or had rea- the Grokster and Streamcast courts avoided pre-
son to know, of direct infringement.106 The sec- scribing any direct filtering that would man-
ond point (i.e., had reason to know) was made date a change in software technology that was
in an amicus brief filed by nine distinguished apparently beyond the capacity of the courts to
experts on copyright law.107 The Ninth manage.
Circuit’s latest decision on Grokster may then The two outcomes represent an evident
provide an incentive for software developers circuit split, and the Supreme Court has
to figure out ways in which they can look granted certiorari. The Court may choose to
blind, innocent, or simply incapable of tak- overturn the “significant noninfringing use”
ing deterrent action, whatever the apparent clause of Sony that can apparently admit any
harms of taking action. The Seventh Circuit technology regardless of offsetting harm to
reached a different outcome regarding “will- rights owners. The Court may indeed impose
ful blindness” inherent in the Aimster file- the alternative test of a strategic fix (i.e., a
sharing system: “[W]illful blindness is knowl- comprehensive analysis that maximizes effi-
edge, in copyright law, where it indeed may ciency after considering all offsetting costs
be enough that the defendant should have and benefits of each position). However, such
If filters are known of the direct infringement.”108 a fully rational analysis is entirely impracti-
imposed, courts From an economic perspective, the tech- cal; it is impossible to determine all likely
may monitor the nological outcome of the conflicting deci- events and alternatives, measure relevant
sions in the Ninth Circuit is clearly ineffi- quantities, and make accommodations and
resulting outcome cient. Napster, Grokster, and Morpheus lead to adjustments piecemeal. A more specific tacti-
to determine the same basic result: more than 90 percent cal solution would consider the deployment
of their use infringed on copyrights. If only of filtering techniques that enable P2P tech-
the need for one technology is to be allowed, Napster nologies to continue operations so long as all
additional action. would be the apparent choice; it is more effi- steps are taken to reduce or eliminate uses
cient than the remaining two, which take that violate copyright. If filters are imposed,
considerably longer to operate because of the courts may monitor the resulting outcome
lack of a central directory. Moreover, if there to determine the need for additional action.
is an economic reason to restrict Napster
(due to offsetting harms), there is even more
economic reason to restrict the less efficient Toward a Market
services. Resolution?
Whatever the potential uses made possible
by Grokster or Streamcast, plaintiffs contend- An event in November 2004 may be an
ed that the software providers could have taken important harbinger of things to come.
other protective steps to control use.109 Universal Music Group (UMG) entered into
Plaintiffs’ briefs pointed out that the district a licensing deal with Snocap, a fingerprint fil-
court failed to consider evidence that defen- tering technology company founded by
dants elsewhere had successfully blocked Napster developer Shawn Fanning, to use its
pornographic content, provided software up- technology to control usage of and process
dates, and deactivated existing software.110 payment for UMG catalog items found on
Meanwhile, Relatable, Audible Magic, Snocap, file-sharing networks.112 The deal resulted in
and others claim to have devised “fingerprint- a service that was expected to launch by
ing” (acoustic analysis) technology (similar to January 2005. It is currently unclear which
that of Gracenote, described above) that can be P2P networks will be involved with the ser-
used to identify and filter illegal downloads (or vice.
require payment or other consideration before The announcement came shortly after a
allowing access to copyrighted works).111 related disclosure that Sony BMG Music had

12
entered into wider talks with both Snocap record companies will find other ways to use
and the Grokster file-sharing network.113 the technology to build legitimate online
Under the envisioned system, Snocap would music services. Therefore, any type of P2P ser-
provide a service to control usage of some vice that uses fingerprint filtering will serve
Sony BMG content on a new file-sharing ser- as ballast in the market to induce DRM-
vice, provisionally called Mashboxx, that enabled services to add more P2P-like func-
would be controlled by Grokster. Sony BMG tions, such as CD burning or playlist sharing.
would make some content, such as music Most DRM technologies can be configured
from new artists and low-fidelity versions of to provide those features as well, if content
content from established names, available for owners desire them.
free downloading, while other content would
require payment and have usage controlled
by fingerprint filtering. That would provide Alternatives to Coexistence
Sony the ability to use P2P to determine the
potential demand for new releases. Filtering of individual compositions
While the Sony deal has yet to be would be the economically efficient means of
announced formally, the involvement of a restraining infringing uses while allowing
major P2P network represents a primary dif- legitimate users continued unrestricted
ference from the more limited agreement access to unprotected files. However, if filter-
between UMG and Snocap. Snocap is now ing is not technically practical (the question
one of a handful of companies with technol- of practicality with respect to integrating fil-
ogy related to fingerprint filtering that are tering with existing P2P networks like
reportedly in serious licensing talks with the FastTrack and Gnutella is hotly debated at
major labels. The big question is whether any this time) or courts otherwise fail to deal ade-
fingerprinting technology is actually com- quately with the legality of P2P technology,
patible with an existing P2P network like the content industries may yet consider addi-
Grokster, or whether new file-sharing net- tional devices to counter copyright violation.
works would have to be built to use the tech- The industry is already employing or advo- Even if the
nology—as UK-based Wippit has already cating three primary strategies:
done with fingerprint filtering technology
existing file-
from Gracenote. Spoofs and Decoys sharing networks
If Snocap can demonstrate that its tech- Rights owners may seed false versions of find ways to
nology can be used to complement Grokster songs in file-sharing networks using spoofs
with no (or even reasonable) modifications and decoys available from services such as show that finger-
to the Grokster software, then the music Overpeer, Vidius, and Media Defender.114 print filtering
industry will have a demonstrable case that With spoofs, users’ attempts to download
combined solutions are technically workable. particular songs may hit planted ruses with
technology does
As a legal matter, the labels could then credi- complete silence, spoken messages, or repeat- not work with
bly argue that file-sharing networks are ed loops. Problematically, spoofing strategies them, record
avoiding integrating fingerprint filtering face the generic difficulty that the next
technology on purpose. By contrast, any P2P attempt to take a song is literally a mouse companies will
network would risk losing most of its exist- click away. That is, if a track fails, the user find other ways
ing customer base if it were forced to convert may retry by moving to the next song listing to use the tech-
itself to a copyright-respecting operation, displayed on his or her screen. Spoofing then
whether using fingerprint filtering, encryp- is practical only to the degree that the addi- nology to build
tion-based DRM, or some other technology. tional delays are annoying enough to dis- legitimate online
Yet even if the existing file-sharing net- suade such continued efforts. Protection
works find ways to show that fingerprint fil- through spoofing is more likely to be effec-
music
tering technology does not work with them, tive with movies that last two or three hours services.

13
Legislative efforts than with record tracks that can be sampled The act failed to pass in 2004, but Senator
that outlaw in a few minutes. Hatch intends to try again in 2005.123
Legislative efforts that outlaw technology for
technology for User Lawsuit prospective harm deserve real caution; an
prospective harm In September 2003 the major labels began overly broad bill can implicate existing or
a legal war against big uploaders by directly prospective technologies with some benefit
deserve real suing them for copyright infringement. and chill efforts by researchers unsure of the
caution; an overly There was some survey evidence that the ini- financial consequences of aggressive litiga-
broad bill can tial Recording Industry Association of tion and a legal status that will depend on
America (RIAA) campaign communicated its court enforcement in common law.
implicate existing basic point and reduced the overall size of the
or prospective downloading population as an immediate Cooperative Notice
technologies. consequence.115 However, music industry When initiating action against individual
gains may be for naught if new technologies users found to upload files to P2P networks,
keep evolving and file-sharing activity keeps the RIAA now must institute lawsuits against
growing; the most careful scholarly study of anonymous John Doe defendants before
P2P finds no evidence of a long-run slow- learning from their ISPs the identities of the
down in total file-sharing activity,116 infringers.124 Although ISPs may reasonably
although users seem to be moving from pre- wish to protect subscriber privacy, they can
vious market leader KaZaA to new or facilitate settlement and reduce likely pay-
improved alternatives such as eDonkey,117 ments if they cooperate with the content
BitTorrent,118 and Limewire.119 If settlement industries. A template strategy has been initi-
amounts cover costs, there is no particular ated at UCLA. To encourage ISPs to partici-
economic reason to stop litigation. However, pate, the RIAA could agree to allow a wider
the number of network nodes appears to be “safe harbor” against contributory infringe-
quite high; the top 1 percent of the popula- ment, which is now normally activated once
tion, which may account for 40 percent of first awareness is established.125 The RIAA
seeded tracks,120 now numbers approximate- may wish to compensate ISPs for the costs,
ly 400,000 people spread throughout the eliminating one conceivable excuse for non-
world.121 Moreover, the publicity conse- compliance. That may seem an ideal solu-
quences are negative to the industry; the tion, but it has little chance of emerging.
music industry has certainly alienated some Given present ISP concerns about common
portion of its fan base, particularly younger carrier status, an engagement on behalf of
users who are potentially more enthused copyright owners may expose them to addi-
about new uses of digital technology. tional requests for other classes of offending
content, such as libel, obscenity, indecency,
Legislation and fraud.
The content industry’s most recent leg-
islative response to the file-sharing problem Compulsory Licensing and Levies
was the Inducing Infringement of Copy- Another strategy for government involve-
rights Act of 2004122 (known as the Induce ment emerges from academic advocates of
Act for short), sponsored by Sen. Orrin compulsory licensing. Under a number of pro-
Hatch (R-UT). If the Induce Act had passed, posals, users could freely download some sub-
it would have enabled courts to find P2P net- set of music, movies, or other content through
works like Grokster and Morpheus guilty of P2P networks of various natures.126 Appropri-
“inducing” consumers to infringe. That ate levy amounts would be determined by
determination would have involved a judicial Congress or the Copyright Office, or both.
assessment of the intent of a P2P network (or Revenues would be collected on Internet sub-
other type of service) to induce infringement. scriptions, computers, storage media, and

14
other services and hardware that have the rized downloading and related copyright vio-
potential to be used for an infringing activity. lations. If unchecked, unauthorized down-
Collections in the United States would be dis- loading can continue to take standing
tributed to copyright owners per values ground from competitive services that vie for
assigned by a royalty tribunal or arbitration survival in the same market.
panel convened by the Copyright Office. Property rights on P2P networks can be
There are five practical problems with this protected through DRM technologies that
scheme. First, the levies would be assessed on stop unauthorized reproduction and distri-
individual equipment purchasers and Internet bution. Effective DRM makes possible a
subscribers regardless of their actual use of number of different business models, includ-
P2P technology and level of copyright ing those with P2P features, which may then
infringement; computer users would be compete with one another for market share.
harmed by a system of taxation that would Competing technologies and business
reduce their wealth and possibly stifle their models make possible the market battles that
purchases and upgrades of equipment and contribute to “creative destruction.” In an
broadband service. Second, the panel would environment that is imperfectly understood
face the daunting task of parsing out a fixed but learnable, economic efficiency must be
pot of revenues to contending uses and deter- properly gauged by the capacity to test infor-
Government
mining the relative worth of each—a short mation and adapt accordingly; which con- should act to
novel, a two-hour movie, a three-minute song. trasts with static welfare measures common protect property
Third, there is no apparent means for resolv- in economic textbooks. With so important a
ing international theft; the U.S. Congress role for competition among different tech- rights, including
clearly cannot levy a fee on computers or ISP nologies, and so much clearly left to learn in copyrights, but it
subscriptions of foreign citizens. Fourth, the digital content paradigm, government
administrative costs are daunting; as con- should be in the position of protecting prop-
should not pick
sumers download increasing amounts of con- erty rights, including copyright. winners or
tent, copyright administrators and legislators Government should act to protect proper- discourage any
will need to reconvene hearings annually just ty rights, including copyrights, but it should
to adjust the tax instrument in order to keep not pick winners or discourage any technolo- technology from
up with revenue requirements. gy from competing in this new marketplace. competing in this
Finally, in the foreseeable event that con- In other words, P2P and DRM technologies new marketplace.
tent downloading outgrows anticipated levy should be left free to evolve together to meet
dollars, compensation per individual work the also-evolving needs of the market for
would necessarily diminish. Content owners copyrighted works.
would then fight for a revenue pot that bore
no direct relation to the value of underlying
content. The uncertain nexus between indi- Notes
vidual effort and anticipated reward evident- 1. A&M Records, Inc. v. Napster, Inc., 114 F. Supp.
ly harms the incentive of a content provider 2d 896 (N.D. Cal. 2000); 239 F.3d 1004 (9th Cir.
to invest the resources needed to produce 2000).
and bring its commercial wares to market.
2. David Lange, “Recognizing the Public
Domain,” Law and Contemporary Problems 44, no. 4
(1981): 147; Yochai Benkler, “The Battle over the
Conclusion Institutional Ecosystem in the Digital Environ-
ment,” Communications of the ACM 44, no. 2 (2001)
84; and Lawrence Lessig, The Future of Ideas: The Fate
Peer-to-peer file sharing is a useful tech- of the Commons in a Connected World (New York:
nology that may greatly empower consumers, Vantage Books, 2002), pp. 249–61.
musicians, and record labels. But support for
P2P must not become support for unautho- 3. Benny Evangelista, “Scour Expands Napster’s

15
Concept beyond Swapping Music,” San Francisco wholesale service, including content packaging,
Chronicle, May 18, 2000, http://www.sfgate.com/ distribution, and e-commerce services, and
cgi-bin/article.cgi?file=/chronicle/archive/2000/ Pressplay provided both the latter services and the
05/18/BU84030.DTL&type=tech_article user interface.
(retrieved August 22, 2004). Scour filed for bank-
ruptcy after the record and movie industry filed 14. For example, Pressplay users chose among
suit against it. Basic ($9.95 for 300 streams and 30 downloads),
Silver ($14.95 for 500 streams, 50 downloads, and
4. Relevant papers can be viewed at http://www. 10 burns), Gold ($19.95 for 750 streams, 75 down-
riaa.com/news/filings/aimster.asp (retrieved August loads, and 15 burns), and Platinum services
22, 2004). ($24.95 for 1,000 streams, 100 downloads, and 20
burns). John Borland, “Pressplay to Offer
5. Metro-Goldwyn-Mayer Studios et al., v. Grokster, Ltd., Unlimited Downloads,” CNet News.com, July 31,
et al., 259 F. Supp. 2d 1029 (C.D. Cal. 2003); 2004 WL 2002. Basic listeners of MusicNet services pur-
1853717; —-F.3d—— C.A.9 (Cal.), 2004, http://tech- chased through RealNetworks paid a monthly fee
lawadvisor.com/docs/mgm-grok ster.html. of $4.95 to stream 100 songs and download 100
more, $9.95 for a combined package with addi-
6. Sony Corp. v. Universal City Studios Inc ., 464 U.S. tional Net radio services, and $19.95 for a GoldPass
417, 453 (1983). subscription with sports, entertainment, and news
programming. By contrast, AOL offered basic
7. The district court in Universal City Studios v. MusicNet service (20 streams, 20 downloads) for
Reimerdes held that users may not break access $3.95 per month, unlimited streams and down-
protection even to enable fair use protected in the loads for $8.95, and 10 additional burns for $17.95.
Copyright Act. “Defendants are not here sued for John Borland, “NetMusic Gets AOL Audition,”
copyright infringement. They are sued for provid- CNet News.com, February 26, 2003.
ing a technology designed to circumvent techno-
logical measures that control access to copyright- 15. John Borland, “Apple Unveils Music Store,”
ed works. . . . If Congress had meant the fair use CNet News.com, April 28, 2003; and “iTunes Sells
defense to apply to such actions, it would have 1.5 Million Songs during Past Week: Five Times
said so. Indeed, as the legislative history demon- Napster’s First Week Downloads,” Yahoo!Finance,
strates, the decision not to make fair use a defense November 6, 2003.
to a claim under Section 1201(a) was quite delib-
erate.” 82 F. Supp. 2d 211 (S.D. N.Y. 2000). 16. Ibid.

8. Joseph A. Schumpeter, Capitalism, Socialism and 17. Ibid.


Democracy (New York: HarperCollins, 1947).
18. John Borland, “How Much Is Digital Music
9. See, for example, Mike Godwin, What Every Worth?” CNet News.com, December 8, 2003.
Citizen Should Know about DRM (Washington:
Public Knowledge and New America Foundation, 19. John Borland, “Apple’s Music: Evolution, Not
2004), http://www.publicknowledge.org/content/ Revolution,” CNET News.com, April 29, 2003.
overviews/citizens-guide-to-drm/attachment
(retrieved August 13, 2004). 20. Forrester Research, “Commentary: Facing the
Music,” CNet News.com, October 20, 2003; and
10. David Friedman, “In Defense of Private “MusicMatch 8.1,” Tech News, CNet Reviews.
Orderings: Comments on Julie Cohen’s ‘Copy-
rights and the Jurisprudence of Self-Help,’” 21. Ibid.
Berkeley Technology Law Journal 13 (1998): 1151.
22. Ibid.
11. Wendy Gordon, “Intellectual Property as
Price Discrimination: Implications for Contract,” 23. Ibid.
Chicago-Kent Law Review 73 (1998): 1367.
24. John Borland and Jim Hu, “Yahoo’s Long and
12. Carl Shapiro and Hal R. Varian, Information Winding Music Road,” CNet News.com, September
Rules (Boston: Harvard Business School Press, 14, 2004.
1999), pp. 53–82.
25. John Borland, “Napster Launches: Minus the
13. MusicNet was originally owned by Warner Revolution,” CNet News.com, October 9, 2003.
Brothers, EMI, BMG, and RealNetworks, and
Pressplay was owned by Universal and Sony. 26. John Borland, “Napster: 5 Million Songs
MusicNet made available to service retailers Sold,” CNet News.com, February 23. 2004.

16
27. Ibid. 43. Ian Austen, “Big Stores Make Exclusive Music
Deals to Bring in Music Buyers,” New York Times,
28. Roxio, which purchased the Napster brand December 29, 2003, p. C1.
assets in 2003, divested itself of its legacy CD
burning and editing software products in order to 44. http://musicdownloads.walmart.com (re-
focus entirely on the online music service. John trieved January 13, 2004).
Borland, “Betting It All on Napster,” Tech News,
CNet News.com, September 1, 2004. 45. “Circuit City Stores, Inc., to Purchase Assets of
MusicNow, Inc.,” http://biz.yahoo.com/prnews/
29. Peter Cohen, “Apple and RealNetworks—The 040331/nyw057a_1.html (retrieved April 10, 2004).
Real Story,” Yahoo!News, April 16, 2004 (retrieved
April 29, 2004). Real Networks purchased 46. Brian Garrity, “Main Street Goes Digital,”
Rhapsody in 2003 from Listen.com, which origi- Billboard, April 17, 2004.
nally conceived the service as an all-streaming
subscription service. 47. “Big Brands Use ‘Free Music’ to Draw Teen
Consumers” and “Coke to Launch Music Down-
30. “Real Pushes Harmony with Aggressive Price load Service in U.K.,” Grammy.com NewsWatch,
Cut,” Digital Music News, August 17, 2004, http:// http://www.grammy.com/news/newswatch/200
www.digitalmusicnews.com/yesterday/august2004 4/0107.aspx (retrieved April 10, 2004); see also
(retrieved August 17, 2004). Reuters, “Want Some Springsteen with That Big
Mac?” CNet News.com, March 22, 2004, http://
31. Ibid. news.com.com/2100-1023-5177324.html.

32. Cohen. 48. “Loudeye, Microsoft Offer Digital Music


Service,” http://www.grammy.com/news/newswa
33. Pew Internet and Daily Life Project, http:// tch/2004/0107.aspx (retrieved April 10, 2004). Radio
www.pewinternet.org/reports (retrieved April 29, stations are now owned by AT&T Wireless and
2004); see also Frank Barnako, “CNET Launches Gibson Audio.
Free Music Downloads,” CBS MarketWatch.com,
April 26, 2004 (retrieved April 29, 2004). 49. “Music Bundled with Cable: The Right
Choice?” Digital Music News, August 30, 2004, http:
34. http://www.ipsos-na.com/news/pressrelease. //www.digitalmusicnews.com/yesterday/august20
cfm?Id=2100 (retrieved April 10, 2004). 04 (retrieved August 30, 2004).

35. “Independent Record Labels Eye New Group,” 50. “Are Indies Spurring the iTunes Catalog Lead?”
MSNBC.com, http://msnbc.msn.com/id4631891 Digital Music News, August 12, 2004, http://www.digi
(retrieved April 10, 2004). talmusicnews.com/yesterday/august2004 (retrieved
August 12, 2004).
36. Richard Shim, “Sony Unveils Music Store:
Gadgets at CES,” CNet News.com, January 7, 51. “Microsoft Announced MSN Music Store, Many
2004. Players,” Digital Music News, October 12, 2004, http://
www.digitalmusicnews.com/yesterday/august2004
37. Ibid. (retrieved October 12, 2004).
38. “Sony Corporation of America Will Launch 52. “AudioLunchbox Serves Massive Indie Catalog,”
Online Music Service in Spring 2004,” http:// Digital Music News, October 4, 2004, http: //www.dig
www.connect.com/press_releases/01.07.2004.Lau italmusicnews.com/yesterday/october2004
nch.html (retrieved April 10, 2004). (retrieved October 4, 2004).
39. Bill Rosenblatt, “Sony and BeepScience Power 53. “INgrooves and the Emerging Digital Record
Advanced European Mobile Music Service,” DRM Label,” Digital Music News, September 14, 2004,
Watch, September 23, 2004, http://www.drm http://www.digitalmusicnews.com/yesterday/au
watch.com/ocr/article.php/3412081. gust2004 (retrieved September 14, 2004).
40. John Borland, “Virgin Launches Online Music 54. Lynne Margolis, “Independent’s Day,” Christian
Service,” CNet News.com, September 26, 2004. Science Monitor, April 11, 2003, http://www.csmon
itor.com/2003/0411/p13s02 (retrieved September
41. Dinesh C. Sharma, “Version Takes on iPod,” 27, 2004).
CNet News.com, October 12, 2004.
55. See, for example, http://www.narip.com/index.
42. http://music.msn.com/default.aspx (re- php?page=article/Shrinking (retrieved October 5,
trieved October 13, 2004). 2004).

17
56. The RIAA reported in 2003 an average store CD dents, faculty, and scholars significant copying lat-
price of $15.05 (dividing annual revenues by sales itude for their work . . . , at times more than what is per-
unit volume, on year-end statistics available on their mitted via the fair use and library provisions of the
website). Recording Industry Association of Copyright Act of the U.S. [emphasis ours]. Ann
America, Yearend Statistics: 2003, http://www.riaa. Okerson, “The Transition to Electronic Content
com/news/newsletter/pdf/2003yearEnd.pdf Licensing: The Institutional Context in 1997,”
(retrieved October 14, 2004) Based on available Paper presented at Scholarly Communication and
numbers in 2001, 53 percent of collected retail rev- Technology Conference of the Andrew W. Mellon
enue went to the recording label; the remainder to Foundation, Emory University, April 24–25, 1997,
the store and intermediate distributor. William p. 1, http://www.library.yale.edu/~okerson/mellon
Fisher, Promises to Keep: Technology, Law, and the Future .html.
of Entertainment (Stanford, CA: Stanford University
Press, 2004), chaps. 6, 11, http://cyber.law.harvard. 66. Currently, there are two primary “competing”
edu/people/tfisher/PTKChapter6.pdf (retrieved rights expression languages (RELs). One is Open
October 5, 2004). Multiplying $15 by 53 percent, a Digital Rights Language (ODRL), which the
label then receives $8.00 wholesale. Deducting $1 to Open Mobile Alliance has adapted for use in its
$1.50 for manufacturing and packaging of the disk set of standards for wireless devices; the other is
and box gives $6.50–$7.00. eXtensible Rights Markup Language (XrML),
which Microsoft uses in its DRM technologies
57. Borland, “How Much Is Digital Music Worth?” and which the Moving Picture Experts Group
adapted for its MPEG REL standard, which is
58. May Wong, “Napster Receives New Life as now an ISO standard as well.
Public Firm,” Yahoo! News, September 17, 2004.
67. Bill Rosenblatt, “RealNetworks and Motorola
59. Rosemont Enterprises Inc. v. Random House Inc., Open iTunes/iPod Stack,” DRM Watch, July 28,
366 F.2d 303, 306 (2d Cir. 1966), cert. denied, 385 2004, http://www.drmwatch.com/drmtech/arti
U.S. 1009, 87 S.Ct. 714, 17 L. Ed. 2d 546 (1967). cle.php/3387481.

60. 17 U.S.C. § 107 (2000). 68. “Interoperability Nightmare Spells Entrepe-


neurial Opportunity,” Digital Music News, September
61. Sony at 441. 13, 2004, http://www.digitalmusicnews.com/yes-
terday/september2004 (retrieved September 13,
62. 17 U.S.C. § 109 (2000). 2004).
63. 17 U.S.C. § 1008 (2000). See also RIAA v. 69. Governing American law appears in 17 U.S.C.
Diamond Multimedia Sys., 180 F.3d 1072 (9th Cir. 1201(a); copyright law in most European Union
1999), at 32. countries permits such copies to be made for pri-
vate use by consumers and their family members.
64. In the same respect, CD tracks, once battened
down with strict anti-copying protections, now 70. It is too early in the market for digital video
accommodate (through extra files packaged in streaming to predict winners , as PCs, the Internet,
Microsoft Windows Media Audio Format with digital cable, and mobile telecommunications
Windows Media DRM) limited burning, tempo- networks begin to converge and boundaries
rary sharing, and additional uploadable content between them begin to blur.
that provide an enhanced listener experience on
the PC. John Borland, “Copy Protected CDs Take 71. For example, the number of popular physical
Step Forward,” CNet News.com, September 12, audio formats has averaged two, such as the CD
2003. and cassette in recent times, the LP and 8-track
tape in the late 1960s, and the VHS videocassette
65. Ann Okerson, associate director of the Yale in the 1980s and most of the 1990s.
University Library, continues to stand by com-
ments that she made in 1997 concerning libraries 72. For example, Oracle, Microsoft, and IBM in
and fair use: “The market has brought librarians database software; Microsoft, Sun Microsystems,
and publishers together; the parties are discovering and Linux in server operating systems; Sun, IBM,
where their interests mesh; and they are beginning and BEA in Internet application server software.
to build a new set of arrangements that meet needs
both for access (on the part of the institution) and 73. At the time of this writing, a new standards
remuneration (on the part of the producer). . . . initiative is beginning that is attempting to
[Price issues notwithstanding], libraries are able to achieve DRM standardization through service
secure crucial and significant use terms via site provision instead of by standardizing content for-
licenses, terms that often allow the customer’s stu- mats or individual DRM technologies. The Coral

18
Consortium’s initial members include Sony, Objects as Property on the Electronic Frontier (New
Philips, InterTrust, HP, Toshiba, Samsung, and York: Addison-Wesley, 1995).
Twentieth Century Fox film studios. Bill
Rosenblatt, “Coral Consortium Aims to Make 84. Note that this capability appears to contra-
DRM Interoperable,” DRM Watch, October 7, vene the first sale doctrine in copyright law, 17
2004, http://www.drmwatch.com/standards/arti U.S.C. §109, which holds that once a consumer
cle.php/3418741. has purchased a work from its owner, the owner
may not derive benefit from any further transac-
74. Bill Rosenblatt, “Consumer Broadband and tions in that work that the purchaser might care
Digital Television Promotion Act (CBDTPA),” to make. This law engenders the existence of pub-
DRM Watch, March 22, 2002, http://www.drm lic libraries, video rental stores, used bookstores,
watch.com/special/article.php/3095121. and so on. Case precedent for first sale’s applica-
bility to digital (as opposed to physical) content
75. Lange; Benkler; and Lessig. has not been established; therefore the media
industry holds it to be inapplicable, thereby clear-
76. For example, Project Gutenberg, which “. . . is ing the way for Superdistribution schemes of the
the oldest producer of free electronic books type discussed.
(eBooks or etexts) on the Internet. Our collection
of more than 12,000 eBooks was produced by 85. An important example was IBM’s infoMarket
hundreds of volunteers. Most of the Project system of the mid-1990s, which used one of the
Gutenberg eBooks are older literary works that earliest full-fledged encryption-based DRM
are in the public domain in the United States. All schemes, the Cryptolope. InfoMarket was highly
may be freely downloaded and read, and redis- complex and expensive to implement, in part
tributed for non-commercial use.” http://www. because it had to include a number of e-com-
gutenberg.net (retrieved August 23, 2004). merce software components that today would be
commonplace.
77. For example, the Prelinger Archives, which
was founded in 1983 by Rick Prelinger in New 86. For example, if a user legitimately purchases a
York City. Over the next 20 years, it grew into a file and sends a copy of it to someone else, the
collection of more than 48,000 “ephemeral” recipient will not be able to access the content.
(advertising, educational, industrial, and ama- Services that claim to support Superdistribution
teur) films. In 2002 the film collection was today will typically present the recipient with a
acquired by the Library of Congress, Motion URL, which he or she can click to purchase rights
Picture, Broadcasting and Recorded Sound to that file. That is a shallow approximation of true
Division. Prelinger Archives remains in existence, multitier Superdistribution, which allows for dif-
holding approximately 4,000 titles on videotape ferent commerce models at each distribution step.
and a smaller collection of film materials
acquired subsequent to the Library of Congress 87. http://www.wippit.com (retrieved August 31,
transaction. http://www.archive.org/movies/pre 2004).
linger.php (retrieved August 23, 2004).
88. Bill Rosenblatt, “Two Major Labels Wippit,”
78. Dawn C. Chmielewski, “Music Labels Use DRMWatch.com, March 18, 2004, http://www.drm
File-Sharing Data to Boost Sales,” San Jose watch.com/ocr/article.php/3327821.
Mercury News, March 31, 2004, http://www.mer
curynews.com/mld/mercurynews/news/8318571 89. In so doing, the filtering technology identifies
.htm?1c. both the song and its copyright owner. The tech-
nology is not dependent on the designated names
79. “Jam Bands Redefining Economics of Music of the songs and therefore can be trumped nei-
Industry,” Glide Magazine, July 18, 2003, http:// ther by the use of reconfigured titles (a common
music.press-world.com/v/1448.html (retrieved tactic in the original Napster system) nor by triv-
June 12, 2004). ial changes in the data, which would fool a system
based on simpler analysis techniques such as hash
80. Metro-Goldwyn-Mayer. calculations.

81. Ibid. 90. Bill Rosenblatt, “Qtrax to Launch BMI-


Licensed File Sharing Network,” DRMWatch.com,
82. “Online Music’s Winners and Losers,” CNet May 20, 2004, http://www.drmwatch.com/ocr/
News.com, December 27, 2003, http://news.com. article.php/3356861.
com/2030-1027_3-5133561.html.
91. “Alternative Distribution Methods Gain
83. See generally Brad Cox, Superdistribution: Ground,” Digital Music News, August 30, 2004,

19
http://www.digitalmusicnews.com/yesterday/au imposed where a defendant has the right and abil-
gust2004 (retrieved October 14, 2004). ity to supervise the infringing activity and a direct
financial interest in it. Fonovisa Inc. v. Cherry
92. “Streaming P2P App Confuses Piracy Picture,” Auction, Inc. 76 F.3d 259, 262 (9th Cir. 1996);
Digital Music News, September 12, 2004, http:// Napster, 239 F.3d at 1022. In making its conclu-
www.digitalmusicnews.com/yesterday/septem sion, the Grokster court acknowledged that it was
ber2004 (retrieved September 12, 2004). “not blind to the possibility that defendants may
have intentionally structured their businesses to
93. Jack M. Germain, “Beyond File Sharing: P2P avoid secondary liability for copyright infring-
Radio Arrives,” TechNewsWorld, September 18, ment, while benefiting financially from the illicit
2004, http://www.technewworld.com/story/3672 draw of their wares.” Grokster, 259 F. Supp. at
8.html (retrieved October 13, 2004). 1046. This contrasts with Casella v. Morris, 820
F.2d 362, 365 (11th Cir. 1987), where the court
94. 17 U.S.C. 115 (2001). held that willful blindness was knowledge. See
also, Napster, 239 F.3d at 1023; and Aimster, 2003
95. Sony at 453. U.S. App. LEXIS 13229, at *17.
96. A&M Records v. Napster, Inc., 239 F.3d 1004, 106. Napster, 239 F.2d at 1020 and n. 5.
1020 (9th Cir. 2001).
107. Neil Boorstyn et al., Brief in Support of
97. In Re Aimster Copyright Litigation, 334 F.3d Reversal by Amici Curiae Law Professors and
643 (7th Cir. June 30, 2003). Aimster (a.k.a., Treatise Authors Neil Boorstyn, Jay Dougherty,
Madster) was a file-sharing service built on AOL’s James Gibson, Robert Gorman, Hugh Hansen,
instant messenger service and a central mecha- Douglas Lichtman, Roger Milgrim, Arthur Miller
nism that helped users locate files on one anoth- and Eric Schwartz, http://www.eff.org/IP/P2P/
er’s systems. MGM_v_Grokster/LawProfessor_amicus.pdf.
98. Metro-Goldwyn-Mayer. 108. In Re Aimster Copyright Litigation, 334 F.3d
643 (7th Cir. June 30, 2003).
99. Ibid.
109. John Borland, “Landmark p2p Ruling Back
100. John Borland, “Hollywood Takes P2P Case to in Court,” CNet News.com, February 2, 2004.
Supreme Court,” CNet News.com, October 8, 2004,
http://news.com/Hollywood+takes+P2P+case+to+ 110. Amicus Brief of Entertainment Industry
Supreme+Court/2100-1027_3-5403915.html. Groups, Appeal No. 03-55894, U.S. circuit court of
the Ninth Circuit, Section II.B, http://www.
101. Ibid. The district court issued a revised pre- eff.org/IP/P2P/MGM_v_Grokster (retrieved May
liminary injunction that enjoined Napster from 11, 2004).
copying, downloading, uploading, transmitting, or
distributing copyrighted sound recordings. A&M 111. John Borland, “File Swap Killer Grabs
Records, Inc. v. Napster, Inc., No. C 99-05183 MHP, Attention,” CNet News.com, March 3, 2004; and
2001 U.S. Dist. LEXIS 2186 (N.D. Cal. March 5, John Borland, “New Tool Designed to Block Song
2001). When Napster was unable to comply with Swaps,” CNet News.com, April 21, 2004. Indeed,
the requirements, the court temporarily shut down Napster was eventually required to apply Relatable
the service, which led to its bankruptcy. technology to filter infringing tracks on the basis
of 34 distinct audio characteristics. “Napster,
102. The process of locating information on the Bertelsmann’s Digital World Services Working on
Grokster system was made possible by concentrat- Secure Service,” Digital Media Wire, February 16,
ing information at nodal points located on user 2001, http://www.digitalmediawire.com/archives_
machines that accumulated and passed on infor- 021601.html.
mation from nodes on surrounding computers.
Streamcast used a Gnutella system that simply 112. Bill Rosenblatt, “Universal Music Licenses
passed information requests from machine to Catalog to Snocap,” DRM Watch, November 18,
machine. By contrast, Napster used a centralized 2004, http://www.drmwatch.com/drmtech/arti-
directory to which all requests were routed. cle.php/3438001 (retrieved November 23, 2004).
103. Sony at 453. 113. Bill Rosenblatt, “Sony BMG and Grokster to
Use Fingerprint Filtering in New Service,” DRM
104. Metro-Goldwyn-Mayer. Watch, November 4, 2004, http://www.drmwatch.
com/ocr/article.php/3431351 (retrieved November
105. Ibid., IV.B.c. Vicarious liability can be 23, 2004).

20
114. John Borland, “Start-ups Try to Dupe File- 119. “P2P Watch: Limewire Upgrades, Traffic
swappers,” CNet News.com, July 15, 2002. Surges,” Digital Music News, November 2004,
http://www.digitalmusicnews.com/results?title=
115. Peter D. Hart Research Associates confirmed P2P (retrieved November 22, 2004).
that 64 percent of consumers now understand that
it is illegal to “make music from the computer 120. http://www.pcworld.com/news/article/0,aid
available for others to download for free over the ,18166,00.asp (retrieved April 26, 2004).
Internet,” up from 37 percent in the previous year.
John Borland, “RIAA Launches New File- 121. Based on a user base of 42 million swappers.
Swapping Suits,” CNet News.com, December 3, First, swappers exchange files that are downloaded
2003. The Pew Internet and American Life Project to hard drives and burned to blank CDs; the aver-
found that the percentage of Americans who age downloader takes about 60 songs per month.
admitted downloading music fell from 29 percent “RIAA Lawsuits Appear to Reduce Music File
in May 2003 to 14 percent in December. John Sharing according to the NPD Group,” August 21,
Borland, “Building Bridges between P2P 2003, http://www.npd.com/press/releases (re-
Networks,” CNet News.com, January 16, 2004. A ver- trieved April 24, 2004). By simple arithmetic, the
bal survey of 5,000 voluntary respondents by NPD estimated monthly total is 2.5 billion.
Music Watch reported 20 percent activity in May,
18 percent in July, 11 percent in September, and 12 122. http://www.publicknowledge.org/content/
percent in November. Counting downloads, NPD legislation/legislation-induce-act/attachment
MusicWatch Digital, which directly monitors the (retrieved August 13, 2004).
computers of 40,000 consenting households,
found a dropoff in reported downloads from 18 123. Bill Rosenblatt, “Induce Act Dead for This
million in May to 13 million in October, a 14 per- Year,” DRM Watch, October 14, 2004, http://www.
cent increase in November, and another 21 percent drmwatch.com/legal/article.php/3421731.
drop in December. “The NPD Group Notes Recent
Increase in Peer to Peer Digital Music File Sharing,” 124. A circuit court decision in December 2003
January 16, 2004, http://ndp.com/press/releases reversed a lower court decision that would have
(retrieved April 25, 2004). required Verizon to turn over subpoened names.
The Supreme Court declined review in October
116. Thomas Karagiannis et al., “Is P2P Dying or 2004. Reuters, “Justice Won’t Weight Net Music
Just Hiding?” Cooperative Association for Internet Lawsuit Tactics,” CNet News.com, October 12, 2004.
Data Analysis, San Diego Supercomputer Center,
University of California, San Diego, http:// 125. 17 U.S.C. § 512.
www.caida.org/outreach/papers/2004/p2p-dying
(retrieved November 22, 2004). 126. For a kind review, see Joe Gratz, “Reform in the
‘Brave Kingdom’; Alternative Compensation Systems
117. “Mobile P2P May Present Safe Option,” for Peer-to-Peer File Sharing,” http://www.joe
Digital Music News, November 2004, http://www. gratz.net/files/JosephGratz-ReformInTheBrave
digitalmusicnews.com/results?title=P2P Kingdom-Dec19.pdf (retrieved October 5, 2004). See
(retrieved November 22, 2004). also Neil W. Netanel, “Impose a Noncommercial Use
Levy to Allow Free Peer-to-Peer File Sharing,” Harvard
118. “More P2P: BitTorrent Devours More Internet Journal of Law and Technology 17 (December 2003);
Bandwidth,” Digital Music News, November 2004, Fisher, chap. 6; and Jessica D. Litman, “Sharing and
http://www.digitalmusicnews.com/results?title=P Stealing,” http://ssrn.com/abstract=472141, Section
2P (retrieved November 22, 2004). 5 (retrieved October 5, 2004).

21
OTHER STUDIES IN THE POLICY ANALYSIS SERIES

533. Who Killed Telecom? Why the Official Story is Wrong by Lawrence
Gasman (February 7, 2005)

532. Health Care in a Free Society: Rebutting the Myths of National Health
Insurance by John C. Goodman (January 27, 2005)

531. Making College More Expensive: The Unintended Consequences of


Federal Tuition Aid by Gary Wolfram (January 25, 2005)

530. Rethinking Electricity Restructuring by Peter Van Doren and Jerry Taylor
(November 30, 2004)

529. Implementing Welfare Reform: A State Report Card by Jenifer Zeigler


(October 19, 2004)

528. Fannie Mae, Freddie Mac, and Housing Finance: Why True Privatization
Is Good Public Policy by Lawrence J. White (October 7, 2004)

527. Health Care Regulation: A $169 Billion Hidden Tax by Christopher J.


Conover (October 4, 2004)

526. Iraq’s Odious Debts by Patricia Adams (September 28, 2004)

525. When Ignorance Isn’t Bliss: How Political Ignorance Threatens


Democracy by Ilya Somin (September 22, 2004)

524. Three Myths about Voter Turnout in the United States by John Samples
(September 14, 2004)

523. How to Reduce the Cost of Federal Pension Insurance by Richard A.


Ippolito (August 24, 2004)

522. Budget Reforms to Solve New York City’s High-Tax Crisis by Raymond J.
Keating (August 17, 2004)

521. Drug Reimportation: The Free Market Solution by Roger Pilon (August 4,
2004)

520. Understanding Privacy—And the Real Threats to It by Jim Harper (August


4, 2004)

519. Nuclear Deterrence, Preventive War, and Counterproliferation by Jeffrey


Record (July 8, 2004)

518. A Lesson in Waste: Where Does All the Federal Education Money Go?
by Neal McCluskey (July 7, 2004)

517. Deficits, Interest Rates, and Taxes: Myths and Realities by Alan Reynolds
(June 29, 2004)
516. European Union Defense Policy: An American Perspective by Leslie S.
Lebl (June 24, 2004)

515. Downsizing the Federal Government by Chris Edwards (June 2, 2004)

514. Can Tort Reform and Federalism Coexist? by Michael I. Krauss and Robert
A. Levy (April 14, 2004)

513. South Africa’s War against Malaria: Lessons for the Developing World
by Richard Tren and Roger Bate (March 25, 2004)

512. The Syria Accountability Act: Taking the Wrong Road to Damascus by
Claude Salhani (March 18, 2004)

511. Education and Indoctrination in the Muslim World: Is There a Problem?


What Can We Do about It? by Andrew Coulson (March 11, 2004)

510. Restoring the U.S. House of Representatives: A Skeptical Look at Current


Proposals by Ronald Keith Gaddie (February 17, 2004)

509. Mrs. Clinton Has Entered the Race: The 2004 Democratic Presidential
Candidates’ Proposals to Reform Health Insurance by Michael F. Cannon
(February 5, 2004)

508. Compulsory Licensing vs. the Three “Golden Oldies”: Property Rights,
Contracts, and Markets by Robert P. Merges (January 15, 2004)

507. “Net Neutrality”: Digital Discrimination or Regulatory Gamesmanship


in Cyberspace? by Adam D. Thierer (January 12, 2004)

506. Cleaning Up New York States’s Budget Mess by Raymond J. Keating


(January 7, 2004)

505. Can Iraq Be Democratic? by Patrick Basham (January 5, 2004)

504. The High Costs of Federal Energy Efficiency Standards for Residential
Appliances by Ronald J. Sutherland (December 23, 2003)

503. Deployed in the U.S.A.: The Creeping Militarization of the Home Front
by Gene Healy (December 17, 2003)

502. Iraq: The Wrong War by Charles V. Peña (December 15, 2003)

501. Back Door to Prohibition: The New War on Social Drinking by Radley
Balko (December 5, 2003)

500. The Failures of Taxpayer Financing of Presidential Campaigns by John


Samples (November 25, 2003)

499. Mini-Nukes and Preemptive Policy: A Dangerous Combination by


Charles V. Peña (November 19, 2003)
498. Public and Private Rule Making in Securities Markets by Paul G. Mahoney
(November 13, 2003)

497. The Quality of Corporate Financial Statements and Their Auditors


before and after Enron by George J. Benston (November 6, 2003)

496. Bush’s National Security Strategy Is a Misnomer by Charles V. Peña


(October 30, 2003)

495. The Struggle for School Choice Policy after Zelman: Regulations vs. the
Free Market by H. Lillian Omand (October 29, 2003)

494. The Internet Tax Solution: Tax Competition, Not Tax Collusion by Adam
D. Thierer and Veronique de Rugy (October 23, 2003)

493. Keeping the Poor Poor: The Dark Side of the Living Wage by Carl F.
Horowitz (October 21, 2003)

492. Our History of Educational Freedom: What It Should Mean for Families
Today by Marie Gryphon and Emily A. Meyer (October 8, 2003)

491. Threats to Financial Privacy and Tax Competition by Richard W. Rahn


and Veronique de Rugy (October 2, 2003)

490. Defining Democracy Down: Explaining the Campaign to Repeal Term


Limits by Patrick Basham (September 24, 2003)

489. EU Enlargement: Costs, Benefits, and Strategies for Central and Eastern
European Countries by Marian L. Tupy (September 18, 2003)

488. War between the Generations: Federal Spending on the Elderly Set to
Explode by Chris Edwards and Tad DeHaven (September 16, 2003)

487. The Balanced Budget Veto: A New Mechanism to Limit Federal Spending
by Anthony W. Hawks (September 4, 2003)

486. What Does a Voucher Buy? A Closer Look at the Cost of Private Schools
by David F. Salisbury (August 28, 2003)

485. Mending the U.S.–European Rift over the Middle East by Leon T. Hadar
August 20, 2003)

484. Replacing the Scandal-Plagued Corporate Income Tax with a Cash-Flow


Tax by Chris Edwards (August 14, 2003)

483. Casualties of War: Transatlantic Relations and the Future of NATO in


the Wake of the Second Gulf War by Christopher Layne (August 13, 2003)