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At the Music Tech Summit in San Francisco last month, John Perry Barlow, Co-Founder of the Electronic Frontier Foundation (EFF) and former Grateful Dead songwriter, responded to a question posed by Bob Weir, also of the Grateful Dead, about the distribution of music on the Internet as follows: 

“We just have to get the property model out of the picture.  It is not a good way to monetize something that can be infinitely duplicated at zero cost and infinitely distributed at zero cost.”

The EFF believes that because a digital file of a song or movie can easily be copied and distributed over the Internet for free, rights holders shouldn’t be compensated when millions of users choose torrent sites and other peer-to-peer (P2P) networks instead of paying for the song or movie.

Mr. Barlow ignores the costs involved in providing the distribution systems that make torrent sites and P2P networks possible, and the profits being made by the Internet Service Providers (ISPs), search engines and ad networks who provide that access.  Verizon invested $23 Billion (or $4,000 per subscriber) to build its super-high-speed FiOS network.  Google spends as much as a billion dollars a quarter on infrastructure and made $14 billion in profit over the last twelve months.  Further, more than 85 million broadband Internet subscribers in the United States pay an average of $41 a month for service, totaling $42 billion annually.  The EFF doesn’t insist that ISPs and search engines forego the profits from their investments, so why should content creators and owners be forced to do so?

Where is that money going?    According to a recent report, 18.8% of all internet traffic in Spring of 2011 was used for P2P filesharing.  These users were able to do so by paying average of $38 per month to ISPs for Internet access.  Further, Internet advertising revenues in the United States have grown to an average of almost $8 billion per quarter in 2011.  A quick review of any popular pirate search engine reveals ads from Fortune 500 companies, and in many cases targeted ads from ISPs appealing to high bandwidth users who illegally consume copyrighted content. 

Filesharing supporters, like the EFF, suggest record labels and movie studios drive infringement by not offering customers the options they want, bemoaning copying restrictions and limited availability.  The reality is users have the option to buy, stream, or rent content, and choosing filesharing over these options deprives the filmmakers, writers, directors, actors, and indeed tens of thousands of motion picture employees of their livelihood.  Indeed, Fast Five, the most stolen movie of 2011, was illegally downloaded almost ten million times in 2011, a loss of $40 million based on the $3.99 price to stream it on Amazon

Perhaps surprisingly, Congress had the foresight in 1998, even before the rise of Napster, to enact the Digital Millennium Copyright Act (DMCA) in an attempt to allow innovation and artistry to prosper together.  Although Congress had good intentions with the DMCA, the effect has been to allow tech companies to make a fortune at the expense of artists and media companies.

The problem with the DMCA lies in the “safe harbor” provision, section 512(i), which shields ISPs from liability for copyright infringements committed by their users if the ISP helps prevent infringements.  Specifically, ISPs cannot be held liable for infringements of their users as long as the ISP both implements and enforces a policy that provides for terminating the accounts of repeat infringers.

Unfortunately, ISPs have distorted the DMCA in identifying “repeat infringers” for purposes of determining which accounts should be terminated, and neither Congress nor the courts have provided much help to define the term.  Some ISPs have taken the position that before they are required to remove a user’s Internet access, the user must have been found liable for copyright infringement after legal proceedings on more than one occasion.  This is the most extreme version of the ISPs’ definition of “repeat infringer,” but even less extreme versions of the definition fall short common-sense meaning – a subscriber that repeatedly infringes.

Considering the potential length of a proceeding before a determination of infringement is made, any reading of the statute that requires an actual adjudication (or anything close to it) would make the requirement that ISPs implement policies to obtain “safe harbor” protection virtually illusory in nature.  Instead, the procedures set forth in the DMCA warrant a conclusion that at least two notices of infringement should require an ISP to terminate a user’s account or face liability for the infringements.