How to Protect Copyrights on the Web

CFOs may need to rethink how they can protect their digital content.
Joseph RadiganJuly 24, 2001

Last week, when a federal appeals court stayed the injunction that had shut down Napster’s music sharing Web site, the renegade music service was given something of a new lease of life. But as the online music service continues to meander its way through the court system, it may no longer occupy center stage in the battle over intellectual property on the Web.

It’s not that the issue of protecting copyrights on the Web is declining in importance, but it seems destined to become even more of a hot button in the corporate market.

The Napster lawsuits primarily dealt with a company serving consumers that ran afoul of the commercial owners of music copyrights, observes Susan Barbieri Montgomery, a Boston lawyer who is a past chairperson of the American Bar Association’s committee dealing with Internet copyrights. But what will happen when a business-to-business marketplace, for example, using a peer-to-peer file sharing system finds itself faced with a copyright infringement suit?

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Montgomery could not cite any existing lawsuits involving B2B sites, let alone say how such a case might be decided, but she says the nature of the Internet makes it all but certain that such a lawsuit will arise in the near future.

Copyright owners may also find themselves policing more one-off infringements of their protected content, Montgomery notes.

“It’s easier for an owner of a copyright to be aware of unauthorized copies,” she says. “But they have to sift the incidental from the significant — the things they’re going to do something about and the things they’re not.”

The biggest challenge for many companies is that given the nature of E-mail alerts and Web access is that they are likely to find themselves literally inundated with news of copyright infringement incidents.

“Just sorting through it is a newer issue,” she says. “They have to develop policies about that and how they’re going to respond.”

For companies that may or may already have violated someone’s copyright, the defense strategies have yet to be clearly established, says Ed Fiorito, a Dallas patent and trademark attorney who chairs the American Bar Association’s committee on intellectual property.

A lawyer for a copyright owner might first determine how much damage the violation has actually caused, and then see if a settlement can be reached. But Fiorito notes, “Some things are just so trivial in the overall scheme of things, it may not be actionable.”

In the future, the legal treatment of a copyright may be adjusted based upon the nature of the content, says Eric Scheirer, an analyst with Forrester Research in Cambridge, Mass.

For example, one of the things that made Napster so popular so quickly is the manner in which people listen to music, Scheirer observes. Prior to the Web, it was common for people to record cassettes of their favorite albums and CDs. Since so many consumer habits formed—prior to the rise of file sharing on the Net— occurred outside the commercial space, it was hard for the record companies to police Napster without shutting it down.

But many of the same record companies whose copyrights were violated by Napster are also movie-production and distribution companies that may soon be confronted with peer-to-peer sharing systems of their movie content. Here, Scheirer believes they’ll have less trouble collecting fees from customers if for no other reason than consumers are already used to paying $9 or $10 for movie tickets or $3 or $4 to watch a video.

Still, the movie companies’s copyright polices may vary among the firms based upon their corporate strategies.

For example, through the first six months of 2001, AOL Time Warner had earnings before interest, taxes, depreciation, amortization (EBITDA) of $801 million on sales of $2.1 billion from its Internet access business. Meanwhile, the Warner Music Group generated $87 million in EBITDA on sales of $895 million.

Based on recent financial performance alone, Scheirer says the online access business is far more valuable to AOL than its music business. Whether it’s AOL or another Internet service provider, it’s not unreasonable to think that the corporate management of an online service could decide it makes business sense to simply give unlimited access to a record label’s complete library to subscribers.

Perhaps it was no coincidence, then, that on Monday AOL announced two music services for its online subscribers, the Artist Discovery Network and [email protected] An AOL spokeswoman says the services will not permit peer-to-peer file sharing among AOL subscribers.

The challenge for copyright holders and ISPs will be packaging their services in such a way that consumers will agree to pay for content that they can get for free elsewhere. As difficult as that problem may be, it’s a lot easier when it’s just a marketing issue and much more of a challenge once the legal department has to get involved.