The Change Mariner

Impact of File Sharing: Legal battle raging over the "Magna Carta of the technology age

Fortune:

... For two technologically eventful decades, the Betamax case—formally, Sony Corp. of America v. Universal City Studios—has defined the tense frontier that divides the rights of entertainment companies from those of technology providers. The conflict arises from a fundamental tension. Copyright laws grant creators a monopoly over the right to reproduce and distribute their works during the term of a copyright. Technology providers make devices that enable consumers to reproduce and distribute copyrighted works—photocopying machines, VCRs, TiVo, "ripping" software, CD burners, and high-bandwidth cable and DSL lines, to name just a few. Does that mean those technology providers are facilitating copyright infringement by their customers? Must technology providers be perpetually seeking permission from entertainment companies every time they want to develop a new invention capable of reproducing a copyrighted work?

Since 1984, the answer in the U.S. has been a resounding no. In the Betamax case the court decided that Sony, by marketing VCRs, could not be held liable for facilitating copyright infringement, even though it knew that some consumers would use its VCRs illegally. The VCR's "primary" uses, Justice John Paul Stevens noted, were noninfringing. But his ruling then went a step further. He suggested that any technology provider should be protected as long as the device it marketed was "capable of substantial noninfringing uses"—even if the device was not currently being used that way. The idea was that courts should not stifle potentially beneficial technologies in their infancy, before their usefulness might be fully understood.

In the intervening 19 years digital technologies have supplanted analog, and technology providers have devised ever faster and cheaper ways for their customers to copy and distribute content. As a result, the perils those technologies pose to copyright holders have increased. At the time of the Betamax ruling the studios had not yet been able to show any actual revenue loss attributable to VCRs, even though VCRs had already been in circulation for almost a decade. In contrast, since 1999, when a 19-year-old college kid launched the first music file-sharing service, Napster, unit sales of recorded music have dropped 26% and record industry revenues have fallen 14%—a $2 billion decline. It was a measure of the industry's desperation that last month the Recording Industry Association of America sued 261 file-sharing music fans, knowing full well that it was asking for a public-relations shellacking.