As those involved in the music and motion picture industries already can attest, companies involved in the creation and distribution of copyrighted content ignore the threat of peer-to-peer (P2P) piracy at their peril. How one should combat this threat may be open to question; whether one should do so is beyond question.
What Is P2P Piracy?
Peer-to-peer networks allow for the instant, global distribution of any content that can be saved as a digital file. This includes music and motion pictures, books, computer software, video games, photographs, and any other creative content that exists in, or can be scanned or otherwise copied into, digital form.
P2P networks function by allowing all computers using the particular P2P software to access any such digital files made available on all other computers also using that software. They make possible the instantaneous global distribution of digital content at effectively no cost to the individual infringers - both at the distribution end (the person who uploads or "shares" the digital content with his or her "peers" on the network) and the copying end (the person who downloads the digital content for use and potential further distribution).
Why Should Content Owners Care About P2P?
The consequences of the P2P piracy phenomenon are well-established and startling. Because established retail distribution systems are so easily and quickly bypassed, content owners are cheated out of their rightful profits from the sale of their creative properties on a far greater scale than through traditional forms of individual piracy (e.g., one person making a copy of a copyrighted work for a single friend). As a direct result of the proliferation of P2P networks such as KaZaA, Grokster, and Morpheus, worldwide music industry sales were down some 11 percent in 2003, with revenue off more than $2 billion in the United States alone. According to published reports, illegal downloads have surpassed legal sales of music in certain parts of the world.
What Can Content Owners Do To Protect Their Rights?
The only realistic option is a carefully coordinated legal, technological, and business response.
The legal landscape is complex, but the recording and motion picture industries have blazed a trail for other content owners to follow. In the Napster case, the recording industry succeeded in shutting down Napster's illicit P2P network, and established strong legal precedent that P2P networks that facilitate copyright infringement can be held liable. This precedent was followed and reinforced in the subsequent Aimster case, and the courts are now considering whether - as the recording and motion picture industries believe - this precedent makes KaZaA, Grokster, Morpheus, et al, similarly liable. The recording industry further has embarked on a successful litigation campaign against individuals who download copyrighted music off these P2P networks.
Content owners' legal options for fighting P2P piracy generally boil down to sending cease-and-desist letters, followed by litigation if necessary, against the various P2P networks and/or the individuals who use those networks to infringe the particular content owners' copyrighted works. Coordination among content owners is a key way in which resources can be pooled and the costs of litigation controlled.
Technology is another critical element in the fight against online piracy. New encryption and other digital rights management (DRM) solutions - technologies that deter piracy by allowing digital content to be distributed online while preventing its unauthorized copying - have been and continue to be developed. However, as the motion picture industry has discovered with the widespread "cracking" of the CSS anti-copying technology used to protect DVDs, no DRM solution is likely to be perfect. On the other hand, the motion picture industry's successful legal response under the Digital Millennium Copyright Act's "anti-circumvention" provisions - suing sellers of so-called "DVD cracking" software - is an example of how a technological solution provided by DRM can be supplemented by a coordinated legal strategy.
Finally, combined with these legal and technical strategies, content owners ultimately must consider altering their business models to defeat P2P piracy by offering better, legitimate alternatives for their customers. This already has occurred in the music and motion picture industries, most famously through the Apple iTunes service, which allows for the lawful downloading of DRM-protected digital music.
While the specific solutions that will work are likely to differ by industry, the basic lesson is the same: content owners must adapt to the changing demands and expectations of their customers by providing state-of-the-art online distribution of their products, while at the same time taking all necessary and reasonable legal and technological steps to protect their valuable intellectual property from wholesale pilfering. Putting your head in the sand is no longer an option.
Matt Railo and Larry Drapkin are partners at Mitchell Silberberg & Knupp LLP in Los Angeles. Mr. Railo is actively involved in litigating the cases against Grokster, Morpheus, and KaZaA; Mr. Drapkin specializes in all aspects of labor and employment law in a variety of sectors including the entertainment industry.
