eCommerce Law and Regulation 46-840

M.Shamos

 

Homework 2

 

Due: April 24, 2002

 

General homework policies are the same as those of Electronic Payment Systems, 20-763.

 

All homework must be submitted in machine-readable form with extension .doc by email to jmoore2@andrew.cmu.edu with a copy to shamos@cs.cmu.edu.

 

This homework is worth a total of 300 points.

 

Problem 1. [300 points]  Compulsory Web Licensing

 

A “compulsory license” is one that the copyright owner cannot refuse to grant but the licensee must pay for.  The purpose of this homework is to explore the possible use of compulsory licensing to solve several problems involving distribution of copyrighted content over the Internet, such as widespread piracy of  MP3s.

 

In the United States, compulsory licensing exists but is quite limited.  One of the few types of compulsory license permitted is described in 17 U.S.C. 115(a): “When phonorecords of a nondramatic musical work have been distributed to the public in the United States under the authority of the copyright owner, any other person, including those who make phonorecords or digital phonorecord deliveries, may, by complying with the provisions of this section, obtain a compulsory license to make and distribute phonorecords of the work. A person may obtain a compulsory license only if his or her primary purpose in making phonorecords is to distribute them to the public for private use, including by means of a digital phonorecord delivery.”  [“Phonorecord” is not confined literally to a phonograph record.  Here is the statutory definition:

 

‘Phonorecords’ are material objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device.”  This includes audio tape, CDs, etc.]

What this means is that once the writer of a song has allowed his song to be recorded, anyone else is also allowed to record the song and sell copies of the recording (not copies of the printed words or music) without permission of the copyright owner.  These copies must be primarily for personal use of the purchasers.  For each copy a person makes, he must pay the copyright owner the greater of (a) 7.55 cents; or (b) 1.45 cents per minute or fraction of the song’s duration.  As long as the person making the copies complies with the terms in the statute and makes quarterly payments of the royalty, the compulsory license cannot be terminated by the copyright owner.

 

The compulsory license described above is extremely narrow.  For example, it does not allow a person to reproduce and sell copies of a sound recording made by someone else, even if a royalty is paid.  So it does not apply to MP3s, which are simply digital copies of the sound recordings of others.  The U.S. has no compulsory license at all for non-dramatic literary works, that is, for text.

 

What you are asked to do in this assignment is explore the possibility of a general compulsory license for web viewing of content (music, audiovisual works, images and text) for personal use in the United States.  The fundamental question is whether there is any fair and workable scheme that will accomplish this.  ASSUME FOR PURPOSES OF THIS ASSIGNMENT THAT ALL ACTS TAKE PLACE IN THE U.S., ALL USERS ARE IN THE U.S. AND NO CONTENT IS DELIVERED OUTSIDE THE U.S.  This will avoid the need to deal with difficult international copyright questions.

 

1. Sound Recordings [75 points]

One reason that the phonorecord compulsory license works well is that measurement of the use of copyrighted material is easy.  All works, regardless of merit, are worth 1.45 cents per minute, with a minimum of 7.55 cents, pre copy made.  It doesn’t matter how many times a user listens to the copy, since that cannot be tracked.  So we have the notion of the NUMBER OF COPIES MADE and the LENGTH OF THE SONG.  These are objective measurements.

 

We want to create a compulsory license that would allow the delivery of someone else’s sound recordings over the web.  For example, the business model of a hypothetical company called Buckster might be to buy one copy of every CD in the U.S. and upload the contents to a server so that anyone who visits buckster.com and pays a (small) fee can listen to anything that is available on CD.  Buckster then pays a given royalty to the publisher of the CD every time someone plays one of the songs.  Draft proposed compulsory license terms that would make it possible for Buckster to operate without the permission of the copyright owners.  Specify exactly how the royalty that Buckster must pay will be computed.

 

2.  Text [75 points]

Many books are out-of-print, unavailable in libraries and very hard to get.  So a company called Bookster would like to scan every book in the U.S. into a computer and deliver the content (or any part of the content) to users who pay a small fee.  Bookster then pays a defined royalty to the copyright owner of the content.  One problem with defining a compulsory license for this sort of use is that any obvious measurement mechanism based on the length in words of the content delivered seems unfair.  Poets who write short poems won’t get paid very much, while there will be a strong tendency for writers of novels to fill up their books with extra text just to increase the royalty they might get.

 

2(a). Draft proposed compulsory license terms that would make it possible for Bookster to operate without the permission of the copyright owners.  Specify exactly how the royalty that Bookster must pay will be computed.

 

3.  Images [100 points total]

Web pages that consist only of text are very boring, so it is desirable to illustrate them with digital images.  A company called Picster wants to scan every image it can get its hands on (including copyrighted ones) at high resolution and deliver them to anyone who wants them for a small fee.  The restriction is that the only use that can be made of the images is to put them on web pages.  That is, they cannot be published or distributed in paper form or on posters, used in books, published in newspapers, etc.  Just the web.  Picster then pays a royalty to the copyright owner for every copy it delivers.

 

3(a).  [75 points] Draft proposed compulsory license terms that would make it possible for Picster to operate without the permission of the copyright owners.  Specify exactly how the royalty that Picster must pay will be computed.  Be very careful with this.  The royalty cannot be based on the number of bytes in the original image.  (Or can it?)  There is a huge difference in size between an uncompressed TIFF and a highly compressed JPEG.  Also consider how much someone should have to pay for using a small part of a large image.

 

3(b).  A serious problem with any such image licensing scheme is that once Picster delivers an image to me, I can put it on my website legally and anyone in the U.S. can visit my website and view it for free.  That is, Picster (and the copyright owner) only get paid once for my use of the image but millions of people might enjoy it for nothing.  (They can’t post it on their websites -- they would have to pay the compulsory license royalty for that.)  So I start a company call Freester, which buys a single copy of every image in Picster (this is legal) and posts the images on freester.com (this is legal, since they’ve been paid for).  Now everyone in the U.S. can view every image for nothing (legally) by visiting Freester.

 

3(b)(i).  [10 points] Is there really anything wrong with allowing viewing for free once an image has been posted (and paid for)?  After all, I can view all the images I want for nothing by going to a library or museum and the owner will receive nothing.  If an image is popular, presumably it will be used on many websites and the owner will get paid multiple times.  Discuss the pros and cons of this argument.

 

3(b)(ii).  [15 points] Assuming that a copyright owner should get paid for each viewing of his image, it is impractical to ask everyone who has a web page to perform detailed accounting for every piece of text and image on it and pay royalties every quarter to all owners who are involved.  Devise a scheme that is able to measure (and pay for) every viewing of a copyrighted image on the Web.  You can describe your method generally without going into great detail.  Do not spend more than half a page.

 

4.  [50 points]  This carefully and write half a page on the usefulness of compulsory licensing in encouraging the delivery of web content and fairly compensating copyright owners.  Do you think it will solve the music industry’s problems with Napster, Gnutella and the like?