- The Washington Times - Tuesday, August 22, 2000

The 9th U.S. Circuit Court of Appeal's decision to stay an injunction against Napster, which allows users to download and swap songs for free, violates U.S. obligations as a member of the World Trade Organization (WTO).

The United States, along with most all other trading nations, obligated itself by treaty to uphold the right of creative authors to effective copyright protection. Indeed, the WTO's enforcement of intellectual property (IP) rights was largely instigated by the United States, based upon complaints of inadequate enforcement of copyright and trademark rights by developing countries. For example, the United States waged a relentless campaign against software piracy in China.

In June, a 15-member WTO panel unanimously ruled that the United States failed to enforce music copyrights against small business establishments, which under a recent congressional amendment were exempted from paying music performance royalties to artists' collecting societies ASCAP and BMI. And on July 27, the WTO's Dispute Settlement Body formally ruled the United States was in violation of international trade rules. U.S. ambassador to the WTO Rita Hayes did not appeal the ruling, acknowledging several of the WTO's legal points.

The United States will be hoist on its own petard if the 9th Circuit fails to protect copyright proprietors from the wholesale depredation of their rights practiced by Napster. The United States seems to be slipping into the attitude that IP rights reduced to digital form are simply there for the taking; even the ethics expert for the California Bar Journal, in a recent news column, mentioned how she herself uploads CDs via Napster.

The WTO panel decided that the United States violated its trade obligations by amending the copyright statute to permit free use of broadcast music by small business establishments (stores having under 2,000 and restaurants under 3,750 square feet). For years, enforcement efforts by performing rights societies ASCAP and BMI to collect copyright infringement penalties from such businesses (and to make the owners themselves liable for payment) triggered complaints to congressional representatives, who finally obliged their constituents by amending the statute to clip ASCAP's wings.

The very smallest establishments were already exempted by the "homestyle" safe harbor of the copyright statute, which permits playing a home radio in a small business. While this practice was also challenged, the WTO panel ruled that it did not have significant economic impact. According to the decision, since such establishments would not have been significant sources of revenue and did not justify commercial licensing, there was no economic detriment to the rights holders from this exemption.

In contrast, the European Community estimated the loss to rights holders from the recently enacted U.S. small business exemption to be $54 million. Hence, the WTO panel ruled that the United States violated its obligation to enforce copyright, when it appeased small-business voters (and campaign contributors) at the expense of foreign copyright proprietors. In all fairness, how could the United States be heard to complain about disregard of U.S. copyrights (like that on Microsoft's Windows operating system) by small businesses in China, if it is not prepared to bite the bullet and enforce foreign copyrights against small businesses here at home?

The WTO specifically held that it is not permissible to create a free-use exception for copyright in newly introduced rights, even if the necessary collection management structure does not yet exist. Hence, there can be no argument that it is "too hard" to enforce copyright over the Internet.

Indeed, this argument rests upon ignorance of the technology that exists (even today) to "fight fire with fire" by automated rights enforcement. Internet "bots" acting on behalf of copyright owners can root out and shut down an infringer who dares expose a hard drive to the Internet in a Napster-style scheme, as this author recently pointed out in the National Law Journal.

In the case of a centralized infringement depot like Napster, there can be no doubt that collecting a royalty would be both economically feasible, and the amount would be substantial. Unlike playing a home radio in a pizza parlor, Internet exchange of music CDs exposes digital copies of musical works to an audience of millions, who can save, reproduce and replay them at will. Safeguarding the exclusive right to reproduce and distribute such protected works has always been a core value of IP law.

Failure of U.S. courts and legislatures to enforce music copyrights against the wholesale disregard for copyright advocated by Napster no matter how politically popular such inaction may be with the millions of Napster users, who now get something for nothing similarly will trigger WTO sanctions against the United States. If U.S. courts and legislators do not have the resolve to enforce copyright morality, the WTO will do it for them.

Robert Kunstadt is an intellectual property attorney in New York. His practice includes domestic and international copyright law.

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