Music Industry Targets Net Swappers

Music Industry Targets Net Swappers
Sat Oct 5, 9:50 AM ET
By D. IAN HOPPER, AP Technology Writer

WASHINGTON (AP) - Music companies tried to persuade a judge Friday to let them obtain the names of people suspected of trading music files online without going to court first, a move that could dictate how copyright holders deal with Internet piracy in the future.

Internet service provider Verizon is resisting the music industry's subpoena, saying that it could turn Internet providers into a turnstile for piracy suits and put innocent customers at risk.

U.S. District Judge John D. Bates, who heard the case, lamented ambiguities in the Digital Millennium Copyright Act ( news - web sites), which was enacted to uphold copyright laws on the Internet while shielding technology companies from direct liability.

Congress "could have made this statute clearer," Bates said. "This statute is not organized as being consistent with the argument for either side."

Bates said he would try to rule quickly, but lawyers for both sides had no guess of when a decision might arrive.

The subpoena hearing, which is normally a tame affair, was contentious because the music industry sees it as a test case. If it succeeds, it plans to send reams of cease-and-desist letters to scare file-swappers into taking their collections offline.

Until now, copyright holders have relied on requests sent to Internet providers to take action on their own against suspected pirates. Almost all Internet providers forbid sharing copyrighted material without permission.

But that can take a lot of time, and makes copyright holders reliant on Internet providers to enforce the law. Internet providers do not always respond as well or as quickly as music and movie publishers would prefer. They think individual letters from the maker itself might work better.

"Wouldn't that be a lot easier way to let people know that they are in fact not anonymous and there could be consequences?" asked Cary Sherman, RIAA ( news - web sites)'s general counsel.

Verizon said that since the hundreds of songs up for trade by the anonymous Verizon customer at the center of the case sit on the person's computer rather than Verizon's network, it is not required to automatically give up the subscriber's name.

"Verizon was a passive conduit at most," said Eric Holder, a former Justice Department ( news - web sites) prosecutor who represented Verizon. Holder said the music industry's strategy could create a contentious relationship between Verizon and its customers and put the Internet provider in the position of handing over names to the music companies without a judicial determination of piracy.

"We also don't want to be the policeman in this process," Holder said.

Lawyers for the recording industry rejected Verizon's arguments that it had little obligations in the process. Industry lawyer Donald Verrilli said no type of service provider is exempt from having to identify a potential music pirate, no matter where the songs sit.

Verrilli also dismissed Verizon's position that the Internet provider's customers have a right to privacy.

"You don't have a first amendment right to steal copyright works," Verrilli said.

The judge disagreed with Verrilli's assumption that the works were stolen.

"Here, there's only an allegation of infringement," Bates said.

Bates gave few hints as to how he might rule. He asked many, detailed questions of both sides. He called some Verizon positions vague, but showed little patience with other arguments advanced by the music industry and movie studios, which also argued on behalf of music publishers.

Through programs like Kazaa, Morpheus and Gnutella ( news - web sites), a person can find virtually any song or movie — sometimes even before it's released in stores — and download it for free. On a typical afternoon, about 3 million people were connected on the Kazaa network and sharing more than 500 million files.

 

Whats next? Will they send hitmen to take out people who swap songs online?

Here's the funny thing:

Music Cos. Settle U.S. Price-Fixing Case
Mon Sep 30, 4:11 PM ET
By Derek Caney

NEW YORK (Reuters) - The world's five largest music companies and the three largest music retailers will pay $143.1 million to settle a CD price fixing case launched by New York and Florida two years ago, New York State Attorney General Eliot Spitzer said on Monday.

In August 2000, most U.S. states joined in a lawsuit alleging that an industry practice called "minimum advertised pricing" (MAP) artificially inflated the price of CDs between 1995 and 2000, violating federal and state anti-trust laws. Under MAP, the labels subsidized advertising for retailers that agreed not to sell CDs below a certain price.

The five record labels -- Vivendi Universal's Universal Music Group, Sony Corp ( news - web sites).'s Sony Music, Bertelsmann AG ( news - web sites)'s BMG Music Group, Warner Music Group, a division of AOL Time Warner Inc. and EMI Group Plc ( news - web sites) -- and the three retailers, Musicland Stores Corp., Trans World Entertainment Corp. and Tower Records, agreed to stop using MAP policies as part of the settlement.

The companies, which did not admit any wrongdoing, will pay $67.4 million in cash to compensate consumers who overpaid for CDs between 1995 and 2000. The companies also agreed to distribute $75.7 million worth of CDs to public entities and nonprofit organizations throughout the country.

"This is a landmark settlement to address years of illegal price fixing," Spitzer said in a statement. "Our agreement will provide consumers with substantial refunds and result in the distribution of a wide variety of recordings for use in our schools and communities."

MAKES MORE SENSE TO SETTLE

John Sullivan, chief financial officer of Trans World said, "It's always been absurd to us to even be involved in this case. Given the cost of lengthy litigation, it made more sense for us to settle the case." Trans World owns the FYE and Coconuts music chains.

Universal Music Group, the world's largest record company said it believes MAP policies were legal, although it wanted to avoid the cost of lengthy litigation. "We believe our policies were pro-competitive and geared toward keeping more retailers, large and small, in business," the company said in a statement.

BMG and Warner Music each issued similar statements.

In a May 2000 settlement with the U.S. Federal Trade Commission, the five labels agreed to ban the MAP policy for seven years. The settlement did not require the labels to pay any damages, nor did the labels admit any wrongdoing.

In the mid-1990s, large department stores and consumer electronics retailers began selling CDs below cost as a "loss leader," in an effort to get people into the store to buy big-ticket items, the labels have said in the past.

The labels have said MAP policy helped smaller retailers compete with chains like Wal-Mart Stores Inc., Circuit City Stores Inc. and Best Buy Co. Inc. . They argued that smaller retailers do not have the option of offsetting losses from cut-price CD sales with the sale of other products.

The labels have said they received no financial gain from the MAP policy, noting that the wholesale price charged to retailers was the same whether or not they participated in the policy.

But the states allege that if a retailer advertised a price below the minimum, the retailer risked losing promotional funds from that record label.