Creative work makes for slippery private property online

You might have to go back to Johannes Gutenberg's printing press to find a publishing technology as disruptive. The Internet can reproduce content and distribute it almost anywhere at nearly light speed. Call it the perfect copying machine - with an out tray to everyone.

And that's the trouble. For any creator of "intellectual property" - text, software, music, videos, and so on - the Internet is challenging the fundamental notion of who owns the content and how it can be used. This week, the issue reached the United States Supreme Court in a case that may go a long way toward deciding what rights creators have. The issue isn't clear cut.

Protect the creators too much and it may inhibit technological progress and chill artistic expression, some argue. Others say the technology and culture of sharing electronic files has made the philosophy of "all rights reserved" obsolete.

What's needed, some observers urge, is a new copyright that recognizes a middle ground between all rights and no rights to a work of art.

In court, the big music and film companies "can win every single case from now until the cows come home, but they cannot put the genie back in the bottle because people have discovered that they have the tools of participation," says Andrew Zolli, founder of Z+Partners, a think tank in New York. What the Internet has done is wrest away from a few producers the ability to sell scarce goods to a large group of consumers through expensive and highly controlled channels, he adds, such as when three commercial networks controlled what TV viewers saw in the 1960s. Now everyone with access to a computer has "the tools to produce as much media - if not more - than they consume."

Indeed, the Internet hasn't only made copying easy, it also has helped foster a culture in which some artists create new work by literally reusing or remixing the work of others. Hip-hop music, built on the idea of "sampling" the beats or sounds of earlier music, is the most obvious of several examples. "The very works that we seek to copyright are built from found objects of other cultural products," Mr. Zolli says.

Some say this remix world demands a new attitude toward copyright, one that still respects the artist's need to make a living, but acknowledges that a carrot works better than a stick to pay the bills.

That was John Buckman's idea in 2003 when he founded Magnatune.com, an independent record label that sells music through online downloads and CDs and also licenses music for both commercial and noncommercial use. His business plan was simple: Let people listen to the music all they want for free over the Internet. If they like an album so much they want to own it, they can pay a range of prices from $5 to $18 per album, which they can choose. (On average, he says, buyers are paying $8.20.)

Whatever they pay, half goes directly to the musician, a much larger share than in conventional record deals. The company has 180 artists signed up, most of whom produce music in niche categories, such as classical or new age. So far, no one's getting rich. The highest earners, Mr. Buckman says, make a little more than $20,000 a year, barely enough for a couple of Britney Spears's wardrobe changes.

The company's slogan is "We Are Not Evil." That's a direct swipe at major record labels, whose pricing policies and crackdown on illegal file-swapping have angered many. That activity, known as peer-to-peer (or p2p) file-sharing, is shrinking a bit, and legal downloading from sites such as Apple's iTunes music store is increasing, according to a recent poll from the Pew Internet & American Life Project. But it's unclear whether illegal swapping really is decreasing, or whether respondents are reluctant to admit to it for fear of being sued by music companies.

While iTunes has sold 300 million songs online in its first three years, some 750 million songs are traded for free online each month, according to estimates by BigChampagne, a firm that tracks file-sharing on the Internet. Those p2p trades are illegal, according to current law.

P2p lies at the heart of a case argued before the US Supreme Court Tuesday. In MGM v. Grokster, lawyers for the entertainment industry and others argue that p2p software such as Grokster is used almost exclusively for illegal sharing of copyrighted material, such as songs. They want it shut down or hemmed in by strict safeguards.

Those supporting Grokster, mostly from the high-tech community, argue that such restrictions would inhibit future technological innovation and creative energy. They say that the software has legitimate uses.

The Grokster case will turn on one issue: whether the technology has substantial uses that are legal uses, says Manny Pokotilow, the managing partner of Caesar, Rivise, Bernstein, Cohen & Pokotilow, an intellectual property law firm in Philadelphia.

In a narrow 5-to-4 decision in 1984 involving the Sony Betamax videocassette recorder, the Supreme Court said Sony wasn't liable if some people used the machine to make illegal copies because the technology had substantial legal uses as well.

With Betamax as precedent, Mr. Pokotilow isn't so sure the argument from the entertainment companies will hold up. "To me, someone could have enjoined the use of the Xerox machine when it first came out," he says, because it could be used to make copies of copyrighted materials.

If the court does crack down, and if entertainment companies continue to sue individuals who use p2p, Buckman says, he expects a boon for his business. "The harsher the atmosphere is for pirates, the more angry they will be, and the more they'll seek out fairer alternatives," he says.

Buckman operates under a unique kind of copyright called Creative Commons, developed by Stanford University law professor Lawrence Lessig, in which "some rights reserved" is the operating principle. Under Creative Commons, artists can choose to relinquish all rights (release to the public domain) or keep some, such as requiring attribution (giving the author credit). They may ask for permission and payment for commercial use, but not for noncommercial use. And they can mandate that the user agree to "share alike," meaning that if the work of art is used to help create a new work (such as a new song), that new work of art has to allow others to use it in the same way.

More and more companies springing up will recognize the new economics of copyright, Zolli says. "Some of them will flame out badly. Some of them will go down and take some of their customers with them.... But a new crop of companies will eventually emerge to take advantage of the participation and create economic value out of it."

One successful model already exists in Amazon.com, he says. "Amazon actually puts huge amounts of their intellectual property [online for free]. You can read many of the books that you can buy from Amazon right on the website."

Letting customers sample content creates new demand and not just for a few blockbusters. Some 90 percent of the books listed on Amazon.com sell fewer than 1,000 copies each, he says. People are "buying books they've never heard of" until Amazon.com introduced them.

The technique isn't new, Buckman says. "Music has always been given away for free to create demand." It's been sold through being played on the radio and more recently through music videos on MTV or free CDs stuck into magazines. "All we're doing is giving it away through a different medium," he adds.