UK: A Copyright Strategy for your Business: Important Lessons from the Music Industry

Internet piracy is a major threat to all businesses whose success depends on controlling copyright works. Hana Ferraris outlines mistakes made by the music industry in dealing with Internet theft and shows how you can learn from them to prevent your own works being copied.

In 1999, the European Commission estimated that piracy accounted for between 5% and 7% of world trade. The Commission claims that the cultural sector alone (including the music and audiovisual industries) loses over € 4.5 billion each year because of counterfeiting and piracy. Similarly, the Recording Industry Association of America (RIAA) blames piracy for a 31% drop in music sales over the last two years.

Many web users consider it entirely acceptable to download music from file sharing online services - some have even developed a cult in praise of those who make piracy easier¹. A similar situation exists in the computer software field where a recent survey² found that only 14% of respondents thought illegally copying a software program was a serious crime.

Unfortunately, the music industry made the mistake of immediately viewing the Internet as a threat rather than embracing it as an integral part of our lives and identifying the potentially profitable opportunities it offered. Up until recently, there were very few websites offering legal music downloads for a reasonable price. Those that did exist carried only a limited selection of music.

As copying and downloading technology has improved, the lure of being able to get hold of high quality music cheaply or for free has increased. The singles market is a case in point – only a limited number of songs are made available as singles because record companies prefer to concentrate on album sales. Therefore the choice for consumers who want their favorite song has been to either buy the whole album for approximately £9 to £13 or to look for an easily downloadable, high quality copy of their favorite track (for free).

There is also an indication that the tactics initially adopted by the music industry to enforce its copyright actually ended up encouraging piracy. Copyright enforcement was usually targeted at high-value buyers such as businesses who could be easily recognised and monitored. However, according to a recent study³, this approach increased piracy by giving the copyright owner a smaller captive market and an incentive to charge even higher prices. The result is that those with less disposable income were priced out and thus encouraged to commit piracy.

The study suggests that the interests of the copyright holder and those of the consumers do not necessarily have to be in conflict. A successful enforcement strategy should be based on the principle that all consumers face the same risk of action being taken against them if they infringe copyright. Such broad-based enforcement not only reduces piracy, but also encourages the copyright holder to lower prices to accommodate a broader market. Hence both copyright holder and consumer benefit.

An example of such practice is the RIAA’s recent effort in filing an enormous number of copyright infringement lawsuits in the US. Together with the increased availability and affordability of legally downloadable music, these enforcement tactics actually resulted in a considerable reduction of Internet music piracy.

Legal online music services in the US like OD2, iTunes, Napster or Rapsody are expecting a healthy profit from their online sales. OD2 (the biggest European online music supplier) has reported that its sales are rising at the rate of 25% per month. There are no manufacturing costs involved, no CDs, no packaging or advertising material and the current price in Europe is just 99p a track.

The boom of the online music industry after the revival of Napster and similar sites as legal services has been compared to the dot.com craze in the late nineties. Virgin, Coca-Cola and Wall-Mart have already decided to capitalize on the ongoing trend and Starbucks are considering the same idea. This year’s music fair in Cannes showcased the massive range of other opportunities for investors in music and technology. Mobile jukeboxes and numerous other gadgets that can use downloaded music seem set to permanently revolutionize the way we listen to music.

So what can individuals and businesses do to successfully and safely publish copyright works – whether in the online music industry or otherwise? Here are a few key considerations:

1. Find out whether you have a right to enforce copyright on the works you are selling.

2. Advertise your copyright if you have it by placing a prominent copyright notice where appropriate. Also, post a prominent warning against breach of copyright on your website. (It is also a good idea to explain exactly what copyright means).

3. Keep yourself up-to-date on technological changes.

Carefully and promptly consider the challenges and opportunities those changes could bring to your business.

4. Seek legal advice on the best enforcement policy for your particular business. If your business sells works by other people, you will need to ensure they are protected as well.

5. Consider whether membership of/contact with anti-piracy associations like Alliance Against Counterfeiting & Piracy, FACT, Counterfeiting and Piracy (CAP) Forum or the Patent Office’s Enforcement Group can assist you in protecting and enforcing your rights.

http://europa.eu.int/comm/internal_market/en/indprop/piracy/munchen.htm

http://www.usatoday.com/tech/news/2003-12-19-riaa-loses-cour_x.htm

Proposal for a Directive 2003/004 (COD) on measures and procedures to ensure the enforcement of intellectual property rights, p.10, http://europa.eu.int/eur-lex/en/com/pdf/2003/com2003_004eu01.pdf

www.usatoday.com/tech/news/2003-12-19-riaa-loses-court_x.htm

Survey conducted by Yankelovich Partners for the Business Software Alliance (BSA) as cited in "Take a Byte out of Software" published by the BSA at http://www.bsa.org

Harbugh, R, Khemka, R, Does copyright enforcement encourage piracy?, Claremont Colleges, working papers in economics, August 2001

http://www.theregister.co.uk/content/6/35131.html

http://www.inq7.net/inf/2004/jan/25/inf_2-1.htm

http://news.bbc.co.uk/1/hi/entertainment/music/3498651.stm

Footnotes

^{1. Referring to Jon Lech Johansen, also known as ‘DVD Jon’ who broke the encryption code for DVDs and developed the programme which enables users to circumvent anti-piracy software for Apple iTunes site.}

2. Survey conducted by Yankelovich Partners for the Business Software Alliance (BSA) as cited in "Take a Byte out of Software" published by the BSA at http://www.bsa.org

© Pictons 2004

Pictons Solicitors is regulated by the Law Society. The information in this article is correct at the time of publication in April 2004. Every care is taken in the preparation of this article. However, no responsibility can be accepted to any person who acts on the basis of information contained in it. You are recommended to obtain specific advice in respect of individual cases.