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« Selling Out Your Shows Every Time | Main | The Individual Edition CD »
Wednesday
Aug182010

Four Cases You Need to Know About and How They Affect The Music Industry, Part 2 with Joyce Dollinger

Last week I posted the first two cases that Russell Rains, (Program Director for the Digital Media Management MBA program at St. Edwards University), talked about at the welcome lunch the SPOT Festival

These cases are complex and frankly had me a bit confused, so I asked my dear friend and attorney Joyce Dollinger who ‘unconfuses’ me on a daily basis to contribute her view as an entertainment lawyer and my go-to woman.

Case 3: Content Vs. Delivery
This case represents the people who own the art versus the technology.

Comcast Corporation vs. Federal Communication Commission and United State of America [United States Court of Appeals, D.C. Circuit]
  
Who regulates the Internet in the United States? This is a profoundly important question for the music business, no matter what level you are on (indie artist, major label, writer, producer etc.)

It turns out there is no definitive answer.  In other words, it is not clear who regulates the Internet. There was an assumption that it was the FCC because of net neutrality (the theory that everyone should have equal access to all parts of the Internet).

However the people who built the pipes that support the Internet (ISPs or Internet Service Providers) think that this notion is ridiculous.  In their opinion if you use more of their bandwidth you should pay for more.

The appeals court in the District of Columbia ruled last month that the FCC does not have that authority. This shocked everyone in the music industry - if the FCC does not have the authority, then who does?

AH: Why did this case happen? And what caused it to get to the courts?
RR: Comcast challenged a 2008 FCC order banning the company from blocking its broadband users from using BitTorrent [a file sharing technology used for large film and music files].  Comcast in effect appealed the ruling and surprisingly the D.C. Circuit Court agreed with Comcast, stating that the FCC lacked the authority to issue the order thereby undermining the FCC’s adoption of the net neutrality policy.  Net neutrality is an attempt to keep the Internet free from usage discrimination.   In other words, net neutrality views all Internet traffic equally regardless of bandwidth consumed.  By many, this policy has been seen as protecting the growth of the Internet; however, entities responsible for the build out of the “pipes” feel that consumers should be charged according to the amounts of data transferred.

AH: How this will affect the music career of an independent artist?

Joyce Dollinger: One of the reasons why the FCC sued Comcast was that the FCC thought that the ISPs (owned by the telephone and cable companies) should not be able to play favorites with the content that goes over the Internet network “pipes.”  Therefore, it filed a complaint to prevent Comcast from blocking access to legal peer-to-peer content, which Comcast was doing by interrupting Internet connections between the users’ computers and the Internet network “pipes.”  The FCC lost its case and the ruling called into question who now controls the Internet “airwaves” (big business or government).  Since there was not a definite answer on net neutrality, it further increased the disparity on that issue.  But with the outcome being in favor of Comcast, if the ISPs wanted to, they could literally shut off Internet network access – just like a light switch. 

Artists, especially independent artists, depend on the openness and freedom of the Internet to survive and thrive in their careers.  Independent artists run their businesses online: they sell music, tickets and merchandise; send emails out with press kits attached; chat with team members and fans; book gigs, and on and on… So for independent artists especially, this may impact their daily existence because they are not in control of their own destiny and most importantly – they are not in charge of their own music distribution.  Until there is a definite ruling on the matter of Internet control, the ISPs seem to be in control of the Internet “airwaves” and they may now block the Internet network delivery and sales of their music and ancillary products, including merchandise and ticket sales. 

Therefore, the net neutrality issue in this case is extremely important to independent artists; they need to have access and be able to compete on a level Internet playing field.  They need to have access to the “airwaves” so that they can create their intellectual property – their music – and work within legitimate online distribution mechanisms that they know will stay open to them so that fans can receive their music.  Additionally, they need access to broadband for their business dealings since music and video files are big and without broadband we would potentially be back to the Internet caveman days where you would need to wait all night for a file transfer to complete. This would end up hindering the speed with which artists would be able to sell and distribute music, especially in the fast, instant gratification world in which we live.

Further in scope, it could affect how independent artists connect and socialize with their fans using social media mechanisms. Since the future of music is necessarily tied to the Internet, this could negatively affect all entities in the industry, including major record labels like Universal and Warner, indies like Beggars Group and Wind-Up, retailers like iTunes or the Orchard, and Internet radio like Pandora or Grooveshark - both directly and indirectly.

AH: Anything you may want to say about why this case is so important?

JD: This case is so important because it gives power, control and responsibility to the ISPs and takes that out of the hands of government.  They basically become the content gatekeepers.  Further, it allows the ISPs to self-regulate and make judgment calls on what they think is appropriate use of the Internet network “pipes.”  However, depending on what side of the scale you stand on in regard to what is copyright infringement versus copyright protection, the ISPs may provide a high level of copyright security if the ISPs believe that the delivery of certain content over their network “pipes” is infringing various copyrights and will prevent the infringement from occurring. 

Additionally, the case is important because it is a case if first impression on this matter and the courts specifically rejected the FCC’s first try to enforce its net neutrality policy.  As such, this ruling will likely force Congress to reassess, and/or reclassify, Internet services under the Federal Communications Act and therefore provide the FCC with statutory authority to regulate the ISPs’ business practices.  However, due to high public policy concerns of governmental regulations of the Internet as a whole, some case law analysts suggest there should be Congressional support first.

Case 4: The Anti Counterfeiting Trade Agreement
Note: This is not a case but rather an international agreement being negotiated by the office of the United States Trade Representative and several other countries. 

This agreement includes many countries including the USA, European Union, Australia, and some parts of Asia. This treaty looks to reach an agreement on a very large scale. To reach enforcement of Intellectual Property laws including trademarks, patents, and copyrights (not just music and film) - including pirated merchandise like Gucci handbags and counterfeiting of prescription drugs. The end result is that there will be some coordination between these countries and some consistent way to enforce polices. This will most definitely affect the transfer of music.

AH: Why did this agreement come about?
ACTA would establish an international framework to more effectively combat the proliferation of counterfeiting and piracy.

AH: How this will affect the music career of an independent artist?
RR & JD: This proposed agreement is supposed to be about protecting consumers from counterfeit merchandise and medical drugs.  It also addresses creating international standards for regulating the Internet to prevent unauthorized sharing of copyrighted works and copyright abuse by making ISPs liable for illegal content in part.  What this means for independent artists is that this proposed agreement would potentially strengthen their intellectual property protections and enforcement of their music and merchandising rights in the physical and online worlds in countries that would be signatories to the proposed agreement.  So if an independent artist saw that their music was being transferred online without their consent in a country that was part of the proposed agreement, they would be able to follow the proposed agreement’s enforcement procedures for recourse.  Additionally, US Copyright laws affecting ISPs [under the DMCA] will be mirrored in most industrialized countries around the world.

However, this proposed agreement has been fraught with controversy.  Most opposition groups believe that the drafting and negotiation of this proposed agreement has not been transparent. It has mostly been conducted behind closed doors in secret meetings. As the proposed agreement has not been available for public review or comment; certain parts have been leaked out.  Also, if the proposed agreement goes through, it technically becomes a treaty since other countries will be signing it and it will obligate the US to legally enforce it which might change some US Copyright laws.   

AH: Anything you may want to say about why this is so important?

RR: After several years, the negotiations are continuing in Switzerland this summer. Many feel that the main point is that ACTA could make the US’s DMCA an international phenomenon or mechanism, especially regarding ISPs. [See LimeWire above re: liability from inducing others to infringe copyrights].    

###

About Joyce Sydnee Dollinger:
Joyce Sydnee Dollinger of counsel with Dollinger, Gonski and Grossman, practices in the entertainment law field and concentrates on music and media law transactions in addition to corporate and business entity dealings and some film and television representation.

Joyce and has worked in different capacities for major and independent labels such as BMG, Motown and Palm Pictures.  She was also co-founder of a concert-promotion company and serviced as vice president and in-house counsel for a talent management firm.  She is frequently asked to be a guest speaker on topics surrounding entertainment law, careers and artist management.  She was the acting CLE Program Chair and Program Director of an all-day Music Business Law Seminar, which she created and produced with CMJ.

Admitted to practice in the States of New York and Florida, Ms. Dollinger is a graduate of Bucknell University and the University of Miami School of Law.  Joyce lives and works in New York and may be reached at: jdollinger@dgglawoffices.com

Reader Comments (1)

Good post, but there are more than a few factual inaccuracies that should be clarified or fixed.

1. "In their opinion if you use more of their bandwidth you should pay for more."

Charging more for bandwidth has nothing to do with net neutrality. This statement is misleading. As it stands now, ISPs are perfectly free to charge more for more bandwidth, and some (outside the US) do this already, and a few US ISPs have experimented with such pricing. This has nothing to do with net neutrality.

The actual issue with net neutrality is not charging you more for the bandwidth *you* use... it's charging the *service providers you access* more for the bandwidth *you* use. This is a bit complex, but it's important. As it stands right now, everyone pays for their bandwidth. Google pays for all of its bandwidth and you, at home, pay your ISP for the bandwidth you use.

What the ISPs are attempting to do is to doublecharge. That is, even though you pay for your bandwidth, and Google pays for its bandwidth, it ALSO wants Google to *pay again* every time you decide to visit Google. Yes, even though each of you have already paid for your bandwidth.

That's one aspect of net neutrality. The other is that it could potentially then favor certain types of access or services, and potentially degrade others. For example, a provider that offers a VoIP service, could degrade or block competing VoIP services. Or, in the context of the music world, in theory, without neutrality, an ISP could, say, do a deal with Amazon to promote its music store and slow down or block iTunes.

However, the reality is that almost any ISP that tried to do such a thing would get tremendously bad publicity for it, and it would probably backfire. The "fears" that without official net neutrality iSPs would definitely block services is a bit overblown.

2. This shocked everyone in the music industry - if the FCC does not have the authority, then who does?

I'm not sure that's really the question that people were asking. Not everything is "regulated."

3. This case is so important because it gives power, control and responsibility to the ISPs and takes that out of the hands of government.

I recognize this is an opinion statement, but it's a bit misleading. It implies that the government already had the "power, control and responsibility" in this arena. The District Court made it clear that they never did. Historically, the internet has been self-regulated for the most part, so the government didn't technically lose any power here -- it was just told that its attempt to step in and regulate went beyond its mandate.

4. "This treaty looks to reach an agreement on a very large scale."

This is a really far down in the weeds point, but it becomes important. Technically, this is NOT a "treaty," but an "executive agreement." Part of the debate has been over how influential ACTA would be, and what it's power would be in changing laws, so how it's classified is important. Defenders of ACTA point out that while a treaty can lead to changes in US law, an executive agreement legally cannot change US law.

Others, however, will point out that this is a bit of semantics. While an exec agreement has less direct power to influence laws, lobbyists will still strongly point to the agreement and argue for changes to the law due to our "international obligations."

But, most importantly, a treaty needs to be ratified by the Senate. An executive agreement does not. That means, one of the big problems with ACTA is that there will be no ratification process by the Senate, so no oversite or public debate about it.

5. "To reach enforcement of Intellectual Property laws including trademarks, patents, and copyrights (not just music and film) - including pirated merchandise like Gucci handbags and counterfeiting of prescription drugs."

Some of this is still being argued. The US is actually looking to take patents out of the discussion, while Europe is trying to make sure patents are included. Either way, ti may be premature to say that patents are covered by ACTA.

6. "Additionally, US Copyright laws affecting ISPs [under the DMCA] will be mirrored in most industrialized countries around the world."

This is mostly true, but some of the concerns is that some of the proposed language appears to go further than the the DMCA. For example, it seems to export all of the enforcement mechanisms, but not the exceptions (fair use, safe harbors) which should be of tremendous concern to musicians who rely on fair use for their creative endeavors.

On top of that, the current text would effectively lock in certain aspects of US copyright law that is entirely caselaw created, rather than Congressionally created. For example, the entire issue of "inducement" comes from case law. Congress specifically chose NOT to pass a bill that would have made secondary copyright infrignement via inducement against copyright law -- but the courts chose to rule that inducement broke the law anyway. ACTA's current language appears to lock this in, such that Congress would have trouble going back later and adjusting the standards for secondary liability.

7. "As the proposed agreement has not been available for public review or comment; certain parts have been leaked out."

The entire document leaked. Also, at the end of April, an official draft copy was released following that round of negotiations. However, following the last round of negotiations, in Switzerland, the new draft was not officially released, but did leak out a few weeks later.

Apparently, the US negotiators blocked the official release of the document, and used it as a bargaining chip to try to get Europe to drop patents from being covered by ACTA.

On Friday of this week, the current round of negotiations in DC will end with a discussion on whether the latest draft will be officially released again.

8. "Also, if the proposed agreement goes through, it technically becomes a treaty since other countries will be signing it and it will obligate the US to legally enforce it which might change some US Copyright laws."

Again, this is incorrect. It does not become a treaty, and *technically* it cannot obligate the US to legally enforce it or to change copyright laws. *Practically* speaking, however, it could have that impact, as there will be pressure to abide by "international standards."

9. "After several years, the negotiations are continuing in Switzerland this summer."

Not sure when this interview was conducted, but the Swiss negotiations ended a while ago. There's a current round going on this week in Washington DC and the next round is expected to take place in Japan at the end of September.

Anyway, I don't mean to nitpick, but you're right that these are important issues, and I think it's important to make sure the discussions are factually accurate. The larger themes in the post are correct, but some of the details are not quite right, so I hope this helps.

August 19 | Unregistered CommenterMike Masnick

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