E-Distribution: Digital Delivery of Sound Recordings,
Motion Pictures, and Literary Works
© 1999 Gorman & Williams
by:
Francis J. Gorman
Michael S. Yang
Gorman & Williams
fjgorman@gandwlaw.com
www.gandwlaw.com
Fax: 410-528-0602
Phone: 410-528-0600
September, 1999
Everyone knows that computers, software programs,
and e-mail have brought about dramatic and pervasive changes throughout
our society. They are here to stay. It is hard these days to
find a "stick-in-the-mud" who refuses to change his/her ways to adapt to
the new technology. For several years, electronic commerce ("E-commerce")
has been conducted on the Net -- the actual buying and selling of goods
and services over the Internet. More recently, we have been seeing
even more dramatic changes in the actual distribution channels for literary
works, sound recordings, and motion pictures and other visual works, bringing
E-commerce to yet another level of sophistication.
Wherever marketing, advertising, buying, selling,
and distributing goods and services takes place, issues relating to trademarks,
service marks, trade dress, and infringement will also be found.
Are established trademark and copyright law principles keeping up with
these commerce and distribution changes? How much will (or must)
these areas of the law change in order to remain the means to balance the
rights of the owners of intellectual property with the rights of users
and consumers?
I. TECHNOLOGY CREATES NEW BUSINESSES AND MARKETS
--
THE INTERNET AND E-DISTRIBUTION
A. Digital Media
Within the last few years, as technology has advanced,
digital media has become more and more of a reality. Where it was
previously unfeasible to deliver media electronically due to inadequate
transfer speeds or limited storage capacity, the advent and proliferation
of high speed transfer mechanisms, advanced compression technology, and
low-cost, high-capacity storage options have given consumers the ability
to take full advantage of electronic distribution.
Prior to the widespread, commercial use of the Internet,
which did not begin until five years ago, there was no convenient, universal
means for the average consumer to obtain digital media unless that consumer
was a BBS user or was fairly technologically proficient. The Internet,
with its point-and-click simplicity, has changed all of that. Now,
entrepreneurs have begun to take advantage of the Internet as an efficient
channel for distributing all forms of electronic, digital media, including
video, audio, and printed text.
B. Sound Recordings
Audiotapes and CD-ROMs may already be obsolete.
Albums by top recording artists will soon be released directly to, and
distributed to customers over, the Internet. Digital recording of music
and motion pictures will allow these creative works to be stored in your
computer's hard drive and/or transmitted as attachments to E-mail messages
over the Internet, just like text documents created with word processing
software programs.
You might say, however, "I will still need an audiotape
or a CD so I can play music in my car or watch the movie at home."
Not likely, because what is now your car radio and tape deck will, in years
ahead, be a hard-drive equipped computer in your car, and what is your
TV and VCR at home today in the years ahead will be a device that combines
your computer, your TV, your VCR or DVD, your CD-ROM player, your telephone,
and a lot more.
Today, with the introduction of sound compression
formats such as MPEG Layer 3 ("mp3") and Liquid Audio, and portable digital
music players such as Diamond's Rio, consumers can take advantage of the
availability of the many new sites which offer music downloads, most of
which are currently free. In a matter of minutes, that song (or album)
will be delivered straight to your hard drive, and can immediately be enjoyed
in full digital-quality sound.
Recently, major recording artists such as David Bowie
have released new albums on the Internet prior to their record store releases,
or, in the case of the David Bowie single "Telling Lies," without any record
store release at all. According to his label, this is the first time
that a complete album has been released via digital download through the
Internet. Read the recent USA Today
news article about this new release. For an excellent overview
of the music industry's growing use of digital distribution and digital
media, see the recent CNN
news article on the subject.
Major recording companies such as Sony Music have
also gotten in on the action. In addition to announcing recently
that Sony Music Japan would soon begin exclusive electronic distrubution
of portions of their popular music catalog in Japan, Sony has also gotten
into e-distribution domestically by announcing electronic distrubution
which would still have consumers venturing into music stores at their local
malls, but allow them to purchase custom-made compact discs, the contents
of which are electronically delivered to the stores. In a deal with
Digital-On-Demand, these music kiosks would give consumers some of the
benefits of digital distribution of digital media with the ability to have
physical components of the music package (e.g., silk-screened CDs and printed
booklets) delivered as well. Read the recent CNN
news article about this development.
C. Motions Pictures and Video
Hollywood filmmakers and producers are now committing
to releasing full-length motion pictures on the Internet. While high-quality,
full motion video is one of the most burdensome media formats to transmit
via the Internet due to its extremely large size, the technological advances
which are making file size less of an obstacle, coupled with compression
technologies which make files more manageable, are making direct, E-distribution
of motion pictures and videos a reality.
One company, Sightsound.com, will be debuting a motion
picture on its website, which viewers will be able to download for a fee.
Produced by Metafilmics, the production company which made the Robin Williams
movie 'What Dreams May Come,' an Academy-Award winner for Best Visual Effects,
the film, "Quantum Project," will be the first longer-length motion picture
to have its debut online. Read the recent Baltimore
Sun article about this new project.
D. Books And Literary Works
The Internet and the World Wide Web have, from their
inception, been a conduit for the transfer of text and information.
E-distribution has taken the dissemination of text and written works to
the next level, by allowing consumers to have entire volumes of books delivered
straight to their computers or hand-held devices.
While physical books may never truly become obsolete,
the newest batch of electronic books, may prove to be worthy competitors
if consumers are willing to give up paper and ink and curl up with a small,
hand-held computer. Electronic books allow users to purchase and
download full novels over the Internet, saving the reader a trip to the
bookstore and a bit of space on their bookshelf.
II. TECHNOLOGY CREATES NEW BUSINESSES AND MARKETS
--
THE INTERNET AND E-COMMERCE
If you and your friends plan to take a trip to Boston
to see the Red Sox play the Orioles in Fenway Park, you can purchase your
ticket from the Boston Red Sox organization in a matter of minutes using
your on-line computer in Maryland and your credit card. If you want
to buy a Pavarotti tape to send as a gift to your friend who took you to
the opera last week, you can select it, buy it, and ship it to your friend
in a matter of minutes at the Amazon.com web site using your on-line computer.
If you want to be pre-approved for a mortgage loan, you can fill out the
application on your computer, transmit it over the Internet to the mortgage
company, and receive your pre-approval by E-mail. This technology
has already created many new markets and many new businesses. But
even more dramatic changes are coming.
III. CHARACTERISTICS OF CYBERSPACE
This new world of E-commerce and digital distribution
over the Internet -- known as "cyberspace" -- will be hard to tame.
Copying is so much easier over the Internet, and in many instances, is
actually necessary in order to use browser software. Distribution
is so much easier, quicker, and more widespread over the Internet.
Controlling the content and distribution of literary, music, and visual
works is difficult over the Internet. Enforcement of legal rights
in the Internet context is new and uncertain.
For businesses, the issues are how to engage in E-commerce
and Internet distribution and at the same time sell and be paid for your
product. For governmental authorities, the issues include how to
identify and capture taxable transactions and collect sales taxes on those
transactions. For lawyers, the questions from clients are how the
existing rules of law apply to this dynamic new technology and what remedies
and enforcement measures are available and effective.
IV. TRADEMARK AND COPYRIGHT INFRINGEMENT LAW
A. TRADEMARK INFRINGEMENT
A suit for trademark infringement of a federally-registered
trademark may be brought in a United States district court or in state
court, and the court may grant as remedies injunctive relief, monetary
damages, and/or destruction of the infringing articles. In addition,
there are federal criminal penalties for certain trademark infringing activities.
Many state statutes provide civil and criminal remedies for trademark infringement
as well. If a user wishes to provide notice to the public that they
are asserting rights in a trademark or service mark, but do not wish to
go through the federal registration process in order to obtain the right
to use the ®, the user of a mark may use the initials "TM" or "SM"
in connection with the sale of the goods or the providing of the services.
Although not infringement, the failure to designate
on a product the foreign origin as required by § 304 of the Tariff
Act of 1930 can constitute a violation of § 43(a) of the Lanham Act.
For the protection of manufacturers, there are provisions making purposeful
deceptive use of trademarks a federal crime (18 U.S.C. § 2320, dealing
with trafficking in counterfeit goods or services). There is also
a federal anti-dilution act, the Federal Trademark Dilution Act of 1995,
and many states have established state anti-dilution statutes. These
statutes aim to prevent harm to the goodwill established in a product name,
damage to the reputation of the business interests of the owner, and confusion
to the public. The legislative history behind the Federal Anti-Dilution
Act can be found at House Report No. 104-374 (dated 11/30/95).
TRADE NAMES
Trademarks should be distinguished from "trade names."
While a trademark is a mark used to distinguish a person's or business's
goods, a trade name is a name, word, or phrase employed by one engaged
in a business as a means of identifying his products, business, or services,
and it may be used to indicate part or all of a firm or corporate name,
or an abbreviation thereof. Trade names are often signified by "d/b/a,"
denoting that a business or individual is "doing business as" or under
a different name. Commonly, trade names will acquire a special significance
or secondary meaning.
Trade names are also protected, and may be infringed
if another person uses, in business, a designation which is identical with
or confusingly similar to a pre-existing trade name. Most states,
including Maryland, require trade names to be registered with the state.
In Maryland, the party desiring to use a trade name must file an application
with the State Department of Assessments and Taxation to do so.
Trademark issues relating to domain names on the
Internet may also arise. If multiple companies with the same trade
name attempt to register the same mark concurrently, Network Solutions,
Inc. ("NSI") (which currently administrates all of the domain name registrations)
will only allow one of the companies to register a unique name commercially.
NSI, along with AT&T, took over domain name registration under government
contract from InterNIC, a service originally coordinated by the National
Science Foundation to handle domain name registration.
B. COPYRIGHT INFRINGEMENT
The test for determining whether copyright infringement
exists, i.e. whether copying has occurred, requires (1) proof of substantial
similarity between the allegedly-infringing work and the copyrighted work,
and (2) showing access by the alleged infringer to the copyrighted work.
With respect to the other rights of a copyright owner, for example, the
right to distribute, infringement would require proof that the infringer
distributed or sold the copyrighted work without authorization.
The test for whether infringement of a computer software
program has occurred also requires a showing of "substantial similarity."
In this context, determining substantial similarity requires a 3-step process:
breaking down a copyrighted program into its constituent structural parts,
examining each part in order to sift out unprotectible material such as
material taken from the public domain, and comparing the protectible material
in the copyrighted program with the allegedly-infringing program.
However, when dealing with other types of copyrightable subject matter
(e.g., motion pictures, sculptural works, etc.), courts have articulated
different tests for determining infringement.
There are both civil and criminal remedies for copyright
infringement. On the civil side, the copyright holder is entitled
to an injunction to prevent infringement. The copyright owner might
also receive actual damages plus the infringer's profits, or in a case
where actual damages or profits are nonexistent or very low, the copyright
owner may seek statutory damages which are an amount authorized by statute
to be fixed by the court for each infringement ranging from $500 to $20,000.
A copyright owner may also have a court authorize the seizure and/or destruction
of infringing items. With respect to criminal remedies, if the infringement
is willful and the governmental prosecuting authority brings indictment,
the punishment is for up to one year of imprisonment and $10,000 in fines.
Penalties for record and tape piracy are higher. With respect to
electronic privacy, see the Federal Electronic Privacy Act, 18 U.S.C. §
2510 and the Maryland state statute at § 10-402(c) of the Courts and
Judicial Proceedings Article.
In October, 1992, the Copyright Act was amended to
extend the criminal penalties for copyright infringement. The Copyright
Act now has uniform penalties for infringement of all copyrighted work.
If it is willful infringement for commercial advantage -- the punishment
is a bit complicated and is structured -- it includes imprisonment for
a substantial period of time and fines up to a maximum of $250,000 for
individuals and $500,000 for organizations.
There are federal provisions making willful infringement
of a copyright a crime. 17 U.S.C. § 506. There is now
a federal anti-bootlegging statute (which will now stand alongside existing
state statutes) which prevents the unauthorized fixation of live musical
performances including protecting against their further reproduction, distribution,
or public communication.
A defense against copyright infringement is the "first
sale doctrine." A person who lawfully obtains title to a copyrighted
work as a result of an authorized sale has full ownership rights and may
distribute, sell, or otherwise dispose of or use the copyrighted work.
There are no implied licenses under copyright law in the sense that there
are no such things as "shop rights" in copyright law.
V. THE PROCESS OF RESHAPING IP LAW PRINCIPLES TO
ACCOMMODATE
THE REALITIES OF CYBERSPACE.
The advantages of a free enterprise system, open
markets, and a common law tradition are already producing changes to intellectual
property law principles in order to make them effective in cyberspace.
This process will be global and international because
the Internet (and the commerce and distribution done on it) are global
and international. The minimum levels of uniformity in trademark
and copyright law required of all member nations in the World Trade Organization
and the 1996 World Intellectual Property Organization treaties dealing
with copyrights and with sound recordings are just two examples of how
intellectual property law principles are being developed on an international
level. Nations which want their people to participate in global trade
and financial markets will conform their national laws to these developing
international principles.
In the United States, the combination and interaction
of legislative and judicial actions -- on both the federal and state levels
-- has begun the process of reshaping and expanding our intellectual property
law principles. The statutory pillars in trademark and copyright
law, the Lanham Act and the Copyright Act of 1976, still stand strong and
tall, but new statutes are coming along each year. For example, the
Digital Millennium Copyright Act of 1998 contains two titles, one entitled
"WIPO Copyright Treaties Implementation Act" and another entitled "On-Line
Copyright Infringement Liability Limitation Act." The Communications
Decency Act of 1996 was quickly challenged in court on constitutional grounds
and resulted in a prodigious three-judge opinion with a comprehensive description
of the Internet, its history, and its capabilities. See ACLU v. Reno,
929 F. Supp. 824 (E.D.Pa. 1996).
Human beings are by nature adaptable. If past
is prologue, we can be reasonably confident as attorneys that we can reshape
the law as necessary in the years ahead in order to (1) provide some certainty
to those who do business on the Internet, and (2) a balance among the competing
interests.
