Hearing Held on the Intricacies of Digital Copyright Laws

The legal battles that have surrounded the evolution of digital media, rivals even the U.S. electoral process. With the highly publicized wars against Napster and MP3 moving from the courtrooms to the boardrooms, in search of the business plan that will reign in the rebels, the less glamorous squabbles over the details of the Digital Millennium Copyright Act (DMCA) have entered the spotlight.

When the DMCA was enacted into law on October 28, 1998, it held a provision that the Register of Copyrights and the Assistant Secretary of Commerce for Communications and Information, prepare a report for the Congress on certain aspects of the law. Public hearings were opened in June for interested parties to plead their cases -- the final hearing was held Wednesday, November 29, 2000.

At the hearing, representatives of the old guard of the record and publishing industries, faced off against that of new digital media and distribution companies at the U.S. Copyright Office. The Digital Media Association (DiMA) was joined by companies such as RealNetworks, Launch Media, and MusicMatch to argue their side against representatives of the Recording Industry Association of America (RIAA), Association of American Publishers, and National Music Publishers' Association, among others.

One of the main issues under scrutiny at the hearing was the "first sale doctrine" which defines the legal reselling of traditional media, such as books and CDs and how this is extended to digital media. Steven Metalitz, representing several traditional media publishing institutions, including the RIAA, argued that the existing law should not be amended to cover digital transmissions, stating that the current law is sufficient: "The first sale doctrine continues to apply with full force in the digital environment." Representatives of digital media companies disagree.

Alex Alben, on behalf of RealNetworks, in a statement of intended testimony stated: "Consumers need and deserve the same rights for digitally-acquired content as for physical media. Restrictive license agreements imposed upon today's downloading consumers impede the development of legitimate e-commerce in music, and limit the inherent flexibility and value proposition offered by digitally-delivered content."

Another issue addressed, revolved around whether backup files of computer programs, or digital media files, fall under a copyright owner's reproduction rights. Digital media companies argued that given the unstable nature of hard drive storage, a consumer has the right to backup their files without infringing copyright owners. Both sides used this opportunity to open discussion on the nature of incidental copying which could have a tremendous impact on the future of webcasting.

Traditionally when a CD is copied for resale, a mechanical royalty is paid to an agency representing music publishers. Under an amendment made in the DMCA, those owning the mechanical rights could charge webcasters a royalty each time the property is streamed, due to a temporary copy that is created during the buffering process. Webcasters argued that this copy is merely "incidental" and should be exempt from a mechanical fee.

Wolfgang Spegg, president and CEO of Musicmusicmusic, which has a streaming radio service, feels strongly that royalties should be paid and was one of the first companies to negotiate licenses from the record labels for streaming music. However, Spegg argued that charging a mechanical royalty fee on each stream would not allow for a viable business model for webcasters. Spegg was not present at the hearing.

Metalitz, representing copyright owners said, "enacting the proposed 'incidental copies' exception would undercut the reproduction right in all works. "

The law currently sides with the copyright owners, though to date it has not been successfully acted upon. Jesse Feder, of the U.S. Copyright Office stated: "Though claims have been asserted, I haven't heard anyone say they have paid a mechanical royalty for the [temporary copy created in streaming] and there is currently no set rate for this fee."

The Copyright office is scheduled to submit its report to Congress on February 28, 2001.