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Promises to Keep by William W. Fisher III (Stanford University Press, 340 pages, $29.95) Digital technologies, which have brought us MP3 music files, Napster, and iPods, are transforming the entertainment industry, but not always in a good way. Sure, the new technologies mean that huge customized music playlists can be crammed into tiny players and perfect reproductions of audio and video files can be zipped around the world at the click of a mouse. Yet the technologies have also led the entertainment industry to deliver stern lectures about the evils of digital piracy to their customers and to haul petty miscreants into court. The industry persuaded Congress to pass the Digital Millennium Copyright Act to jail inventors, programmers, and even academics who, in the industry’s eyes, might aid or abet infringement of its valuable intellectual property. Meanwhile, entertainment artists receive surprisingly few of the dollars that their creativity generates. Little wonder that William W. Fisher III, who teaches intellectual property at Harvard Law School, thinks the current copyright system is running amok. In Promises to Keep, he argues that the only way to compensate artists fairly and to ensure continued open access to their intellectual property in a digital age is to administer a public system of compensation. The entertainment industry’s views are well-known. The pirates among us “rip” digital copies of music CDs and pass them around via the Internet for free. The same thing happens, to a lesser extent at the moment, to motion pictures on DVD. Since this file sharing deprives copyright owners of their royalties, it should be stopped at all costs. That is what the industry believes. Fisher too is concerned about this sorry state of affairs, but his solutions are different. He believes the present copyright law, as it applies to digital technologies, is out of sync with the consumer’s sense of morality. Moreover, the system as a whole fails to compensate artists fairly, encourages inefficient distribution of publicly important intellectual property, and threatens to lock up content. In short, digital technologies are not living up to their promises, and they never will unless the system is changed. Fisher starts by telling about a lecture he gave a few years ago in Rio de Janeiro to 700 lawyers, judges, and law students. The Napster system for sharing music files over the Internet had been declared illegal by a trial court in the United States, and so Fisher asked how many in his audience had downloaded music. To his surprise, about half of those at this legal gathering had done so. Fisher observes: “[T]he scale of the illegal behavior enabled by Napster and the brazenness with which it is acknowledged are striking. After all, the audience consisted almost exclusively of people upon whom we rely to interpret and enforce the law. Something is dangerously out of whack if half of them knowingly violate the law and, moreover, have no compunctions about admitting as much.” From this beginning theme, Promises to Keep examines the reality of how the entertainment industry uses intellectual property. It is reminiscent of the way sausage was once made. Squeamish readers may not want to know. Fisher dissects the system of compensation to trace how much of the consumer’s dollar ultimately reaches the artists who compose music, record songs, write screenplays, and act in movies. The system leaks money at every turn. Fisher’s lucid descriptions of the cash flows will knock your music-loving socks off. He quotes musician-turned-lawyer Beau Brashares: “This is why a major [record] release frequently needs to sell 500,000 copies � go gold � before sales proceeds begin reaching the band’s pockets. And while the labels lack imagination in most respects, they are notoriously creative when it comes to accounting. All in all, the deal offered to artists by a major record label is, you get the glory, and we get the money.” Fisher cites studies showing the combined royalties of song writers and performers amount to between 14 percent and 16 percent of the retail price of a music CD. Managers and lawyers rake in an estimated 2 percent. Producers, record companies, and middlemen get the rest. Whatever merit the current, labyrinthine payment structure may have for the distribution of vinyl records and CDs, Fisher says it makes no sense in a digital age where entertainment can be transmitted over the Internet. Besides, the industry seeks to avoid risk by using proven artists. Thus, Fisher characterizes the recording business as “winner take all” with a few musicians hitting it big while the rest starve for compensation. The film industry is no different. Big stars like Mel Gibson, Dustin Hoffman, Arnold Schwartzenegger, and Meryl Streep command up to $20 million for leading movie roles while far lesser amounts trickle down to the rest of the actors and other artists. The concern is not merely with the system’s fairness, or lack thereof, but also with its economic inefficiency. For example, between 1980 and 1990 � well before Napster came along � the entertainment industry’s yearly output of record albums dropped from 4,000 to 2,000. During the same period, the annual number of films released was virtually unchanged, but box-office revenues doubled. In other words, the entertainment industry acted like a classic monopolist, reacting to increased demand by limiting output and raising prices. But what kind of property is this “intellectual” property. Is it like a chattel or land? How should it be treated? And why shouldn’t copyright holders be free to control their property in whatever way they want? Fisher looks at the package of rights. Intellectual property, he points out, has important social purposes. It not only brightens and enlightens our lives, but also expands our thought. It provides the content and the context of public debate. There is, therefore, a tug between the private interest of the copyright holders to use their monopolies to maximize profits if they want and the public interest in ensuring the widest possible dissemination of ideas and entertainment. There are also historical constraints on copyrights, including the constitutional limitation that they can last only for a fixed term. Furthermore, Fisher argues, the law should be encouraging, not discouraging, artists who want to use new inexpensive digital technologies to prepare derivative works from copyrighted music and images to expand the culture. Thus, under the present scheme of copyright regulation, the highly concentrated entertainment industry has every incentive to limit output so as to maximize profits. Digital technologies permit it to control distribution of its product so tightly that it could, if it wanted, charge for each and every playing of a song and viewing of a movie. Carrying this power to the extreme, the entertainment industry could lock up in perpetuity every lyric, tune, sound, and image that passed through its hands. Indeed, Fisher points out, if the industry had a foolproof means for encrypting records and films, it would not even need copyright laws. Five hundred years from now, CNN could still charge people for the images of Sept. 11 that are in its film archive; the Walt Disney Co. would still earn money from children watching Mickey Mouse; and the Beatles’ “Strawberry Fields Forever” would be literally true. Fisher believes intellectual property is a public good, like a lighthouse erected to warn ships away from a rocky coast. The lighthouse is socially desirable, but how can the builder get compensated? Once the light is in operation, every sailor benefits whether or not he pays. By the same token, a music CD, once converted to MP3 format, can be freely made available to anyone, and so how can the artists get paid? Fisher proposes several alternatives. The best, he believes, would be one by which the government compensates copyright owners based on the popularity of their works either from user fees on broadband Internet access or from taxes: “Using techniques pioneered by American and European performing rights organizations [such as ASCAP and BMI] and television rating services [e.g., Nielsen], a government agency would estimate the frequency with which each song and film was heard or watched by consumers. Each [copyright] registrant would then periodically be paid by the agency a share of the tax [or user fee] revenues proportional to the relative popularity of his or her creation. Once this system were in place, we would modify copyright law to eliminate most of the current prohibitions on unauthorized reproduction, distribution, adaptation, and performance of audio and video recordings. Music and films would thus be readily available for free.” He also outlines alternative, nongovernmental solutions although, he points out, Congress has previously enacted public compensation systems for such things as cable television carriage of television broadcast stations, certain types of digital audio recordings, and Webcasting. His is a persuasive case conceptually. Who could argue with a system that would make more entertainment available at significantly lower prices to consumers, fully compensate the artists, and cut out unproductive middlemen? Unfortunately, the answer may be the middlemen that get up to 84 percent of your entertainment dollar and shortsighted artists together with the lobbyists they will hire. Promises to Keep is an intelligent call for reform in the entertainment industry’s intellectual property business. Fisher’s approach, while scholarly and genteel, is no less significant a critique of the 21st century entertainment industry than Upton Sinclair’s novel The Jungle was of the corruption and filth in the meatpacking industry at the turn of the 20th century. Besides, for those not fortunate enough to have taken Fisher’s class on intellectual property at Harvard, this book is the next best thing. Perhaps better. Reading it is like joining him on an imaginary drive south along California’s coastal highway from Silicon Valley to Hollywood. The destination is provocative, and the journey itself is spectacular and edifying. D.C. lawyer James H. Johnston is a frequent contributor to Legal Times. He may be contacted at [email protected].

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