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What happened to the days when “Dead Heads” traded bootleg tapes of Grateful Dead concerts? Today, Dead Heads, die-hard Dave Matthews Band fans and even classical music aficionados collect and trade digital music files, known as MP3 files. MP3, which stands for MPEG1, or Moving Picture Exports Group 1, is an audio compression file format. The format allows music lovers to trade music files over the Internet with the click of a mouse. An MP3 file compresses music data while retaining crystal-clear sound quality. When you compress a music file, it uses less storage space and you can download it or send it more quickly than in its original format. You can now transfer a song over the Internet in a few minutes rather than a few hours. You can download, listen to and even trade MP3 files at several different Web sites, including www.MP3.com, www.napster.com and www.spinner.com. At www.MP3.com, you can even create your own online jukebox and your own online “radio” station. You can search for your favorite song, songs by your favorite band or songs of your favorite genre with MP3 search engines like www.mp3now.com. Some Web sites host MP3 file barter exchanges and only allow you to download an MP3 file after you upload one. THE MP3 BATTLE The fans have embraced the MP3 technology because it allows them to forgo paying $15 or more for a CD. Now, music comes fast and free. Naturally, the recording industry is seething. It claims that a musical “black market” has developed. The industry is losing millions of dollars in copyright licensing and royalty fees, and would like to control the online music market. The recording industry never felt too threatened by the black market bootlegging industry in the 1980s. Music thieves still had to buy the tapes, and the dubbed tapes had so much background buzz that by the fourth generation copy, listeners could hardly hear the music. MP3, however, has really caught the attention of the music and recording industry because there is no loss in fidelity even after multiple generations. Each copy of an MP3 music file sounds as good as the original. Industry members claim that MP3 “traffickers” are violating U.S. copyright law. The Recording Industry Association of America is an industry group representing more than 500 companies that engage in the creation, manufacturing and distribution of music. Company members include Sony Music Entertainment Inc. and the Warner Music Group. RIAA is leading the fight to require MP3 Web sites to obtain proper licenses and pay legally mandated royalties. To understand the MP3 controversy, you need to know a little bit about copyright law. The Copyright Act of 1976, as amended, provides protection for “original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced or otherwise communicated, either directly or with the aid of a machine or device.” Copyright law provides that the creator of a work owns the copyright. When a musician owns the exclusive right to a piece of work, copyright law allows the artist to do just about anything with her creation. She can copy it, sell it, give it away or perform it. An artist can also freely transfer her copyright to a music publisher or recording company. Generally, copyright law dealing with music is very complicated. One reason that even experts in the area sometimes are perplexed is because the law makes distinctions between copies and phonorecords. Simply speaking, a copy refers to sheet music and a phonorecord refers to the tape or compact disc. You should be aware that these legal distinctions exist and that a copyright holder’s rights may differ depending on the technology involved. In 1992, Congress passed the Audio Home Recording Act (AHRA). This is the law that allows you to make an audio recording for your own, noncommercial use. In 1995, Congress passed the Digital Performance Rights in Sound Recordings Act (DPRSRA). This act gave record companies a limited performance right in sound recordings. In other words, it gave record companies the right to receive royalties for the digital audio transmissions of recordings for which they hold a copyright. Congress passed the Digital Millennium Copyright Act in 1998 to clarify certain issues surrounding the DPRSRA, including the fact that it applies to the streaming of audio over the Internet. As the recording industry claims that the MP3 market is wholeheartedly ignoring copyright law (and as it hasn’t figured out a way to control the market itself), it’s going after copyright violators in full force both in and out of court. WHAT’S AT STAKE? Violation of copyright rights may expose you to civil and criminal liability. For example, the No Electronic Theft Act (NETA) imposes criminal penalties for copyright infringement by electronic means. A first offense could land you in prison for three years and expose you to heavy fines. As authority for its position that MP3 has turned copyright law on its head, the recording industry also points to the Federal Anti-Bootleg Statute. In other words, you may want to think twice before uploading the concert you just recorded at the Nissan Center. If you own or operate an MP3 Web site, whether you plan to distribute the files by streaming or downloading, you should first obtain an appropriate license. If you don’t, you may wind up defending yourself in court. Others have. CURRENT LITIGATION The recording industry has looked to the courts on several occasions in an effort to enjoin MP3 Web sites from violating its rights. In 1998, the RIAA filed one of its first major cases dealing with MP3 against Diamond Multi-Media Systems for alleged violations of the Audio Home Recording Act. The RIAA claimed that Diamond’s Rio MP3 Player violated the AHRA because it was a digital audio recording device that did not have any system for preventing the copying of copies. In other words, it didn’t protect the copyrights of the music that it reproduced. While Diamond won at both the trial and appellate levels based on highly technical issues, the parties eventually settled out of court in an undisclosed settlement. In December 1999, RIAA sued Napster, a company that facilitates MP3 bartering by distributing software that allows users to search for and download MP3 files. The key to the Napster case, and one of Napster’s main defenses, is that it only facilitates the MP3 trade distribute the actual music. When the court decides this case, it should serve to clarify the liability of companies that only facilitate the exchange of online music but seemingly don’t get involved in its copying or distribution. In another interesting case, in November 1999, Jeffrey Levy, a student at the University of Oregon, pleaded guilty to violating the No Electronic Theft Act. Levy decided to upload and distribute tons of copyrighted material, including more than 1,000 MP3 files. You can imagine the heyday fraternities and sororities had at parties. In this case, the court convicted Levy for violation of NETA. Levy got off pretty lightly, though (probation and limited Internet access). Carnegie Mellon University punished its students for using the university’s intranet for MP3 swapping by stripping them of Internet access and requiring them to attend a lecture on copyright infringement. The MP3 debate is likely to continue. Law always develops behind new technologies. As of now, we still have free trading of MP3s and all this controversy. I suspect it will take another couple of years before Congress and the courts figure our how MP3s fit into the copyright scheme. Mark Grossman leads the computer and Internet law department of Becker &Poliakoff in Miami. Allison K. Hift is an associate with the firm.

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