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8.7. Legalities of MP3

Many questions have arisen concerning the legality of MP3 files on the Internet. There have been a number of court rulings, and there are many cases still pending on this issue. No doubt, this issue is at the heart of what will emerge as one of the most contested issues surrounding the Internet.

In many ways, MP3 will serve as a testing ground for how the United States courts and other legal entities of the world will respond to and shape their decisions concerning the future of Internet distribution. For now, the outcome is still unclear. However, certain aspects of this contested debate have begun to take shape.

8.7.1. Is MP3 legal?

The first question that must be addressed is one that many are still unsure of: "Is MP3 legal?" The answer to that question is a resounding "yes." MP3 is simply a file format, and the legality of a file format is not in question. MP3 files can be used either legally or illegally. The question is simply one of copyright infringement issues. MP3 merely magnifies the issues because it makes copyright infringement so easy, and because the stakes are so high.

Copyright infringement is a civil offense, punishable by fine. Distributing music to which you do not own the copyright is copyright infringement. Moreover, it's a criminal offense to copy music illegally and redistribute it for financial gain. You can be imprisoned for this sort of offense.

The bottom line is as follows: if you don't own the copyright to a piece of music or you are unsure of who does, you had better check it out, get proper legal advice, and be certain that you are not violating any laws that could serve to cause you legal problems down the road. And what about downloading files that other people have posted illegally? Simple: if you know the files are pirated before you download them, you're stealing. It's not likely you'll get caught, and it's more important for labels to find distributors than downloaders. But it doesn't make it legal or right.

It is, however, completely legal to make MP3 copies from a CD for personal use -- you have the right to time-shift, space-shift, and media-shift playback of music you own (for the same reason it's legal to tape an LP so you can listen to it in the car). You purchase this right when you purchase the record/tape/CD. You should always check with the latest legal rulings regarding copying issues and MP3, and when in doubt, seek the advice of a legal professional. However, it is definitely illegal to encode MP3 files from a CD and trade them with others over the Internet unless you have the express permission of the copyright holder. Keep in mind that piracy laws precede MP3 by decades, and copyright laws are written right into the Constitution of the U.S. Most of the legal "questions" in MP3 land are not new -- just more prevalent.

The Recording Industry Association of America (RIAA) is an association designed to protect the major record labels and their artists. It has made its position very clear. Fearing a loss of control of distribution, as well as the economic loss associated with sales of their artists' music, the RIAA has waged an all-out legal war concerning the MP3 distribution issue.

The actions of the RIAA have ranged from systematic, court-assisted shutdowns of web sites that illegally post copyrighted MP3 files, to the attack of the owners and creators of MP3 web sites and equipment manufacturers. For example, the RIAA once filed suit against Diamond over their Rio player, claiming that it encouraged piracy. The RIAA lost that battle, because the courts found that the Rio is not a recording device but merely a storage unit. And because Diamond was careful to build the unit so that files could be put in but not taken out again, it was nearly impossible to use the device for swapping files. In fact, this decision has shaped the whole arena of MP3 hardware, none of which makes it easy to transfer files from playback devices to other devices. However, the advent of flash memory cards has again introduced gray areas into the conversation, since people can easily swap memory cards. Still, the devices qualify as storage units and not recording units.

The RIAA, in conjunction with other groups, has proposed the Secure Digital Music Initiative (SDMI) -- a grand plan to make all kinds of digital audio and video secure for Internet delivery. Likewise, companies such as Liquid Audio offer solutions for digital watermarking that can authenticate MP3 files in order to determine whether the file was obtained legally or not (see the sidebar "Liquid Audio: building a viable e-music system" in this chapter for information).

Diamond Multimedia, Xing Technologies, MP3.com, and a host of other MP3-related companies hold a number of disagreements with the RIAA. While all of them agree with the RIAA that artists and labels have a right to find means to protect copyrights and revenue streams, they disagree about how the SDMI should be implemented -- parts of the SDMI proposal carry with it a "presumption of guilt," which assumes that all MP3 use is illegal and that most users are probably pirates. If SDMI passes in the form the RIAA has proposed, unsigned artists may find it difficult to use the MP3 format for unfettered distribution. While the RIAA assumes that unrestricted MP3 distribution is always the problem, that's exactly what many unsigned artists like about MP3 -- its ability to get music distributed far and wide, quickly. The trick will be in striking a balance between the needs of the industry and the rights of unsigned artists and the general public.

8.7.2. Legal MP3 files: headline artists sign up for MP3

Many artists, including Willie Nelson, Dionne Warwick, and the Beastie Boys, as well as record labels such as Hollywood Records and Emusic (which runs an online record company shown in Figure 8-17), have all signed up to distribute legal MP3 files -- or at least excerpts -- over the Internet. Furthermore, the growth rate of MP3 downloads and other market research reports support the view that MP3 distribution is growing into a viable medium. This points to a large and legal market emerging around the MP3 format. Legal MP3 files, freely available over the Internet, are no longer the sole domain of independent artists. This creates a strong sense of validation for the MP3 format being used by mainstream musicians in a legal way.

Figure 8-17

Figure 8-17. Emusic (http://www.emusic.com) is the first Internet record company to offer MP3 files for sale by major recording artists.

Further legitimizing MP3 as a commercial format was the announcement of MP3 files for sale. Emusic (http://www.emusic.com), and Rykodisc (http://www.rykodisc.com), publishers of well-known musical artists, are teaming up to offer MP3 files available for legal download at a cost of 99 cents per track to customers over the Internet. This is considered a major first step, and it is virtually assured that other major record labels will follow suit. Ultimately, traditional music distribution (which includes stores, truck drivers, warehouses, and other middlemen) could be severely threatened. This is undoubtedly bad news for music retailers, but certainly good news for online consumers.

The Grateful Dead on MP3

One enlightened take on MP3 comes from the Grateful Dead. The band has always allowed and encouraged fans to exchange tapes of its live shows with one another, but has frowned on people taking advantage of their "open source" attitude for commercial gain. Similarly, the band permits free dissemination of MP3 files and streams of their concerts, but forbids taking commercial advantage of the music -- even indirect commercial advantage, such as selling ads on a site that offers audio files of Dead shows. Note that the Dead's liberal attitude toward MP3 distribution applies only to recordings of live shows, not to studio records (the rights to which are controlled by labels, not by the band). The Dave Matthews Band and Phish, among others, have taken a similar stance on free dissemination of live material.

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