Copyright law protects the rights of authors (creators of original works). It was written into the United States Constitution in 1787 when the printing press was the primary means of reproducing works. Since then, the technology to enable copying has evolved dramatically.

Allowable or Infringing use?
Under the “fair use” doctrine, limited use of a copyrighted work is allowed for personal or educational use. Penalties for infringement are severe. Minimum damages are $750 for each copyrighted work that was infringed, with higher damages if the infringement is “willful,” plus costs and attorneys fees.

Technology Advances
Copy machines and VCRs are examples of the progression of copying technology. The courts struggled to establish standards for allowable use of these technologies. It is also allowable to make a few copies for personal use or to record a movie for viewing at another time. Making money from a copyright protected work is not allowed without permission from the Copyright owner.

File sharing capability, such as with Napster and Grokster, have enabled downloading music from the Internet. This has caused upheaval in the music industry. Proceeds from the legitimate sale of music support not only the recording artists and songwriters, but also all the support staff and the workers in the sales and distribution channels. To protect their profits, the record companies have resorted to suing individuals (including minor children) with their claims of damages.

The lawsuits have not stopped the copying. Technology continues to progress. P2P (peer to peer) networking capability, such as BitTorrent (which was created to enable the transmission of huge electronic files to assist Linux developers) has now been applied to the copying of TV shows and films. The Motion Picture Association of America (MPAA) has filed lawsuits to stop the trading of pirated movies and TV programs over the Internet.

Law Enforcement Ineffective
The reality is that counterfeiting is rampant (and spans many industries in addition to music, including for example, computer software and apparel). Enforcement efforts are undermined by the public perception that greedy companies maximize every dollar and prevent consumers from getting a good deal.

The U.S. Congress tried to help with the Digital Millennium Copyright Act (DMCA), which made it against the law to circumvent copyright protection mechanisms, but it has been ineffective and misapplied. For example, Lexmark tried to prevent remanufactured (refilled) toner cartridges for its printers by invoking DMCA, alleging copyright infringement of the interface software code. The case has implications for all “aftermarket” businesses (e.g., video game cartridges for games, or windshield wipers for autos).

Lawsuits, and laws, lag technology and are, at best, only a temporary way to protect rights and profits.

New Business Models
It is much more effective to adopt a business model that anticipates the reality of copying and find a way to make money in spite of it. Evolving business models include subscription pricing and pay per use. These models enable consumers to obtain copies “legally” for a reasonable price.

Another evolving model is illustrated by Amazon, which has opened up its API’s (application programming interfaces) to enable a whole range of “partners” to access Amazon’s data and build their own storefronts that draw on the Amazon data and infrastructure. Amazon insists that purchases be completed through Amazon and the “partner” site owners receive a commission. With this approach, Amazon expands its customer reach and the partners profit from leveraging the Amazon data and infrastructure.

Technology Continues to Advance.
In conclusion, copying and counterfeiting are a reality worldwide and especially in countries such as China. To protect rights and profits, businesses must adapt. Staying competitive requires keeping ahead of the copycats and the changing technology. Companies cannot rely on law enforcement to stop copying, nor is it realistic to stifle the advancement of technology. It is much more effective to develop a business model that embraces the reality of advancing technology.

Jean D. Sifleet, Esq., CPA
Business Attorney
120 South Meadow Road
Clinton, MA 01510 USA
t. 978-368-6104
f. 978-368-6105
c.978-618-2162

Big firm expertise - Small firm accessibility.™

P.S. A successful business uses a combination of legal protections and smart business practices. If you know someone who could benefit from this information, please forward this enews to their attention. Thanks!

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Jean Sifleet, business attorney, CPA and three-time entrepreneur, is pleased to announce the release of her new book, Advantage “IP”: Profit from Your Great Ideas. Visit the Smartfast Bookstore for details, and to order the book.