Brandon Evenson is a 2010 JD Candidate at Osgoode Hall Law School. He holds a degree in Computer Engineering from Queen’s University. Prior to attending Osgoode, Mr. Evenson consulted for some of the world’s leading technology firms in the area of contract risk and licensing compliance.

Last Thursday, IP Osgoode hosted Chris Castle, managing partner of Christian L. Castle LLP, to give a talk on Voluntary Collective Licensing as part of IP Osgoode’s speaker series.

Over the past year a number of peer-to-peer (P2P) websites and their Internet Service Providers (ISPs) have been taken to court for infringing copyright. Perhaps the most sensational of these proceedings has been the Pirate Bay trial . Despite these legal efforts to curb piracy, copyright infringement continues to be a pervasive problem on the internet.

Castle attributes part of the problem to the lack of government enforcement of copyright. The government has effectively left it up to the private sector to monitor and catch infringement and enforce rights through existing legal mechanisms. For such a large and systemic problem, however, private enforcement of rights requires significant resources – which can prove particularly challenging for small, independent artists.

A number of alternative commercialization schemes have been proposed to allow the legal distribution of copyrighted music over the internet with minimal government intervention. One such scheme is voluntary collective licensing. It is here where Castle centers his talk. In such an arrangement, users of an ISP have the option to pay a fixed monthly fee (typically between $5 and $20). The fee would be collected by ISPs and given to collectives to distribute to rights holders. Copyright holders, like the users, would have the option to participate in the scheme. In return for this monthly fee, rights holders would provide a covenant not to sue the ISPs or the end users for the infringement of their copyright. This allows the end users to exchange as much copyrighted music as they would like without the threat of legal action.

One of the strongest proponents of this scheme is Electronic Frontier Foundation (EFF).  EFF is a public interest organization that focuses on civil liberties issues raised by new technologies. EFF cites a number of benefits in a voluntary collective licensing scheme including a new $90 billion revenue stream, a user supported music collection (“library of Alexandria”), minimal government involvement, and the availability of other licensing options for artists and consumers outside of the scheme.

Despite this, Castle provided strong criticism in his talk on why a voluntary collective licensing scheme for music is not the solution to the current copyright woes. His comments are premised on the notion that society desires a professional, creative class of musicians and a market system that rewards artists.

The first issue Castle raised was the significant investment of time and money required to implement such a scheme. There would need to be thousands of contracts between rights holders (including record companies and independent songwriters), collectives, and ISPs. This would require a sustained investment over a lengthy period of time. Castle felt that while there may be the opportunity to automate the contracting process to some extent it is doubtful that a Click-Through agreement would be possible due to the need for tax numbers and the potential for significant liability.

Castle also highlighted the burden of collecting and digesting millions of audio and audio-visual works into a large database along with metadata and accounting information. Such a system would be needed to track music consumption and allocate revenue to the respective copyright owners in some fair, agreed-to manner.

Castle also argued that a voluntary scheme will likely have no effect on the amount of infringement that is currently taking place. If millions of people don’t care about complying with the existing laws, why would anyone opt-in to such a voluntarily scheme? Alternatives to traditional distribution channels such as iTunes have existed for a number of years yet infringement on the internet is still rampant. Additionally, if a voluntary licensing scheme were to be highly successful, this may have the effect of resulting in an exodus of users from existing legitimate internet distribution streams like iTunes.

In the EFF’s and other models, there is a push for rights holders to agree to a covenant not to sue. Castle emphasized that such a contractual term, however, is not a licence – there are no representations or warranties on rights. Bennett Lincoff on IPWatch provides a long discussion on the implications of rights holders only giving a covenant not to sue instead of providing a licence. Lincoff highlights that a covenant not to sue would still allow rights holders whose rights have not been cleared through the voluntary licensing scheme to pursue legal action.

Castle also noted potential international treaty implications of a voluntary collective licensing regime given the international scope of music and artists, and the reach of the internet. There is a concern in the industry that a voluntary collective licensing regime may infringe international treaties to which a country is a signatory even if the government is not involved in setting up the scheme.  The risk is that if a court or government agency should enforce some aspect of the regime, then that may be sufficient to engage international treaties. Somewhat similar concerns were raised in the Google Books settlement hearings.

Two other problems Castle mentioned in his discussion was the potential for ISPs to violate user privacy and to lose their safe harbour protection. To ascertain what portion of the revenue rights holders should receive, online music usage would need to be assessed and this may require ISPs to use packet sniffing and fingerprint user file transfers. Castle’s first concern is that user privacy will be compromised and data will be collected on individual music preferences. The second threat is that by packet sniffing and fingerprinting, ISPs would have knowledge of copyright infringement on their networks. Infringement could take the form of users who have not voluntarily registered for the scheme or users who are trading works not covered under the scheme. This knowledge may present a red-flag to ISPs. In effect, ISPs that take part in the voluntary collective licensing scheme would lose statutory safe harbours (under US laws) that apply to all content in favour of a contractual “safe harbour” that only applies to some content. ISPs would still be exposed to liability from copyright owners that do not participate in the contractual “safe harbour”.

With so many disadvantages for so many stakeholders, Castle concluded his talk by questioning why such a strong impetus for a voluntary collective licensing regime still remains.

Full video coverage of Chris Castle’s talk, including the questions and answer period, can be accessed here.

Posted in Commercialization, Copyright, Electronic Databases, events, Infringement, Internet Sharing, Music Industry, Music Industry, Privacy