The Secure Digital Music Initiative (SDMI) is steaming towards its goal of limiting online music piracy, and its progress suggests that solutions to the Internet's intellectual property problems are within reach. As the SDMI demonstrates, technology -- not government - holds the answers to the most vexing policy questions of the Information Age.
The Internet's rapid growth has clouded the future of intellectual property laws. Liberated from traditional formats such as books and compact disks, intellectual property can now be zipped around the globe at light speed. Copyright owners fear their property will lose value as pirates begin copying it without permission and with impunity. These fears have been fueled by the illegal trade in digital music.
Using the MP3 compression format, computer users upload, digitize, and copy songs from compact disks. Once transferred into MP3, songs can be emailed and posted on web sites. In the process, they become available to millions of people eager to download and listen to music using one of the many MP3 players now available. As a result, music piracy is rampant on the Web.
According to Wired magazine, roughly 17 million MP3 files are downloaded from the Internet every day. Typically, these files are illegal copies of songs that listeners would otherwise have to purchase. The MP3 trade's victims, therefore, are the record companies and musicians that earn their income from publishing royalties. But while the MP3 problem is obvious, its solution has been elusive.
The recording industry first turned to Congress and the courts. Joining forces with others who shared its concerns, the industry successfully lobbied for the passage of 1998's Digital Millennium Copyright Act, a measure intended in part to protect intellectual property in cyberspace. Bolstering this lobbying effort, the Recording Industry Association of America (RIAA) took legal action against the MP3 threat.
Last year, the RIAA unsuccessfully sued to prevent sales of Diamond Multimedia's Rio, a portable MP3 player. Simultaneously, the RIAA bombarded Internet service providers with cease and desist letters that forced an estimated 2000 pirate music sites to close. But these legal efforts could not change the reality of MP3. The illegal distribution of music was easily outpacing copyright enforcement efforts, a situation that encapsulates many of the Information Age's dilemmas.
The Internet promotes anonymous transactions and defies geographic borders, rendering many valid laws futile. This leaves industries and lawmakers wondering how to respond. But in the area of intellectual property law, the Secure Digital Music Initiative is answering this question. Spearheaded by a consortium of recording and technology companies, the SDMI's goal is to allow music publishers to control their songs. What differentiates SDMI from other industry efforts is that it uses technologies to allow music publishers to dictate when consumers can upload, copy, and play songs and CDs.
The initiative's cornerstone technologies are security software and digital watermarks. Embedded on compact disks, watermarks will both verify that CDs were legally copied and contain a series of playback and copying restrictions. Soon to be installed into CD players, MP3 players, and other playback devices, SDMI security software will automatically read these watermarks and follow the instructions they contain. The goal is to limit how many times a song can be copied.
For example, under phase one of SDMI, which began being implemented in July, songs that have been digitized from CDs will expire after four recordings. As the initiative progresses into phase two, SDMI-compliant playback devices will reject CDs that were illegally copied. This movement is not isolated to the recording industry.
SDMI is but one example of how "digital rights management systems" are emerging to protect intellectual property online. Video producers and print publishers are using similar technologies to protect their copyrights. Intellectual property problems are being solved not by new laws and regulations but by mechanisms that prevent illegal copying. Policy makers should consider this a lesson.
As the Internet continues expanding into a central feature of society, lawmakers will be faced with complicated policy problems similar to the intellectual property dilemma. They must remember that, when cyberspace defies laws and regulations, more laws and regulations are not necessarily the answer. More often, the solution will be found in technological innovations created by the private sector.
Policy makers should embrace these solutions and the free markets that promote them. To do otherwise would hinder the Internet's progress by turning back the clock to the cumbersome, costly, and ineffective laws that hinder businesses in other sectors. In that situation everyone, not just music publishers, would lose.
*Justin Matlick is a Senior Fellow in Information Studies at the Pacific Research Institute. To learn more about PRI and the Center for Freedom and Technology, see www.pacificresearch.org.
