Master of Science
In E-Commerce
Independent Study In E-Commerce (COMP 5009)
Draft Report (ver 0.91)
Supervisor: Professor Vincent Ng
Student Names : Yu Kwan Ho (02733381g) Date: 01/06/2004
Underground Web -- Peer to Peer network (A social and legal view)
1. Background ..........................................................................................................3 1.1. About Napster ..........................................................................................4
1.2. Peer to Peer Network.............................................................................7 1.2.1 P2P Clients ...........................................................................................8
1.2.1.1. 1st Generation Clients ...............................................................8 1.2.1.2. 2nd Generation Clients .............................................................8
1.2.1.3. 3rd Generation Clients ..............................................................9 2. Legal Issue ........................................................................................................ 10
2.2 Why and How Napster against US law ?.......................................... 12 2.4 Does Downloading Infringe in US? ................................................... 16
2.4 Does Downloading Infringe In Hong Kong?..................................... 18 3. Future of P2P.................................................................................................... 20
Reference.................................................................................................................. 22
1. Background
In 1999, a young man named Shawn Fanning developed a use of the Internet
that allowed people to identify and copy music files from other people's computers. As
you know, this model popularized peer-to-peer technology and a company called
Napster tried to turn it into a profit-making business. Napster became phenomenally
popular in a remarkably short period of time, boasting millions of registered users the
very next year. But it quickly became clear that Napster was being used extensively
(by millions of users) for the purpose of copying and distributing an unprecedented
number of copyrighted works, primarily sound recordings of musical works.
The rapid spread in Napster’s popularity has made many business people sit up
and take notice. Unfortunately for Napster, most of those noticing initially came from
record labels. The messy court battles that have since halted Napster in its tracks
have, nevertheless, served to alert people to their own community and consumer
power, and other businesses to the wider commercial potential of file sharing and
peer-to-peer networking.
1.1. About Napster
The music industry was turned on its head four years ago when the internet start
up company, Napster, introduced its music sharing software at its web site, Napster.
Shawn Fanning was a nineteen-year-old college student when he and twenty-year-old
Sean Parker discovered the idea of creating a database that would catalog a user's
MP3 (m-peg 3) music files to make them readily available to thousands of other users.
Unsurprisingly it was not as popular with the record labels, who, in December '99
banded together to file a huge lawsuit against the company. The Recording Industry
Association of America filed suit against Napster accusing them of encouraging the
duplication and distribution of copyrighted material.
In its defense, Napster cited a number of acts including the Digital Millennium
Copyright Act claiming that as an "Information Location Tool" it cannot be held liable
for copyright infringement. It also referred to the Sony Vs Universal Studios case
(discussed above) by stating that the majority of transactions carried out on Napster
were non-infringing and therefore it could again not be held liable for those that
'abused the system'.
Unfortunately for Napster these arguments were shot down in court. According to
RIAA lawyers, between 70 and 80 percent of transactions on Napster were illegal,
which negated Napsters main defense. In August 2000 Judge Marilyn Hall Patel
issued an injunction ordering Napster to prohibit the transfer of copyrighted material
using its file -sharing program. Napster immediately appealed the injunction to the
Court of Appeals for the Ninth Circuit, which allowed Napster to continue to operate
while the continuing trial was in progress.
In February 2001, after much arguing and counter-arguing, the Court of Appeals
finally handed down its ruling on the Napster case. The panel (comprised of three
judges) declared that Napster was indeed liable for copyright infringement and must
immediately stop the transfer of copyrighted material, effectively shutting down the
Napster service much to the dismay of its some 30 million users.
Time line for Napster
1999: Napster founded. College student Shawn Fanning's file-sharing
technology allows computer users to trade electronic music
files. Use spreads like wildfire across college campuses.
December 1999: Recording Industry Association of America (RIAA) takes
Napster to federal court in San Francisco for copyright
infringement.
April 13, 2000: Heavy metal rock group Metallica sues Napster for copyright
infringement; Rapper Dr. Dre files suit two weeks later.
May 3, 2000: Metallica drummer Lars Ulrich and the band's manager hand
Napster a list of more than 335,000 user names of people the
band says are illegally sharing their songs using Napster.
May 5, 2000: U.S. District Judge Marily Hall Patel rules against Napster
saying they are not entitled to "safe harbor" under the Digital
Millennium Copyright Act.
July 26, 2000: Patel grants the RIAA's request for a preliminary injunction and
orders Napster to shut down.
July 28, 2000: The 9th U.S. Circuit Court of Appeals keeps the injuction.
October 2, 2000: Appeals court hears oral arg uments.
October 31, 2000: Napster and German media giant Bertelsmann AG join forces to
develop a membership-based distribution system that would
guarantee payments to artists. Under the deal, Bertelsmann
agrees to drop the lawsuit against Napster and make its catalog
of music available to Napster, while gaining the right to buy a
stake in the service.
February12, 2001: 9th U.S. Circuit Court of Appeals rules that Napster must stop
trading in copyrighted material and may be liable for "vicarious
copyrighted infringement."
July 2001: Napster shut down.
December 2001: Pressplay, a joint venture of Universal Music Group and Sony
Music Entertainment, launches, offering licensed music for
download by subscription.
May 2002: Napster files for Chapter 11 bankruptcy protection as part of a
plan to be acquired by Bertelsmann.
September 2002: Napster sale to Bertelsmann is blocked. Liquidation planned.
November 2002: Roxio buys Napster's name and technology for about $5 million.
February 2003: Roxio hires Napster founder Shawn Fanning as a part-time
adviser.
May 2003: Roxio buys pressplay for $36.2 million in cash and stock. It
gains technology and licenses for more than 500,000 songs
from five major record labels and plans to use it as a foundation
to relaunch a legitimate Napster.
Today: Roxio formally launches Napster 2.0 as a paid service.
1.2. Peer to Peer Network
Peer-to-peer is a communications model in which each party has the same
capabilities and either party can initiate a communication session. Other models with
which it might be contrasted include the client/server model and the master/slave
model. In some cases, peer-to-peer communications is implemented by giving each
communication node both server and client capabilities. In recent usage, peer-to-peer
has come to describe applications in which users can use the Internet to exchange
files with each other directly or through a mediating server.
IBM's Advanced Peer-to-Peer Networking (APPN) is an example of a product
that supports the peer-to-peer communication model.
On the Internet, peer-to-peer (referred to as P2P) is a type of transient Internet
network that allows a group of computer users with the same networking program to
connect with each other and directly access files from one another's hard drives.
Napster and Gnutella are examples of this kind of peer-to-peer software. Corporations
are looking at the advantages of using P2P as a way for employees to share files
without the expense involved in maintaining a centralized server and as a way for
businesses to exchange information with each other directly.
Put a little more technically, Napster comes into the peer-to-peer definition
because Napster users bypass the domain naming system (DNS) that people
associated with the Internet. Once the Internet protocol addresses of the song you
want to upload have been identified, control of the file transfers to the PC rather than
to any central server. E-mail.
1.2.1 P2P Clients
In general P2P clients can classify into there generation
1.2.1.1. 1st Generation Clients
As stated above, Napster was the original P2P application that popularized the
concept to millions. The way Napster worked was quite simple. Napster (the
company) hosted a central server which indexed all the files that each Napster user
had. When you wanted to find a particular file, you simply "searched Napster". The
process of searching simply asked the central server: "does anyone have this file?".
The central server would look at its list of known files and provide you with the
internet location of the other users who had the file.
The central server model made sense for many reasons -- it was an efficient way
to handle searches, and allowed Napster to retain control over the network.
However, what it also meant was that when the lawyers came down on Napster, all
they had to do was turn off the central servers and that was the end of Napster.
1.2.1.2. 2nd Generation Clients
Gnutella was the second major P2P network that emerged. After Napster's
demise, the creators of Gnutella wanted to create a de-centralized network -- one
that could not be shut down by simply turning off a server.
In the most basic sense, Gnutella worked by connecting users to other users
directly (and bypassing any central server altogether). When you started the
Gnutella client, you would connect to a certain number of other users, and those
users were connected to other users etc... in one giant network. In order to search
for a file, you asked everyone you were connected to "hey, do you have this file?".
They in turn would see if they do, and also pass the message on to all the people
they were connected to. Basically, it was one big game of "telephone".
The main advantage was that it couldn't easily be shut down. The disadvantages
were many -- including slow searches and islands of sub -networks that weren't
connected to each other.
1.2.1.3. 3rd Generation Clients
Well, and technology marches forward, as always... and clever programmers
found ways to improve these networks and improve file transfer speeds.
Fasttrack is perhaps the most famous of this generation of networks. You may
recognize it as Kazaa, or Grokster or Morpheus... but it's all the same. Fasttrack is
the name of the network. Kazaa, Grokster and Morpheus are the names of the
different clients that connect to the Fasttrack Network. What that means is that
users of any of those clients had access to the exact same files.
Fasttrack added a number of enhancements to the P2P networks, including
supernodes, and spawning. These improvements both helped searches as well as
download speeds.
Despite legal battles, the Fasttrack network remains operational, and is the most
popular P2P network.
2. Legal Issue
2.1 The copyright Law
Copy right in US and Hong Kong
US Hong Kong US Copy Right Law:
http://www.loc.gov/copyright/title17
Hong Kong common Law
Chaper 528 section 115-118
http://www.justice.gov.hk/cHome.htm
This law protects copyright owners from the
unauthorized reproduction or distribution of
copyright protected works.
The penalties for breaking this law are as
follows:
1. If it's for commercial or private financial
gain: up to 5 years in prison, and $250,000 in
fines. Repeat offenders can face up to 10
years of prison time and up to $150,000 per
copyrighted work infringed upon.
2. The Federal Anti -Bootleg Statute prohibits
the unautho rized reproduction, recording, and
distribution of an artist's live musical
performance. Punishment could be up to 5
years in jail and $250,000 in fines.
There are also two legal concepts under
the Copyright Law that deal with Internet
usage:
1. Contributory Infringement: a person who
contributes to the infringing conduct of
another person with the knowledge they are
doing so.
i.e. a person provides a link on their
A person commits an offence if he, without the
licence of the copyright owner- distributes an
infringing copy of a copyright work. otherwise
than for his private and domestic use;
A person who commits an offence under
section 118(4) or (8) is liable on conviction on
indictment to a fine of $500000 and to
imprisonment for 8 years.
website to an infringed song
2. Vicarious Liability: "where a n entity or
person has the right and ability to control the
activities of the direct infringer and also
receives a financial benefit from the infringing
activities" (RIAA.com).
Fair Use Doctrine :
http://www4.law.cornell.edu/uscode/17/107.html
Hong Kong Common Law
Chapter 528 , section 38
This doctrine limits the extent of property
interest granted to the copyright holder. For
instance, it allows a person to cite a part of
the copyrighted work when it's used for
teaching, research, news reporting,
comment, criticism, or parody.
This doctrine limits the extent of property
interest granted to the copyright holder. For
instance, it allows a person to cite a part of the
copyrighted work when it's used for teaching,
research, news reporting, comment, criticism,
or parody.
Audio Home Recoding Act of 1992
http://www4.law.cornell.edu/uscode/17/ch10.text.htm
l
Hong Kong Common Law
Chapter 528, section 251
This act allows consumers to copy recorded
music for private, noncommercial use.
The AHRA also covers the devices used to
make copies such as: digital audio cassette
players, minidiscs, and DAT players. It also
covers all future digital audio recording
technologies, so Congress will not have to
keep revising this act everytime something
new is invented.
Multipurpose devices, such as CD-ROMs,
ARE NOT covered under this act.
prohibiting the transfer of the fixation by
the purchaser, imposing obligations which
continue after a transfer, prohibiting the
assignment of any consent or terminating
any consent on a transfer
Digital Millennium Law
http://www.gseis.ucla.edu/iclp/dmca1.htm
http://lcweb.loc.gov/copyright/legislation/dmca.pdf
No similar law in Hong Kong
This act has basically, 10 main parts, but for
Napster purposes only the ones that apply
have been listed below.
Service providers must remove material
from users' websites that seem to be
infringing on on copyrights.
Requires that "webcasters" pay licensing fees
to record companies.
Prohibits the manufacturing, sale, or
distribution devices used to "undermine
electronic devices."
Napster's lawyers are trying to use this
particular law in court.
No electronic thief la w
http://thomas.loc.gov/cgi-bin/bdquery/z?d105:HR022
65:@@@L
Hong Kong Common Law
Chapter 528 section 64
Because of this law, sound recording
infringements can now be criminally
prosecuted even if no monetary profit or
commercial gain is being achieved in the
infringing activity.
it allows consumers to make copies of
copyrighted media for noncommercial
use.
2.2 Why and How Napster against US law ?
As the Napster saga illustrates, the future of peer-to-peer file -sharing is entwined,
for better or worse, with copyright law. The legal fight has already broken out, with
copyright owners targeting not only the makers of file-sharing clients like Napster,
Scour, Audiogalaxy, Aimster and Kaza a, and Morpheus, but also companies that
provide products that rely on or add value to public P2P networks, such as
MP3Board.com, which provides a web-based search interface for the Gnutella
network.
The fight has only just begun. If these early skirmishes yield any lesson for future
P2P developers, it’s that a legal strategy needs to be in place early, preferably at the
beginning of development, rather than bolted on at the end. As a result, if you are
interested in peer-to-peer file sharing, whether as a developer, investor, or provider of
ancillary services (such as search services, platform tools, or security), it’s time to
bone up on some copyright law basics.
A brief overview of copyright law shows that one of the first copyright laws was
the Statute of Anne, enacted by the British Parliament in 1710. The first United States
copyright statute, passed in 1790, required conditions such as registration, copyright
notice, and renewal, as conditions for copyright protection. More recent legislation has
lessened the requirements of registration but with the advent of advanced technology,
in particular, the Internet, the ownership of intellectual property in terms of copyright
protection has quickly become an insistent conflict that a cumbersome legal system
has not been able to successfully address.
As one Washington copyright attorney points out, "This Napster case doesn't
make new law. It applies long-standing law to a new technology."11 One somewhat
recent attempt to update copyright law to the new technology is the Audio Home
Recording Act (AHRA) passed in 1992 in US. This compromise between the
consumer electronics and music industries specifically addresses the long-standing
uncertainty surrounding home audio taping and the introduction of new digital audio
recording technologies. Essentially the law says that when you buy a tape or CD, you
are not obligated to pay each time you listen to the item. The law also allows you to
make a tape recording for you car as well as, loan it out to a friend who may want to
make a copy to listen to their car. What you cannot do is rent the CD out, play it on the
radio, or play it in a restaurant, concert, bar, or store without the owner's permission.12
Jessica Litman points out in her book, Digital Copyright, that copyright laws today
are based on the premise that "neither the creator of a new work of authorship nor the
general public ought to be able to appropriate all of the benefits that flow from the
creation of a new, original work of authorship. If creators can't gain some benefit from
their creations, they may not bother to make new works," and distributors might not be
inclined to distribute new works.13 She goes on to point out that all artists, including
writers, musicians, painter, sculptor, among many, use "expressive ideas" first
encountered elsewhere. For example, the author writes a book based on experiences
he has had or that he imagines others have had using his knowledge of an already
existent world. The fact that the artist gleans his "raw material" from the world gives
the public at least some right to this material.
In an interview with Wired magazine in October of 2000, David Boies, the lawyer
for Napster, states there are four basic arguments used in Napster's defense against
the recording industry's challenge. The first issue is, "Are Napster's users engaged in
copyright infringement?" The second is, "Whether Napster can be held responsible if
some users engage in copyright infringement." The third is, "the Digital Millennium
Copyright Act, which we have argued that we are covered by, and which was
specifically designed by Congress to give a safe harbor to Internet service providers
so that they would not be held liable for their users' activities." And the last point is,
"Copyright misuse. The 9 th Circuit has made it clear that if copyright holders use their
copyrights for anticompetitive purposes - to try to gain control over something they do
not control directly through their copyrights - that's copyright misuse."
Though Boies's arguments made during court hearings in year 2000 did enable
Napster to stay in operation for a while longer, he was not able to stop the inevitable
closure of Napster that occurred in July of 2001. Napster was not able to convince the
courts that it was 100% able to prevent copyright misuse by its users and until this
occurs, the court finally did not allow Napster to continue the music file swapping
service. As of now, Napster is now is a division of Roxio, Inc., (Nasdaq: ROXI), which
provide pay service that you have to buy music instead of downloading it for free.
Does it mean that the war between P2P software and the copyright law is near to the
end ? ...... we might need to investigate the question “Does downloading really
infringe? “ , however the answer is different in different countey.
2.4 Does Downloading Infringe in US?
"The law is unambiguous," said Marybeth Peters, head of the U.S. Copyright
Office at a Senate Judiciary Committee hearing in September. "Using peer-to-peer
networks to copy or distribute copyrighted works without permission is infringement,
and copyright owners have every right to invoke the power of the courts to combat
such activity." But Litman notes that current law allows consumers to make copies of
copyrighted music for noncommercial use. She cites the 1992 Home Audio Recording
Act, which permits consumers to copy a digitally recorded work.
Under that act, "consumers cannot be sued for making noncommercial copies of
recorded music, and digital music recorder manufacturers are required to incorporate
technology that allows the recorders to make unlimited first-generation copies but
prevents the recorders from making second-generation copies (a copy of the
first-generation copy)," Litman says. The makers of digital music recorders and
recording media (like audio CD-Rs) must pay a fee into a fund to be divided among
copyright owners, composers, and performers. In exchange, copyright owners can't
sue consumers or the makers of digital music recorders for copyright infringement.
Now, however, the music industry argues that copies of recorded music made on
computers are infringements. According to Litman13, in the 1999 RIAA vs. Diamond
Multimedia case, the Ninth Circuit Court of Appeals held that it is legal for consumers
to use their computers to make MP3 copies of recordings and transfer them to
portable MP3 players. However, in the Napster case, the Ninth District Court "declined
to extend the rationale of the Diamond case to peer-to-peer file sharing," Litman
says.13
The issue remains rife with ambiguities. Among other things, the Ninth Circuit left
the issue of "fair use" open to debate. Rather than rule on the consumer's liability, the
court focused on the peer-to-peer software vendor who, the court decided, abets
infringement of copyrighted material.
2.4 Does Downloading Infringe In Hong Kong?
Similar to the US ,In Hong Kong Common Law Chapter 528 “COPYRIGHT
ORDINANCE”15 section 64 state that “a copy of a work in electronic form (other
than such a copy which was made available to the public) has been purchased
on terms which, expressly or impliedly or by virtue of any rule of law, allow the
purchaser to copy the work, or to adapt it or make copies of an adaptation, in
connection with his use of it.” , it allows consumers to make copies of copyrighted
media for noncommercial use.
Moreover , copyright material sent over the Internet or stored on web servers will
generally be protected in the same way as material in other media in Hong Kong .
Such protected act is referred as 'making available of copies of the work to the
public' in the Ordinance. Section.26 provides that this is 'to make available of copies
of the work, by wire or wireless means, in such a way that members of the public in
Hong Kong or elsewhere may access the work from a place and at a time individually
chosen by them (such as the INTERNET). Copyright works commonly found on the
Internet are sound recordings like music (MP3 format), films (Real Player or Media
Player formats), literary works (texts and passages on world wide web pages and
computer programs), artistic works (photos, graphics).
Uploading songs without copyright authorization for distribution by downloading
for profits or commercial gains is an criminal offence and can lead to arrest and
prosecution. Anyone wishing to put copyright material on the Internet, or distribute or
download material that others have placed on the Internet, should ensure that they
have the permission of the owners of rights in the material.
Different from US , in the Ordinance section 251, if the copyright owner
“prohibiting the transfer of the fixation by the purchaser, imposing obligations
which continue after a transfer, prohibiting the assignment of any consent or
terminating any consent on a transfer” , the purchaser is to be treated as an
infringing fixation for all purposes after the transfer. Under this section, purchaser
convert a CD to MP3 or convert an VCD/DVD to digital file format is an criminal
offence. If the Napster case appear in Hong Kong, it will not need a long period to
discuss it is infringe or not , as all the digital copy store in Napster client’s machine
was infringed . but is it really so easy to be sued by the copyright owner in Hong
Kong?
Although there had no case that home user share their file through P2P network
was bring to the court ,since the launch of the new copyright law from 1st April 2001.
However it doesn’t means that file sharing through P2P is legal. During a meeting in
the legislative council , the chair person of commerce , technology, & technology
bureau state that “digital content products remain to be a property protected by
the copyright laws , and the Custom department will take action once they get
enough adduce that they are against the law”.
3. Future of P2P
Author, Adrian Murdoch asks the question, "Is it now too late to prevent this
technology from being used?" His answer is, "probably yes." 14. Even if Napster is
permanently closed down, the number of P2P sites has increased and become so
global, that it would be almost impossible to close them all down. The reason is that
even though peer-to-peer is still in its infancy stage, it is very powerful. One reason for
this power is the fact that since there is no central server involved, it becomes a set of
applications that can access the edge of the Internet. "Theoretically, P2P computing
makes it possible to unlock the files and data sitting on every personal computer
connected to the Internet."
One future area of concentration will most certainly involve any means in which
to control the content on the Internet, or, digital content management. Several
companies such as ContentGuard, InterTrust Technologies, and Reciprocal have
developed technologies that prevent encrypted content to be released unless some
form of payment is made. However, there are two factors that have impeded the
progress of these systems: there is of yet, no common platform and there is no
economic model to base what should be charged for an activity like listening to a song
for a determined amount of times.
Many others see self-regulation as a solution to the legal conflicts arising over
Internet file sharing. This would be attractive to many because it would ward of
government interference into businesses. Another incentive for self-regulation is
maintaining the balance between piracy and over-regulation of the market.
Economically and creatively, it is important to have an Internet atmosphere of
innovation, and too many legal risks could have a dampening effect on new
enterprises.
While Napster has garnered the most media attention, there is a plethora of other
file sharing systems using distributed search models. Many are attempting to avoid
Napster's legal problems by incorporating digital-rights management systems that
give content owners some control over their works. AppleSoup, created by two
Napster veterans, is designing a system by which content owners will be able to
control, distribute, and even sell their content while the site will retain a "Napster-like
interface." MojoNation takes more of a Gnutella-like approach, using small programs
that run on individual computers to create the network. Unlike Gnutella, users are
compensated with "internal currency" for publishing and storing content. The currency
can then be traded to download content or exchanged for cash. Another startup,
FreeNet is completely decentralized, which means that no one person or computer
controls any of the content. This system makes it virtually impossible to forcibly
remove information from the network. It also provides an anonymity that is very
disturbing for many content owners, government authorities, or anyone who would try
and control the Internet.
Certainly the impact of P2P, in particular, file sharing technology over the
Internet, is in its very early stages of development. In order for content owners and
content users to come to any agreement, there will have to be agreement, legal and
self regulatory, on what is fair to as many involved as possible.
Reference
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19 Issue 1, 32.
2. Spencer E Ante, Steven V. Brull, Dennis K. Berman, and Mike France, "Inside
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http://www.businessweek.com/technology/content/aug2001/tc20010801_849.ht
m.
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PCWorld, May, 2001.
http://www.pcworld.com/features/article/0,aid,44862,00.asp .
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Napster," Electronic Frontier Foundation, March 9,2001.
http://www.eff.org/IP/P2P/Napster/20010309_p2p_exec_sum.html.
11. Raju Chebium, "Napster, DVD Cases Raise Copyright Questions in Digital Age,"
CNN.com. http://www.cnn.com/2000/LAW/08/07/copyright.overview/.
12. "HRRC'S Summary of the Audio Home Recording Act," Home Recording Rights
Coalition. http://www.hrrc.org/html/ahra_summary.html.
13. Jessica Litman, Digital Copyright, (New York: Prometheus Books, 2001).
14. Adrian Murdoch, "Right to Copy." WorldLink March/April 2001, Available from
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15. http://www.info.gov.hk/cib/chtml/copyright_c.htm
16. http://www.copyright.gov/title17/92chap5.html#506
17. Trevor Merriden ,“Irresistible Forces”
