P2P Legal Strategies

Luigi Mansani - University of Parma


An examination of court decisions concerning Peer-to-Peer systems provides useful indications on the behavior and technical approaches which can be used to reduce the risk of legal action against those creating or using these systems.
Although the best-known and most discussed decisions originate from courts in the USA and its laws, the principles on which they are founded are similar to those which might be applied in similar cases occurring in most industrialized countries, particularly those who are members of the Berne Convention and the WTO.
In fact, in recent years, national laws on the reproduction and diffusion, telematic or otherwise, of works protected by copyright have been progressively brought together by supranational institutions and international conferences. Considerable differences remain between these legislations regarding their substance and related sanctions, although these are less marked in the subjects under consideration here.
In particular, all these legislations contain norms prohibiting non-authorized reproduction of works protected by copyright, including in digital form, and their non-authorized diffusion, including via telematic systems. Conversely, those legislations also include a system of exceptions authorizing behavior which, in principle, is forbidden where there are causes for justification, differing in scope and premises, but broadly speaking related to the non-profit aims of the conduct in question.

The users

In practice, it is very unlikely that private users of a Peer-to-Peer system will be sued for infringement of copyright, for various reasons: (a) difficulty of collecting proof of supposed infringements; (b) difficulties and costs of starting legal action against them, particularly if they reside in a country other than that of the head office of the subject claiming infringement of rights; (c) difficulty obtaining payment of damages and substantial ineffectiveness of prohibitions to continue illicit conduct, complicated to put into effect and monitor; (d) choices of political and commercial opportunity which show action against private individuals to be inadvisable. However, this does not mean that the position of these subjects is irrelevant. As in fact emerges from all decisions on the subject, the manager of the Peer-to-Peer system, (where he does not make directly available to users works he has reproduced independently without authorization by the copyright owner, which would mean he would be liable for direct infringement), can be held responsible only for "contributory infringement", i.e. for favoring or not preventing to the best of his ability copyright infringement of which he had knowledge by users of the system. It is thus evident that if the behavior of the end users is not illicit, that of the system manager cannot be so either.

"Fair use"

As said earlier, if the reproduction and distribution without authorization of works protected by copyright by users of a Peer-to-Peer system are in principle illicit, since they infringe the exclusive rights held by the owners of the rights to those works, they however cease to be such where they may benefit from a cause of justification. These causes of justification are termed hypotheses of "fair use" in systems of common law and "free utilizations" in European systems. Their content is similar: broadly speaking, they allow activities otherwise forbidden insofar as they are not carried out for commercial gain. In European systems, to establish whether a certain act is for commercial gain or not, its nature and pursued aims must be examined and the law often contains an example indicating a non-profit activity, (those for educational ends, or by libraries and archives, or by study and research associations, or for quotation, etc.). Whenever the work is reproduced or granted on payment, this equals commercial gain, while only in certain laws is it expressly stated that copying or private distribution thereof are by nature legal.
If private copying is legal or if the law only forbids reproduction and distribution for gain, use of a Peer-to-Peer system does not constitute an infringement of copyright. In laws in which such clear rules do not exist,(almost all), copyright holders claim that commercial gain may be presumed from the saving in costs which the user benefits from in respect of the purchase of the original goods on the market. Although the thesis seems illogical ( if the decisive element is cost saving, then all free utilization would cease to exist: even borrowers from a library would thus save on book purchases), it has been used, (starting from the decisions in the Napster case), to show that the rules of fair use are inapplicable to the activities of Peer-to-Peer system users. And the further argument, (which American judges have used on a number of occasions), that in Peer-to-Peer systems there can be no personal use because the file granted is subsequently distributed to the users who request it, is not in itself relevant: if I lend a record to a friend, my conduct remains legal regardless of the fact that he in turn may give it to whoever asks him for it. The impression from this is thus that the rules already exist but are interpreted, (particularly in the USA; in many European countries such interpretations would not be possible), in an instrumental or illogical manner. However, concerning the possibility of qualifying Peer-to-Peer system use as non-profit, not much more can be done than to demand that current rules be abided by.
But the most effective action must be taken regarding the management of the system, (i.e. that which is attacked in court cases). Peer-to-Peer system managers insert disclaimers on their sites warning users against infringing copyright. This is sometimes of no use in eliminating responsibility but can contribute to limiting it or to at least deprive the adversary of some arguments. These disclaimers might be added to by others intended to show the mutual, associational and non-profit aims of the user communities, stressing the absolute prohibition against using the system for commercial transactions or advertising of any type and stressing that the use of the system means acceptance of its ideal aims of sharing knowledge and cultural growth via communication, emphasizing the mutual aims and community spirit on which all use of the system must be founded.
However, as pointed out below, the best solution is not to attempt to eliminate or limit the responsibility of the system manager, but not to allow the existence of any subject to whom any responsibility, even indirectly, may be attributed for management of the Peer-to-Peer system.

The principle of exhaustion

It is worth looking at the fact that in European Union countries, intellectual property rights are exhausted after their first sell, insofar as the owner of the rights cannot interfere in the circulation of the good incorporating that right after selling it. In other words, after a record company has sold a record or a publisher a book, or a company a product with its trademark, subsequent sales are beyond its control. Goods may thus be put into various channels of distribution or given away without the owner of the trademark, copyright or other intellectual property right being able to forbid it. Even though among the premises of this rule is the principle that the owner has already made a profit from sale of the goods and also the principle of the free movement of goods in the area of the EEC, rules have been introduced whereby it is not applied to the circulation of the work in digital form but only to that of the physical support of the work itself. I am thus free to grant, and even demand payment for, a CD purchased on the market, but I cannot grant, even free of charge, the file related to the music contained therein, without the consent of the holder of the rights. It is evident that the law is being bent, (given that in this case also, the owner has already made a profit and the principle of free movement of goods is applied irrespective of the forms in which that movement occurs), and depends only on the will to protect the interests of the owner against opportunities provided by technology: distribution of works in digital form is possible for anyone at very low costs, while the movement of the support encounters physical limits which circumscribe its extension. For the same reasons, some systems of law forbid hiring music CDs but not videocassettes or books, making a distinction between analogue and digital copy which has no reason to exist in legal terms.

No management of the system, no one responsible

In decisions related to the legality of Peer-to-Peer systems, the manager is held responsible for indirect counterfeiting insofar as: (a) these are not non-profit bodies but companies with capital who, although allowing free downloading of software and not making any profit directly from the movement of the files among users, increased their value on the capital market thanks to the number of contacts and reputation earned by their trademark, thus having a direct interest in the diffusion of conduct held to be illegal; (b) they make available on their site the software used for violation of rights, in certain cases belonging to them; (c) they run an integrated system (site, software, search engine, servers, instruments for interconnection) to which users had to access to load and download the files, unlike manufacturers of a video recorder or other instruments which can be used to infringe copyright, who have no opportunity to check after sale how the equipment is used, nor contribute in any way to how it may be used. Further, the headquarters of the management companies were located in the USA or in other countries belonging to international conventions on the protection of intellectual property and also the instruments used for the functioning of the system were at least in part located in those countries.
The less this situations occurs, the more difficult it is for the Peer-to-Peer system to be attacked via court action. The best hypothesis in this perspective is an open source software, the various versions of which may be made accessible on a large number of independent sites, (accompanied by disclaimers conditioning downloading to respect the prohibition against illegal uses of the software, indicating the legal functions which it can have and clarifying exemption from all liability for non-observation of the conditions laid down), without there being a system management company, a site facilitating its diffusion and use, or even - the perfect hypothesis - a set of special servers and connections which can be configured as a system.
Since such a scenario appears technically configurable only for Peer-to-Peer connections between broadband users, in the other hypotheses the marked reduction in the risk of court action may derive from: (a) use of an open source software whose initial developers have no economic relations with the Peer-to-Peer system managers; (b) use of Peer-to-Peer systems allowing direct connection between users without employing a central server; (c) renunciation of use of a website facilitating use of the system or identifying itself, (e.g. due to identical domain name or similar), as connected to the software or the system. If it is necessary to create a registered name for relations related to several of these activities; this should be a non-profit body by nature whose aims are community and educational and which can in no case distribute profit to members. The modest capital of that body, the use of instruments not belonging to it and if possible its headquarters being located in countries not signatory to international conventions or in which it is costly and complicated to take legal action, will further contribute to discouraging court action.

Copyright (C) November 2002 Luigi Mansani
Under GNU Free Documentation License (GFDL) - http://www.gnu.org/copyleft/fdl.html