Legal News Central
Picture - Men shaking hands
July 12, 2000

Hatch Warns Labels, Don't Make Me Come Over There and Spank You
Inside.com

WASHINGTON -- Get on the stick, labels.

                       That was the message of Republican Senator Orrin G. Hatch to the recording industry during a remarkable hearing of the Senate  Judiciary Committee on Tuesday. Facing a veritable who's who of the music-copyright wars, Chairman Hatch threatened -- in surprisingly direct terms -- to force the music labels and publishers, by legislation, to make their content digitally available for a standard fee if the record business continued to ensnarl e-music with lawsuits. As a capper, Hatch suggested that Congress might even go so far as to offer its own comprehensive definition of ''fair use'' to hasten the arrival of paid digital music  -- an action that would have implications far beyond music.
 

                       For hours before the hearing, spectators lined up in the corridor in the hopes of catching a glimpse of the famous panelists: Lars Ulrich of Metallica and Roger McGuinn, formerly with the Byrds. A small contingent from the Slashdot crowd was there to welcome Gene Kan, one of the principal developers of Gnutella. The enthusiasm outside was translated inside, as Senate staffers practiced their downloading skills on Gnutella and played Sheryl Crow over the loudspeaker.

                       A small-faced, courtly man with a neat cap of gray hair, Hatch is a prolific composer whose Haven Hamilton-like songs have cracked the top 10 of the Christian charts. As the principal architect of the Digital Millennium Copyright Act, he is arguably the most important figure on Capitol Hill to media and entertainment industries. What he said could not have pleased them.
 

                       THE DMCA -- INTENDED TO CREATE what he called ''a stable, predictable legal environment'' that would boost the availability of intellectual property on the Internet -- had ''sadly'' failed for music, Hatch said. Instead of licensing their music to new e-businesses, the senator explained, the labels had kept it locked up in their vaults, cutting deals only to entities they control. Then, dropping the first of several warnings to the industry, Hatch argued that ''a policy of merely cross-licensing among  major-label related entities might raise some competition concerns that this committee would have to consider'' -- in other words, an antitrust inquiry.

                       Claiming that he had spent the morning listening to Metallica in his office, the notoriously straight-laced Hatch introduced Ulrich by mentioning that the authors of ''Seek and Destroy'' and ''Creeping Death'' could use another lyricist. Ulrich smiled wanly at the gibe and went on to describe himself as an immigrant who by playing drums for Metallica had realized ''the classic American dream come true.'' He segued into his by-now familiar litany of abuse against Napster, which Metallica sued in May. (Click here to read the witnesses' statements.) Several minutes into an extended discussion of the number of people on the band's payroll, Senator Patrick J. Leahy, Democrat of Vermont, whipped out a camera and snapped a picture of the diminutive drummer for his daughter.

                       The room temperature rose after the witnesses' statements, when Hatch began quizzing Ulrich and another witness, Fred Erlich, president of Sony Corp.'s music technology division, about whether they planned ever to release their music through the Internet.

                       When Ulrich temporized, Hatch snapped, ''Are you doing it?''

                       ''As soon as we stop defending (our music),'' Ulrich said, ''we look forward to doing it.''

                       To the same question, Erlich said only, ''We're in active conversations'' with e-music sites.

                       A skeptical Hatch then turned to the Recording Industry Association of America president, Hilary Rosen, a surprise addition to the roster of witnesses. Wedging herself into a space next to MP3.com head Michael Robertson, whom the RIAA recently helped to sue, Rosen found herself subjected to the kind of puzzled questions about fair use -- a notorious legal morass -- that millions of music owners have been asking themselves for the last few months.

                       ''Can I make a copy of a CD that I buy and put it into a car?'' asked Hatch. When Rosen hemmed and hawed, Hatch muttered,  ''The answer is yes.''

                       ''Is it fair use to give the copy to my wife for her car?'' Hatch continued. ''Is it fair use for me to rip a CD? Is it fair use if (a computer network) decides for efficiency reasons that one copy is sufficient to serve for storage, instead of keeping 200 separate copies, is that fair use?''

                       ''None of these is fair use,'' Rosen eventually replied. She argued that musicians' willingness to ''tolerate'' people making copies was an instance of ''no good deed goes unpunished.''

                       Leahy, the committee's ranking minority member, is the other principal DMCA author and the second-most-important man on the Hill for the media and entertainment industries. He spent much of the session peering into his laptop, on which he was practicing downloading Grateful Dead tunes from Napster. But he had clearly paid attention to the testimony of Napster CEO Hank Barry, who claimed the number of Napster users had reached 20 million. (Sitting just behind Barry was buzz-cut Napster founder Shawn Fanning, a professed Metallica fan, who spent his Washington field trip being denounced by his hero.) In typical evenings, Barry said, the company has 500,000 users -- a third of the number of people on America Online at the time.
 

                       TO LEAHY, THOSE NUMBERS translated into political power. ''If 20 million Napster users get cut off,'' he warned, ''even those senators who are not sure what that large screen on the desks in  their office is are going to start hearing from those people.''  Without rapid movement to give Napster a license, he said, ''you'll  feel pressure from Congress to create statutory licenses, and pressure to create a single fee to pay all concerned, and I'm not sure everybody will be happy with that.''

                       Dramatic contrast was provided by California Democrat Dianne Feinstein, who lashed at Napster as ''defeating the purpose of copyright protection.'' The company's ''saving grace,'' she
observed dryly, was its utter lack of business model -- a lack that Barry cheerfully confirmed. ''Why are you not liable'' for  massive copyright infringement? she demanded. ''Why do you preserve the anonymity of your users?'' If Napster-like services sprung up across the content industry, she argued, copyright would become ''null and void.''

                       But one of Feinstein's own examples illustrated the divisions that Congress -- and the music industry -- is wrestling with.  Mentioning that Hatch had given her one of his CDs, she asked Barry what would happen if she ''put it on Napster, where 10 million people could copy it.''

                       ''I'd be willing to try it,'' said Hatch, who said that his CDs, seven of which are available at his Web site, typically sell about 2,000 copies. This logic was also espoused by McGuinn. After more than 25 records, many of them hits, McGuinn said, ''I cannot support my family on record royalties alone.'' By contrast, he had released music on the Internet and MP3.com and earned ''thousands of dollars'' from royalties and increased concert attendance. Less financially successful artists often welcome the file-trading on Napster and Gnutella because they want the increased exposure. Only when musicians have big hits do they begin to have something to lose. As a result, the industry is pulled in two different directions.

                       As evident from the wildly clashing testimony of the witnesses, the Big Five record groups are having difficulty doing the simplest thing online -- releasing their own music. (In a first, EMI Music is set to offer a significant portion of its album catalog for digital downloading next week.) And more-complex business models, like MP3.com's attempt to let people listen to copies of their own music through the Internet, are so entangled by competing interests and vaguely worded laws that Robertson of MP3.com, another witness, urged the committee to take immediate steps to cut through the mess. (Robertson's ''Beam-It'' service was sued by the labels and publishers; a huge settlement, perhaps the biggest copyright-infringement payment in history, has not spared the company continued litigation.) ''Because I made what one court says is a single mistake in a totally gray area of copyright, '' Robertson said after the hearing, ''I am being hit with a tobacco-like judgment...It is clearly nearly impossible for any entity to work with the system now.''

                       ''At what point should Congress consider legislative action to ensure that there is access to music at a reasonable price with the artist compensated?'' Hatch asked at the end of the session. ''I'm willing to consider compulsory license and a clarification of fair use'' -- the latter presumably including giving tapes to spouses and friends. Asked after the hearing about the Herculean prospect of defining fair use, Leahy blanched and said, ''Now, that's one of the areas where the devil lies in the details.''

                       Rosen of the RIAA and Erlich of Sony rapidly responded that legislation was not needed, because the market would work out what was needed. But others wondered if the Congress could really stay on the sidelines. If the industry continues to fail to produce ''an environment with fair, reasonable licensing,'' said net-music guru Jim Griffin, co-chairman of Evolab, a startup focused on the wireless delivery of media, the government will need to take action to maintain public access to intellectual and artistic works.

                       ''Legislation is going to have to straighten this out,'' Ulrich told Hatch. ''You're dreaming if you think we can work this out between us. We can't work this out without your involvement.''

                       ''Fair and reasonable licensing needs to take place,'' Hatch flatly told the industry as he closed the hearing. ''We'll be watching closely.''

                       He banged down the gavel, the doors opened and at last some of the kids who had been waiting outside got their chance to rush in and get Ulrich's autogra

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