After Napster will there be a Bookster and a Softster?
Piracy may actually help digital content companies broaden markets

Record companies fighting to shut down the Napster Web-site, are at the forefront of an emerging war over the protection of intellectual property rights that is raising questions about how these rights are going to be marketed in a digital world.

Napster, of course, is a California based company that allows people to exchange music over the Internet. Its servers are filled with tracks by recording artists such as the Eagles, Limp Bizkit and just about anyone who is anyone in the music industry.

After little more than a year since its launch, the company now claims more than 20 million user accounts at its Web site which receives more than 4 million visits each day.

The recording industry, understandably concerned about Napster's incredible success is challenging the fledgling company's business practices. In late July industry lawyers managed to convince a California judge that what Napster is doing is piracy, and the site was ordered to cease operations. A higher court eventually stayed that order, and the matter remains in litigation.

Napster's battle with the recording industry is raising interesting questions about how companies can best protect and market intellectual property such as music, books software and videos which can be converted into digital format and transferred at the click of a mouse.

One question concerns boundaries. For example Napster is based in California. Let's say that at the end of the appeals process, the company is ordered to shut down its servers and end the file swapping that is taking place among its users. What is to stop Napster, or its imitators from picking up and setting up shop in another jurisdiction?

The wide growth of the Net will almost certainly spawn the evolution of "server farms," to host Web-sites for organizations faced with legal, or other challenges to their content.

These would probably located in tax-free havens such as the Isle of Man, where companies can get around the long arm of courts in their individual jurisdictions, giving them the opportunity to market services such as erotic material, lotteries, gambling or even restricted books, which may otherwise be illegal.

But they will also serve as the ideal hosting ground for communities of users such as Napster, who want to exchange files that are protected by copyright in other countries.

There are several sectors that are ripe for this kind of service. One is the book industry where publishing titles in digital format, such as Stephen King's latest, is becoming increasingly common.

From buying a book in digital format, it is a small step to uploading it to a common server and sharing it with a community of users along the lines of Napster, except with a different name say Bookster.
Many books by authors such as Charles Dickens, Mark Twain and Herman Melville, whose copyrights have expired are already available to the public on sites like Project Gutenberg (www.gutenberg.net). Project Gutenberg is run in large part by volunteers, who donate their time by converting widely demanded texts into digital format.

It's not a stretch to imagine similar sites popping up, where copyrighted material is made available to the public free of charge. Prime jurisdictions for this type of activity are poorer countries such as China, with weak intellectual property recognition records, that are attempting to make the leap from third- to first-world status. High prices create incredible temptations among computer users in these countries to pirate intellectual property.

One example is computer software, which has a long tradition of piracy even in the first world. Before long, expect to see sites being set up, where you can download bootleg copies of commercial software such as Microsoft Office, and Adobe PhotoShop.

So what can companies do to protect themselves from digital pirates? Probably not a heck of a lot. While the record industry makes a big show of going after Napster, even if the effort succeeds, other companies will take its place.

The record industry has been dealing with piracy in the form of illegal taping since long before the Internet came around. But there is plenty of anecdotal evidence that piracy in fact broadens the market for a product, by making it more well-known. The people at Napster certainly think so, and never tire of pointing out that legitimate CD sales have gone up since their site has been set up.

There are many people, who, even if they could get music for free, would not have the two to three hours it takes to download a dozen tracks of varying degrees of quality and then burn a CD-ROM from them.

The same thing goes for books. Even if someone can download Moby Dick for free at the Project Gutenberg Web-site, few people want to watch their ink jet printer spew out close to a thousand pages of text. Who wants to go to bed reading a mountain of photocopy paper printed on one side, when a soft cover copy of the novel can be bought at the local bookstore for less than $10.00?

In fact one of the most outspoken opponents of software piracy, Bill Gates, is so convinced of the efficacy of illegal software in boosting legal software sales, that he has long resisted putting effective copy protection mechanisms in Microsoft products. "As long as people are going to steal software," he likes to say, "we want them to steal ours (rather than a competitors)."

E-mail can be sent to Peter Diekmeyer at peter@peterdiekmeyer.com


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