COPYRIGHT PROPOSAL WOULD IMPOSE NEW FEDERAL COMPENSATION SYSTEM

William (Terry) Fisher told Internet Law Program in Stanford, Cal., Wed. how he wanted to supplant copyrights with federal system of registration of works to track consumption frequency; taxation of copying devices, blank media and broadband access; and compensation of artists and entertainment proportional to consumption, initially to roughly make them whole for shortfalls from royalty entitlements under current copyright system. Fisher served as expert witness for Webcasters and broadcasters before U.S. Copyright Arbitration Royalty Panel and adviser to 5 Central American presidents on intellectual property reform.

Fisher’s proposal immediately met with 2 objections: Harvard colleague Charles Nesson said it would face ferocious opposition from powerful music and movie industries. Warner Bros. intellectual-property chief Jeremy Williams called plan interesting but said govt. role would worry Hollywood and its investors.

Conceding political challenge, Fisher unveiled a plan for voluntary entertainment co-op as first step to gain traction by proving feasibility. Artists would grant co-op transferable, nonexclusive downloading and streaming licenses; co-op would license Webcasters and download sites, each of which would charge subscription fee, use password protection and report usage data; fee proceeds would be distributed according to consumption-based plan. Consumers’ incentive to participate would be heightened by tougher enforcement against peer-to-peer systems, Fisher said. Other aspects of system are addressed in draft chapter of his upcoming book Promises to Keep: Technology, Law and the Future of Entertainment.

Administrative, financial and policy responsibilities should be given to Copyright Office, Fisher said, because they would build on existing expertise and duties. It’s troublesome giving any govt. agency such power, and particularly so with office susceptible to powerful lobbying by MPAA and RIAA, he acknowledged. But many other agencies are entrusted with comparably great power and administrative rules, appeal opportunities would mitigate potential abuses and entertainment- industry power probably would dissipate over time, Fisher wrote.

Registration, accompanied by fee to cover administrative costs and producing distinctive ID composed of letters and numerals, would be preferable to alternative tracking method, digital watermarking, he said. Registrants -- movie producers and song composers and performers -- would become copyright owners.

Total taxes distributed to owners at outset would equal Copyright Office’s estimate of their industries’ losses from unlimited copying, plus administrative expenses. That would total $2.4 billion in 2004, including $1.24 billion attributable to music industry and $532 million to film, Fisher said. Over time, those losses would become less meaningful measures and office would switch to trying to collect enough to cultivate healthy body of entertainment, making annual adjustments based on results, he said.

Taxes would be collected on sales of CD recorders, PVRs and associated service, MP3 players, blank CDs and Internet access. Limiting levy to broadband would be best because it roughly tracked heavy use of file-sharing and other Internet entertainment, Fisher said. He proposed charging 25 cents per CD and 20% of list on devices and PVR service. That would leave about $1.2 billion to collect on broadband, which would raise fees about $3.50 monthly from their $31.38 average, Fisher said.

[To compensate content owners for home copying, Audio Home Recording Act mandated royalties on consumer hardware and blank software defined as “primarily audio” in nature, leaving PC products exempt. Law also required recording devices to contain circuitry to implement Serial Copy Management System that permitted cloning of single digital copy of CD for personal and noncommercial use, but barred making digital copy of that copy. Rules applied to CD, DAT, DCC and MiniDisc formats. When home audio CD decks arrived, they also were designed to recognize and record only “Audio” blank CDs, which carry coding that indicates royalty has been paid. Home audio recorders were designed to reject PC-use “Data” discs on which no royalty had been paid. Royalty terms agreed to by CE and music industries tacked 2% levy on factory cost of recorder, with $8 cap on single recorder, $12 on dubbing deck or recorder built into audio system. Levy assessed on blank media was 3% at factory level. Manufacturers submit payment and product shipment audits to Copyright Office, which turns them over to 2 funds for recording companies and artists (which get 2/3 of all collections), songwriters and music publishers (1/3).]

Fisher conceded that inexact fit between taxpayers and beneficiaries was flaw in his proposal, and over time financing might shift to income tax. Money would be allocated first between movies and music overall, then among works by consumption.

Consumers would gain access to flood of new and varied material with no price tags and would consume much more entertainment than they do now, he said. They wouldn’t be restricted in using and modifying content, which Fisher said would greatly benefit culture. Artists would win protection not only of their income but also of their freedom from Hollywood pressures, he said.

Taxes would increase CE and broadband prices but their value would rise much more, making providers winners, Fisher said. He said biggest losers would be music and video retailers and CD and DVD makers.

Hollywood’s position would be most uncertain. Labels and studios would benefit initially from compensation for unauthorized copying, Fisher said. Then their fate would depend on how well they used their marketing experience and clout to fend off scrappier upstarts, he said. Entertainment companies, and all society, would benefit from diminished litigation, law enforcement and encryption costs, he said.

Congress would need to authorize taxes and expansion of Copyright Office’s budget and power, Fisher said, and Agreement on Trade-Related Aspects of Intellectual Property Rights and Berne Convention would require amendment.