Empire Strikes Back

There's a game common at arcades called Whack-A-Mole, where plastic rodents pop up briefly from holes in the playing surface. You know the game--you get points for smacking the moles before they drop again.

That's an apt metaphor for the record industry's current attempts to "whack" a legion of companies that, recently, have crowded the Internet, attracting tens of millions of users who illegally download billions of song files each month.

Though the record industry used lawsuits to shutter Napster, Scour and others, it's now facing a much heartier breed of challengers. As a result, the Big Five record labels and their trade group, the Recording Industry Association of America, have begun to employ an array of technological tricks to fight piracy--tricks that, in turn, have led some online, in the courts, in Congress and even in the Bush administration to say they've gone too far.

"We obviously are aware of a number of ways that infringement is occurring on the Net," says Matt Oppenheim, the RIAA's senior vice president of business and legal affairs. "We're trying to find the right balance between enforcement and over-enforcement. In some instances, we're in active discussions to resolve things outside of court."

The record companies are scrambling to shut down peer-to-peer (P2P) networks, basically thousands of PCs loosely linked together with small, free programs that allow them to swap songs, video, photos and more. Morpheus, KaZaA, Grokster, Gnotella, Limewire, BearShare and others are attracting huge followings--and the record industry's attention.

Music-industry lawsuits already have been filed against Morpheus, KaZaA, Aimster and Grokster, but suits aren't likely to be enough to kill the new networks, according to music attorney Ken Hertz, who represents acts such as No Doubt and Alanis Morissette.

Many of the new file-swapping companies are overseas, and harder to sue, he says. Already, many of the "Open Nap" companies, whose programs independently tap into the Napster network, are based in Italy and Yugoslavia. KaZaA creator Computer Empowerment B.V. is based in Holland and is making the RIAA go through laborious processes at The Hague to sue it.

And even if the RIAA eventually does win in court against these and other companies, it doesn't necessarily kill these new-breed networks, which can live on after the parent companies die.

"Shutting down the network simply makes the users unaddressable, but the network lives on," Hertz says.

So the record companies are using increasingly sophisticated technology from several outside companies to hamstring these increasingly sophisticated networks and their users.

"The first time somebody ripped off a 7-Eleven, they probably walked in the front door and said, 'Give me what you've got,'" says the RIAA's Oppenheim. "Over time, people have gotten more sophisticated. They wear masks; they cover the cameras. Sure they get more sophisticated. Does that mean it's theft to any lesser extent? No. Theft is theft."

To start, all five big labels are experimenting with copy-protected CD technologies from companies such as SunnComm, Midbar Tech Ltd., TTR Technologies Ltd. and Macrovision. As many as 4 million copy-protected CDs that can't be played in a computer's CD-ROM drive have been issued already, mostly in Europe.

But the technologies are clunky at best and won't run in many kinds of CD players, including car stereos, mobile devices and DVD players. That already has sparked a lawsuit against SunnComm for problems caused by the company's technology on a recent Charlie Pride album. (And by the way, how many people are ripping and burning songs off Charlie Pride albums?)

Two Web sites, www.Fatchucks.com and www.Eurorights.org, are organizing online users against copy-protected CDs, saying they treat fans as criminals, even keep CD owners from making compilations or otherwise freely using music they've legally bought.

As well, Webcasters say copy-protected CDs break laws that allow them to play music online in exchange for paying set amounts into a pot distributed among musicians and labels.

"Copy-protected CDs are a real issue for Webcasters," says Jonathan Potter, executive director of the Digital Media Association. "You just have to be careful if you're going to put out poison; you better make sure you catch the rats and don't poison the dogs."

Presumably to that end, the record companies have begun using other techniques to go after illegal file-swapping, techniques that might be familiar to many hackers.

One approach is a variation on the denial-of-service attacks that have clogged high-profile Web sites in recent years. When the technology finds a song on the P2P networks that can't be shared legally, it begins downloading the song like anyone else would, but does so extremely slowly and requests the song repeatedly, so it can't be downloaded by anyone else waiting in line for it. Repeat this for thousands of songs, and it ends up clogging the system, making the P2P networks less usable and less attractive.

The record industry also identifies people who swap a lot of files, then asks their Internet service providers to shut down those accounts.

"Piracy has been a fact of life throughout copyright and before, judging where the name came from," says the RIAA's Robert Raben. "Responsibility may be put on people who are currently not taking on responsibility."

But anti-terrorism legislation passed after September 11 substantially increased penalties for harming people's computers with online attacks. That led the RIAA to try to amend the bill to absolve its online hit squads of any legal liability. RIAA representatives claimed the amendment would restore powers they previously had. Yet the RIAA amendment's sweeping absolution led one Congressional aide to call it the "license to virus" bill. Eventually, the RIAA withdrew the proposal and said it would try a different approach.

The RIAA also has pushed a bill to force computer and consumer-electronics manufacturers to build copy protection into any device capable of "storing, retrieving, processing, performing, transmitting, receiving or copying information in digital form." That would cover a huge range of devices, including computers, TVs, VCRs, camcorders and personal-video recorders. The bill's breadth rankled even people whose companies make anti-copying software, such as Ron Koenen of InterTrust Technologies.

"I've been amazed by the Hollings bill," Koenen says. "It's like mandating a refrigerator in every home to save the fruit industry."

Others have also become concerned, including the Electronic Frontier Foundation, which announced it will help defend KaZaA, Morpheus and Grokster in their music industry lawsuits.

The EFF, a prominent digital civil liberties organization, said the suits are trying to shut down technologies with "substantial non-infringing uses" beyond making piracy easier and should be protected from legal assault.

Jim Griffin, CEO of Cherry Lane Digital and a longtime online music guru, says record companies' suppression efforts are misguided and instead should be attacking "the motive, not the mechanism."

Just as movie companies sued to stop the VCR, but now make $18 billion a year in home-video revenues, Griffin says music companies would profit handsomely and kill off much piracy if they just made it easy and inexpensive to legally get songs online.

It doesn't appear as though they will anytime soon. The record companies' own services--MusicNet and pressplay--still haven't debuted and, so far, don't look as if they'll provide what consumers want. Neither service offers music from all five labels, and neither lets people use the music they get from the services on other computers--or even to copy to recordable CDs. And, of course, unlike the P2P networks, the services aren't free. Until record companies figure out how to compete better, Griffin argues, they'll stall for time with these technological and legal attacks.

"They'd rather be paid a lot of money than have control, but until they get paid a lot of money they'll use control as an excuse," says Griffin. "But isn't our history the opposite of control?"

During recent court hearings, Napster's attorneys said the record companies had committed "copyright abuse," refusing to license their music to would-be competitors of the online services they own. Napster CEO Konrad Hilbers subsequently said Congress may need to force the industry to fairly license its music to all comers, perhaps through the recently introduced Music Online Competition Act.

Within days of the court hearing, word trickled out that the U.S. Department of Justice was investigating whether the record labels' handling of online business violated antitrust and other laws. And in the weeks since then, the industry has announced a handful of new online licensing deals with companies the labels don't own. That could be a harbinger of the future, as the industry tries to figure out how to deal with piracy and a new medium, insiders say.

"I call it digital heroin," says one label executive who also has worked for online companies. "Heroin dealers make a lot of money. They'll figure out how to do it."

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David Bloom