Peer-to-Peer Networking
July 26, 2004
No. 16

Background: Internet file sharing, commonly referred to as peer-to-peer (P2P) networking, allows individuals to trade copies of their digital files over the Internet. To use a P2P service, such as KaZaA, users download software that enables them to "join a club." Members of this "club" store and download copies of digital files directly from their computers – at no cost. The majority of P2P users trade digital copies of songs and, to a lesser extent, movies. It is the unauthorized "sharing" of these copyrighted music and movie files that have stirred the P2P controversy.

Status: Several approaches to dealing with P2P are now being considered in Congress. The Senate recently passed S. 2237, a bill that would authorize the Justice Department to bring civil charges against anyone who infringes a copyright. Among other pending proposals is S. 2560, legislation that would hold file-sharing services liable for individuals' copyright infringements. Other suggested reforms have ranged from allowing copyright holders to engage in "self-help" measures to disrupt P2P operations to regulation of devices and software. Apart from the legislative arena, the music industry continues to file lawsuits against "heavy" P2P downloaders, and private companies continue to develop electronic measures to stop unauthorized copying.

Discussion: Proponents of P2P argue that the practice does not harm album (or movie) sales - some even suggest that it increases sales - while opponents argue that P2P decreases sales. Economic theory, as well as two recent studies, suggest that P2P has decreased album sales by anywhere from 8 to 30 percent. Regardless, P2P remains a threat to the future of the music industry because it forces copyright holders to compete with products that are given away. As broadband Internet connections become more powerful, the film industry also could be at risk.

Action item: Copyright owners should be able to vigorously protect their intellectual property against theft, in court and through private action. Policymakers can help clarify rights by amending the law so that making copyrighted work available to the general public on the Internet is undoubtedly an infringement, and allowing DOJ to bring civil suits. The law should be narrowly targeted, however, against those who actually misappropriate protected works, not P2P networks in general, ISPs, or those engaged in “fair use” of the works. Regulation of devices and software should also be rejected – while technology mandates might reduce unauthorized copying, such rules could stifle innovation. Ultimately, the solution may be a private one, with copyright owners using new technologies to make unauthorized copying of works more difficult.

This brief was prepared by Heritage Research Fellow Norbert J. Michel, Ph.D.

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