Testimony of Lawrence Kenswil,
Executive Vice President of Business and Legal Affairs
Universal Music Group
before the House Committee on the Judiciary
Thank you, Mr. Chairman, Congressman Frank, and members of the
Subcommittee. My name is Larry Kenswil and I am Executive Vice President, Business and
Legal Affairs, Universal Music Group. I am also testifying today on behalf of the Recording
Industry Association of America.
At the Universal Music Group, selling records is our business, and we
are constantly looking for new opportunities to take our music directly to the consuming public.
The Internet provides an excellent opportunity to do so. Today, visitors to our web site can
search for their favorite bands and even listen to clips of their songs; get tour information; and
check out new, up-and-coming artists signed to our labels. And in the future, surfers at our site
will be able to choose which musical selection they want to hear or buy, and download it directly
to their computer. This direct interaction with the customer provides us with enormous insight
into what people are listening to and what they want to hear. This information will hopefully
lead us to find the next Reba McEntire, Patti LaBelle, No Doubt, Gladys Knight, or George
Strait, just to name a few of the artists on our labels.
We believe there are two important factors that will help us realize this
vision of the Internet as a new means of distribution for our music. First, the strong copyright
protection that we enjoy today is essential to provide those who create the music with the right to
control its use and to be compensated when it is played or downloaded. This fundamental
copyright principle dates back to the Constitution. From America's earliest days, the creativity
and ingenuity of its people have been valued and recognized.
Unfortunately, copyright protection alone is often not enough. The
technology that permits authorized users to easily download music may also be used by
others to obtain unauthorized copies from illegal pirate sites. Internet piracy is rampant
and growing daily. Why bother to pay Universal or the artist who created the song, when it's
available for free? Why bother visiting your neighborhood record store when the copy you can
download for free sounds just as good as any CD you would purchase?
Second, we believe that technology that provides protection for copyrighted
is the other necessary element for the Internet to reach its full potential as a safe place for
commerce. At Universal and the RIAA, we spend an enormous amount of time and resources
searching for and developing technology that will allow us to control the product we own. It's
simply not enough to have the legal rights to control how our music is used, we must have
effective technological means to exercise this control.
Just as technology has created this new threat of piracy on the Internet, so too can
it solve the problem it has wrought. Precisely how, or when, remains unclear. But one
conclusion appears inescapable: We will not be able to protect our music entirely on our own;
encryption and other unilaterally-applied technology measures will not prevent any Internet user
from taking any of the 4.7 billion CDs already out in the marketplace and uploading the music on
them to the Internet, where it will become available to millions of downloaders worldwide.
Virtually any technology used to protect our music will be bilateral, requiring hardware or
software on the Internet or in computers to look for and act upon the technological protection
measures encoded in our recordings. We need the cooperation of the online and Internet service
providers -- i.e. Internet Access Providers, or IAPs -- to help us protect our works. We cannot do
It is vital, therefore, that any legislative solution to the issue of copyright liability
must retain the incentives that are already built into existing law for IAPs and others to deploy
these technological solutions when they become available. If it is commercially and
technologically feasible for an IAP to use a technology that will prevent infringements from
occurring on their networks, we see no reason for them to resist. If the IAPs are granted the
immunity from liability they seek, however, what incentive will they have to deploy any
technological protection whatsoever?
The IAPs may give you the impression that we want them to serve as the Internet
police; that we want to obligate them to examine each of the billions of bits of data passing
through their networks, searching for infringing copies of our music. This is simply not, and has
never been, our view. We do, however, expect IAPs to do something when they become
of an infringement on their own. There are a number of red flags that might put an IAP on notice
of possible infringing activity. For example, if an IAP notices that one of the web sites it is
hosting for someone who is not affiliated with the music industry is taking up a tremendous
amount of server space (because sound files are large), or numerous files on this site that are
known to be sound files -- .WAV, .AU or .MP3 -- reside on that server or are evident in the IAP's
activity logs, shouldn't that IAP at least notify us so we can check out whether the recordings on
that site are authorized or not? That sort of action would evidence the cooperation and shared
responsibility the IAPs purport to favor.
But instead, the IAPs state that they should have no responsibility for
infringements unless they have "actual knowledge." This is an impossibly high standard for
copyright owners to meet.
Quite apart from the difficulty of meeting the standard, what is the justification
it? If an IAP should become aware of something suggestive of copyright infringement on their
system, why should they be legislatively entitled to ignore it? Sometimes something is so
obvious to a reasonable person that he or she should be presumed to know it, and have an
obligation to do something about it -- like investigate it, or bring it to the attention of the
Moreover, the IAPs equate "actual knowledge" with receiving official notice
copyright owners. This would mean that they could turn a blind eye toward infringements
occurring under their nose. If an IAP has reason to know of infringing activity, why should it be
entitled to sit back passively, wait for the copyright owner to detect it, wait some more to receive
official notice from the copyright owner -- and only then take down the infringing site?
the damage that the copyright owner can suffer while the IAP ignores the infringement.
Mr. Chairman, no matter how diligent our efforts, we simply cannot detect every
infringement on the Internet. We need the help of the IAPs to help prevent infringements from
occurring in the first place. We must have a proactive, not just a reactive, response. The
potential damage from anything less is enormous. We need the help of the IAPs to
deter, not just
take down, infringements.
The IAPs are seeking a dramatic change in existing law governing infringement
liability. Why do they need such a drastic solution? IAPs claim they are at risk for being held
liable for "massive damages" and "face the prospect" of being adjudged culpable for
infringement. But these are hypothetical risks only, not borne out in practice. Nor are we aware
of any onslaught of debilitating lawsuits that threaten the very foundation of the Internet. To
date, we count only a dozen or so decisions dealing with copyright liability on the Internet -- and
only a couple of them have involved IAPs. And the one decision dealing directly with the issue
of IAP liability came out on the side of the IAP.
And how real is the risk anyway? Look at some examples in today's world.
Printers make "reproductions" under the Copyright Act every minute as part of their ordinary
business, and they cannot know whether all or some of the materials they are reproducing are
infringing someone's rights. Still, they are technically liable for direct infringement of the
reproduction right. Yet there is no printer exemption in the Copyright Act. Bookstores, too, are
technically at risk that they are committing or contributing to copyright infringement by virtue of
their ordinary, day-to-day business operations. They cannot know the content of every book they
sell, and whether any of it is infringing. Still, they are technically liable for direct infringement
of the distribution right. Yet there is no bookstore exemption in the Copyright Act. And the
same can be said for CD pressing plants, record retailers, book and magazine publishers, TV
broadcasters, and scores of others. What makes Internet Access Providers any different?
The IAPs are seeking preferential treatment over every other industry group that
deals in copyrighted works every day. What entitles them to preferential status? Have they
suffered any unusual harm? Has there been a single case imposing liability on them unfairly?
Has the growth of the Internet been crippled? Not one of these things has happened.
Where, then, is the crisis? What is it precisely that we're trying to solve? And
why should we be trying to solve anything by changes to the law when it is very possible that in
the near future we will be able to use new technologies to deal with the infringement issues that
technology has created?
Mr. Chairman, I commend you for introducing legislation to begin this important
debate. But I confess to fear -- fear that unnecessary legislation will make the situation worse by
granting exemptions from liability that are not needed as a matter of law or practicality; and
which will damage our long-term interests by creating disincentives for the IAPs to deploy
technology or otherwise help us to deter infringements.
Let me outline briefly just a few of the major problems we see with H.R. 2180:
For one thing, it eliminates the remedy of monetary damages. Injunctive relief is
important, but it has little deterrent effect. The lack of a damage remedy means that the worst
consequence facing an IAP is to be told to take down a site; that is unlikely to encourage IAPs to
take the kind of steps we think are necessary to deter infringements.
Even injuctive relief is withheld in some circumstances, in which case there will
be no remedy available at all to the copyright owner. Injunctive relief may be the only way an
infringing web site can be shut down in the United States if, for example, the offending site is
located in a foreign country with little or no copyright protection.
Similarly, the bill makes preliminary injunctive relief unavailable in a number of
circumstances, which means that the harm from unimpeded access to the infringing materials on
the Internet can continue unabated until the conclusion of litigation.
Finally, the criteria prescribed in the bill for the exemption to apply are relatively
easy to satisfy, and they would apply not just to IAPs, but to "any person," including bulletin
board operators who have frequently been held liable for copyright infringement in court cases.
Frankly, we believe that existing law is the preferable approach. But if the
Subcommittee concludes that legislation is necessary, we urge you to create a balanced solution
that maintains the partnership between copyright owners and Internet access providers in
deterring infringements and facilitates legitimate commerce on the Internet. In this regard, we
urge you to test any proposed legislation against the following principles:
o does it retain incentives for IAPs to deploy technologies that achieve this goal?
o does it ensure that IAPs are not encouraged to hide their heads in the sand
or allowed to ignore possibly infringing activity? and
o does it curb the real and demonstrable problem of Internet piracy -- a
problem occurring every minute on the Internet?
Thank you very much for the opportunity to present this testimony today.
Subcommittee on Courts and Intellectual Property
September 16, 1997