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July 3, 2003
Copyright (c) 2003 Virginia Law Review Association
Virginia Law Review
89 Va. L. Rev. 679
LENGTH: 27937 words
ARTICLE: WHEN CODE ISN'T LAW
* Tim Wu, Associate Professor of Law, University of Virginia School of Law. I
am grateful to Barbara Armacost, Jack Goldsmith, Scott Hemphill, Mitchell Kane,
Jody Kraus, Lawrence Lessig, Clarisa Long, Tom Nachbar, Irene Oh, Eric Posner,
and Matthew Schruers for discussion and comments on earlier and much earlier
drafts, to workshop participants at the 2002 Canadian Law
& Economics Conference and the Virginia Law School Faculty Workshop; to the
Stanford Law School Internet and Society Speaker Series; and to Miriam Cho and
Kelly DeMarchis for research assistance.
... When the Supreme Court upheld extended
copyright terms in Eldred v. Ascroft, many Internet activists called for renewed
political action in the form of appeals to Congress or even a campaign to amend
the Constitution. ... The important case of peer-to-peer ("P2P") filesharing, explored in depth in this Article, illustrates the possibility
of using code design as an alternative mechanism of interest group behavior.
... That is,
copyright law achieved compliance through the imposition of liability on a limited
number of intermediaries - those capable of copying and distributing works on a
mass scale. ... The node must find at least one peer to join the peer network,
but how can this location be done without knowing a peer in advance? Again, the
solution is usually reliance on some intermediary, such as a
"host cache," that grants the peer node one peer address so that the user may begin to use
the network. ...
" Napster taught peer network designers that both lack of control and general
functionality had to be comprehensive and credible to avoid contributory
liability. ... The KaZaA superpeer system, from user accounts, produces much
better performance than even the next-generation Gnutella clients. ... Their
ability to do so will depend on
copyright protection, either against unauthorized distribution of the software client
(perhaps using a peer network) or unauthorized circumvention of a
copy-protection scheme. ...
When the Supreme Court upheld extended
copyright terms in Eldred v. Ascroft,
n1 many Internet activists called for renewed political action in the form of
appeals to Congress or even a campaign to amend the Constitution. But others
suggested a very different course: They argued that it would be wiser to forgo
institutions controlled by the powers of the past, and to return instead to the
keyboard to write the next generation of
"law-busting" code. In the words of one observer,
"tech people are probably better off spending their energy writing code than
being part of the political process" because
"that's where their competitive advantage lies."
The idea that computer code may be emerging as a meaningful instrument of
political will remains one of the most evocative and poorly understood
propositions in the study of law and technology. The prominent effects of
computer code have made it difficult to ignore the fact that code can be used
to produce regulatory effects
[*681] similar to laws. Hence, the popularity of Professor Lawrence Lessig's idea
that (for computer users at least)
"code is law."
But what this really means remains extremely vague. The subject remains the
focus of grand speculation, ranging from claims that computer code will arise
as a kind of utopian sovereign to improve on perceived failures of state
n4 to concerns that code may be used to negate basic freedoms,
n5 and, of course, the claim that nothing of legal novelty has happened, or
perhaps ever will happen.
Most problematically, none of these understandings of code and law explains a
central issue: compliance. Specifically, they do not explain the shifting
patterns of legal compliance in the 2000s. Explosions of non-compliance in
areas such as
copyright, pornography, financial fraud, and prescription drugs fuel the sense of a legal
breakdown, yet the vast majority of laws remains unaffected. The mixed
compliance pattern finds little explanation in the concept that
"code is law" or in notions that technological self-help can offer a substitute for legal
[*682] This Article will propose a new and concrete way to understand the
relationship between code and compliance with law. I propose to study the
design of code as an aspect of interest group behavior: as simply one of
several mechanisms that groups use to minimize legal costs. Code design, in
other words, can be usefully studied as an alternative to lobbying campaigns,
tax avoidance, or any other approach that a group might use to seek legal
advantage. The approach aims to separate two different aspects of code's
relationship with law. The first is Lessig's concept of a regulatory mechanism:
that computer code can substitute for law or other forms of regulation. The
second aspect is as an anti-regulatory mechanism: a tool to minimize the costs
of law that certain groups will use to their advantage.
The code designer, I suggest, redesigns behavior for legal advantage. The
programmer is not unlike the tax lawyer, exploiting differences between stated
goals of the law, and its legal or practical limits. He targets specific
weaknesses in legal regimes, and has no means to rewrite laws in general.
Therefore, I argue that the long-term significance of the programmer's methods
for the legal system can be described in a fairly straightforward fashion. At
its greatest extent, the design of code may provide a new option for
influencing specific laws. It will be of the greatest importance to individuals
or large, disorganized groups poorly equipped to take advantage of existing
means of political influence. And as such, the code option may mean some change
in the relative power of interest groups, as it makes organization slightly
The gains to diffuse groups may seem to be a positive development. But there is
a darker side. Code design, as a means of avoiding laws, serves as a
particularly useful device for exploiting the internal dynamics of regulated
groups. It is, as this Article will show, a useful way for the computer-savvy
to avoid legal burdens while continuing to enjoy the benefits of an ordered
society, thanks to the continued compliance of the technophobic.
In short, increasing use of code to minimize the burden of laws has interesting
and complicated effects for both the legal system and political system that
have been misunderstood. The effects are
[*683] categorically different from the fundamental challenge to the legal system
that some had imagined, and analytically distinct from the concept that code is
a form of regulation.
The important case of peer-to-peer ("P2P") filesharing, explored in depth in this Article, illustrates the possibility
of using code design as an alternative mechanism of interest group behavior.
These ingenious programs, bearing names like
"BearShare," make it free and easy to trade digital content (usually copyrighted songs)
with millions of new-found friends.
P2P filesharing represents the most ambitious effort to undermine an existing
legal system using computer code. The significance of P2P for
copyright is substantial. The efforts of P2P programmers have provided computer-savvy
music listeners with a continuing reduction in the costs of the
copyright system, comparable to a temporary repeal of
copyright laws for computer geeks. P2P underlines the reality of code design as an
alternative mechanism of interest group behavior.
But P2P filesharing also makes the limits of this alternative mechanism clear.
The efficacy of P2P filesharing depends on two powerful and often unrecognized
weaknesses of the
copyright regime: the law's dependence on a gatekeeper enforcement mechanism and the
severe lack of normative support among the regulated. Successful P2P networks
relegate the law to an exercise in primary enforcement against a multitude of
P2P's success may depend on a unique collective action dynamic among music
consumers that stems from the nature of copyrighted works. The works available
on peer networks are generally non-rivalrous goods.
n8 As a result, the sub-group of P2P users, young and computer-savvy,
n9 can take advantage of the continued compliance of regular consumers. The mass
of regular users pay for the works,
[*684] thereby maintaining incentives for artists to create them, while the P2P
sub-group defects en masse, occupying the game-theorist's version of utopia.
These weaknesses, however, represent unique problems for
copyright law and are not more generalized weaknesses of the legal system. For that
reason, the utility of P2P as a means of avoiding law appears limited. Only a
few regimes may contain other particularized enforcement weaknesses comparable
to those of the
This Article's claims will rely on a model of compliance and interest group
behavior with certain novel features. Namely, the focus is on the mechanisms
through which groups influence law. It is the goal of Part I of the Article to
make the underlying model clear.
Laws impose costs upon regulated groups. Those groups that seek to minimize the
costs of law face a fundamental choice between mechanisms of change and
avoidance. Both mechanisms have the effect of lowering the expected costs of
law, but the similarities end there. Mechanisms of change (principally
lobbying) decrease the sanction attached to certain conduct and tend to require
collective action. Mechanisms of avoidance, on the other hand, decrease the
probability of detection and typically do not require that groups act
collectively, but depend on specific vulnerabilities in the law.
This understanding, while not exhaustive, is descriptively useful even in the
simple form presented. It clarifies the link between problems of compliance and
group dynamics - the extent of organization of the regulated. It shows that
changes in the costs of mechanisms of legal influence can dramatically affect
the function of a given law.
Part I will conclude by explaining how the design of code can be viewed as a
mechanism of legal influence. It will argue that code is used to reshape
behavior to take advantage of loopholes and ambiguities in legal systems. As
such, code is a mechanism of avoidance, displaying the properties of avoidance
described in the model.
Part II will demonstrate the unique vulnerabilities of
copyright laws and code's ability to exploit those weaknesses.
Copyright enforcement has long relied on what Professor Reinier Kraakman
[*685] first called a gatekeeper regime.
n10 In other words, the
copyright regime has achieved its goals through enforcement against specialized
intermediaries - those capable of distributing creative works on a mass scale.
Peer networks exploit that enforcement structure by creating a distribution
network that eliminates intermediaries. While eliminating intermediaries
presents a serious technical challenge, the goal is clear - to remove the
enforcement efficiency of a gatekeeper system, leaving primary enforcement
against end-users as the only option.
P2P networks also exploit an important ambiguity regarding the ethics of home
copying. Compliance with laws pertaining to the theft of real property is
facilitated in part by the status of clearly established norms. These norms
help prevent certain forms of economic injury to
copyright owners, like the stealing of books or CDs from stores. Studies show that
people are generally untroubled by the non-commercial home copying of
n11 P2P applications are designed to look and feel more like non-commercial home
copying than like breaking into a record store. The design therefore
successfully exploits the normative distinction between illegal
"stealing" and innocuous
Part III will demonstrate how P2P protocols have grown, through several
iterations, to specialize in exploiting
copyright's gatekeeper system. By its end, the P2P story suggests real limits on network
design's ability to influence law. Influencing the law in such a manner
requires, particular vulnerabilities in the law and a group that lacks better
options. The limits in generalizing the P2P model to other areas of law
demonstrate why the compliance challenge
[*686] is specific to certain classes of vulnerable laws, not a general challenge to
the legal system.
Part IV will conclude by studying the fit between P2P applications and music
consumers as an interest group. A fascinating aspect of the peer filesharing
story is the lack of coordination and organization that characterized its
development. Developers bicker and work independently, and etiquette among
users must be engineered or, as Professor Lior Strahilevitz argues, induced
n13 Despite the chaos, peer networks have managed to provide a subset of music
listeners with a continuing reduction in the costs of
Such results from disorganized efforts are consistent with the distinction
between mechanisms of avoidance and of change. The disorganization supports the
claim that matters as an option for groups whose inability to act collectively
precludes better options.
Finally, the results may also reflect the current ability of P2P users to take
advantage of the continued compliance of the majority of the population. The
copyright regime's subjects are divided by a technological line between the
computer-savvy and regular users. Because consumption of copyrighted works is
non-rivalrous, P2P users may rely on regular users to pay for music and to
provide incentives for its creation, free-riding on the results.
Analyzing code design as a mechanism of interest group behavior yields a
nuanced picture. It departs from the grandiose predictions that dominate
discussion in this area. As with the onset of lobbying, impact litigation, or
sophisticated tax evasion, the rise of
copyright evasion is best understood as a change in power dynamics among and within
I. A Theory of Code, Change, and Avoidance
The design of anti-regulatory code is best analyzed as one of many mechanisms
that interest groups might use to influence the effects of law. Implicit in
this argument is a set of assumptions and arguments that Part I seeks to
A. Reactions to Law in General Theories of Regulation
John Austin, lecturing on jurisprudence in the early 1800s, sought to separate
"appropriate matter of jurisprudence," from morals, religious scruples, and other distractions.
n14 Two hundred years later, positive legal scholarship has come full circle.
Rather than focusing on separating law from norms or ethics, it has pushed
instead toward understanding law as part of more general theories of regulation.
n15 Led by the law and society movement and Robert Ellickson's book, Order Without
Law, theorists routinely study the regulatory effects of law, group rules,
social norms, and even the regulatory potential of code.
n16 Such scholarship reflects an effort to understand all the
"forces" of regulation that might be acting on an individual, reasoning that
understanding the study of law alone gives an incomplete picture. Robert
Ellickson even gave the study of law in isolation a pejorative label:
Based on this work, the Internet law writers of the 1990s added the idea that
the design of computer code could be understood as an alternative means of
regulation, leading to the catchphrase
"Code is Law."
n18 The idea is that programmers make choices that constrain online capability,
and that such choices are regulatory in their effects. Professor Lessig, for
example, argued that the size and weight of office buildings can be understood
as a mechanism for preventing their theft, just like a law against larceny.
n19 Similarly, he reasoned, code-based
copyright protection for programs that
[*688] make software difficult to steal are a form of regulation.
n20 The same goes for code-based content-filters that might it make it easier, or
harder, to reach an intended audience. The design of filters is simply the
code-based regulation of speech.
But as the scope of regulatory scholarship increases, it becomes more apparent
that there is something lopsided to the effort. Current scholarship pays great
attention to the range of options available to regulators. But how much
attention is paid to the reactions of the regulated? The spirit of positive
scholarship is to leave no stone unturned in the assessment of regulatory
effect. Fidelity to that approach necessitates understanding not only
regulation options, but also how the regulated might undermine or compromise a
regulatory scheme. If the goal of positive scholarship is to understand the net
effect of the regulatory forces acting on a body, the model is incomplete
without incorporating the reaction to those forces. But what form will such
reactions take? And how effective will they be?
Today, such questions are answered in different ways by different bodies of
scholarship. In general, one answer comes from the compliance literature:
Groups will avoid laws they find burdensome. Another answer comes from writings
in political choice: groups will act to change disagreeable laws. This Part
proposes to reconcile and unite these divergent accounts of the behavior of the
regulated by analyzing the choice between avoidance and change.
B. When Groups Get Sick of Complying
What choices face an individual or group that decides to quit complying with
the law and to invest in some mechanism to change its effects? This Section
outlines the fundamental choice between efforts to change and efforts to avoid
First, a few assumptions should be made clear. Laws and other regulations
prevent groups from doing what they would otherwise want to do. As Professor
Tom Tyler puts it,
"Laws are passed and enforced to mandate behavior that people would prefer to
[*689] avoid ... . It is a basic tenet of political theory that any society ... fails
to provide its citizens with some thing they want and feel they deserve."
n22 A related assumption is that the initial content of laws are exogenous, the
result of an unspecified political process.
n23 As a result, groups often face laws with which they disagree and would prefer
to not follow, either in individual cases or as a general matter. In this
model, compliance is driven by expected costs (punishments) deriving from legal
sanctions (other sources are possible, but omitted for the present).
n24 Finally, a mechanism of legal influence is anything that, for a given price,
buys a decrease in the expected punishment associated with violating a given
1. Avoidance Mechanisms
When and why do groups obey the law? Basic economic models of compliance give
a very simple answer: Laws are followed when the expected costs of legal
punishment exceed the expected benefits of the banned behavior.
n25 The result is commendably simple, but, as theorists point out, only because it
does not accurately describe when subjects obey the law. Two important sets of
contributing factors are neglected. The first is extra-legal forces, such as
social norms, that might contribute to compliance. The second is investments in
mechanisms of avoidance, or efforts that would lower the expected costs of the
law, which might lead to greater non-compliance.
Efforts to broaden the basic model have focused on the first point, focusing on
the role that social norms and other factors play in creating compliance. Both
theory and some empirical studies suggest that the threat of legal punishments
alone cannot and does
[*690] not fully explain why people obey or do not obey the law.
n26 Supplemental explanations tend to rely either on normative theories or more
advanced models of self-interested behavior. Some, like Professor Tyler, argue
that normative considerations are central to understanding the public's
decision whether to comply or not.
n27 Others, like Professor Eric Posner, model extra-legal compliance as
n28 Still others have modeled it as a part of self-interested models of group
interaction following game-theoretic models.
This Section, however, focuses on a different criticism of the basic economic
model of compliance - that it fails to take into account investments in efforts
to avoid the law. As much as the regulative effect of social norms may create
more compliance than the basic model predicts, investments in efforts to
decrease or eliminate punishments may result in less compliance than predicted.
In their classic article, Law Enforcement, Malfeasance and Compensation
[*691] of Enforcers, Professors Gary Becker and George Stigler first argued that
investments in avoidance should be considerations of compliance.
n30 They added investments in bribery or intimidation to a model of criminal
behavior, pointing out that if a person had already violated the law, she would
be willing to invest up to the costs of the sanction to avoid punishment.
n31 This insight suggests a very basic point: compliance is not simply a function
of punishments, but also of the cost of mechanisms to avoid punishment.
The compliance literature surrounding particular statutory regimes gives more
particularized insight into how groups avoid laws. Avoidance of laws is a
particular focus of writings on tax compliance,
n33 and is also the subject of study in labor law,
n34 criminal law,
n35 environmental law,
n36 and international
n37 From these areas, a pattern emerges, indicating that there are two
fundamentally different ways to avoid a law's sanctions. The first can be
termed evasion. Evasion can be defined as an investment in decreasing the odds
of being punished for violating a law. Wearing a mask to rob a bank, buying a
radar detector, hiring expensive defense lawyers, and bribing police officers
are all examples.
n38 Each, for a certain price, decreases the odds of being punished after the law
There exists a second, less obvious way to avoid legal punishment. This is what
Professor Leo Katz calls
"avoision," which can be defined as efforts to exploit the differences between a law's
goals and its self defined limits. As Professor Ronald Turner describes it,
"efforts to change legal mandates or the avoidance of laws in ways that evade
the law's intent or purpose but do not actually constitute unlawful behavior."
n39 Consider the example of the pornographer who, worried about running afoul of
decency laws, puts his photos in a book along with incisive essays on
"sex in marriage." Or consider the taxpayer who, blocked from deducting a transfer of money to
her son, devises a complicated loan scheme to achieve the same effect. Katz's
book on avoision is full of such examples from law and other aspects of life.
n40 One may identify a similar dynamic in Professor Neal Katyal's study of the
role of substitute products in criminal deterrence.
n41 If, for example, the goal of the drug laws is to prevent addiction and abuse,
a person who opts to become an alcoholic (legal) instead of a crack addict
(illegal) is practicing avoision.
These writings paint the following picture: Groups, to minimize the burdens of
laws, will sometimes invest in avoidance. If the price
[*693] is right (more on this later),
n42 they will invest in mechanisms to lower or eliminate the probability of being
punished for disregarding a law. Groups may either decrease the probability of
detection (as in Becker's example of a bribe) or adopt other forms of conduct
with the same effects (as in Katyal's substitution effect, or Katz's avoision).
This might seem to deliver a full picture of how groups react to laws. But even
at this level of generality, writings on compliance still deliver a limited
picture of how individuals or groups might try to defeat a regulatory scheme.
For, as the political choice literature teaches, groups also react to
burdensome laws with efforts to change the law. The next section considers
change mechanisms as an alternative.
2. Change Mechanisms
In the early 1990s, the dietary supplement industry faced a serious legal
threat. Following several well-publicized deaths, the Food and Drug
Administration ("FDA") proposed to regulate popular dietary supplements like other drugs, requiring
proof of therapeutic value and carefully determined dosages.
n43 The reaction of the supplement industry was to invest in an expensive but
successful lobbying campaign to change the law. Within a short time, Congress
had passed legislation limiting the FDA's authority to regulate these products.
n44 It is by now a familiar insight from public choice theory that groups that
find a law disagreeable may try to change it.
n45 In the 1970s, a series of articles written by economists George J. Stigler and
n46 followed by Robert E.
[*694] McCormick and Robert D. Tollison's book, Politicians, Legislation, and the
n47 first modeled legislation as wealth transfers that interest groups purchased
with money and votes. As Peltzman put the basic premise:
"I begin with the presumption that what is basically at stake in regulatory
processes is a transfer of wealth ... . Beneficiaries [of wealth transfers] pay
with both votes and dollars."
n48 Or, as Professors Richard Posner and William Landes described the legislative
process, laws are sold for
"campaign contributions, votes, implicit promises of future favors, and
sometimes outright bribes."
The basic model treats legislative change as a commodity available for
purchase. Since the introduction of the model, the literature studying the
specific mechanics of interest groups and lawmaking has become more
sophisticated. Professor Fred McChesney, for example, proposes that law-makers
are more extortionists than bribees.
n50 He highlights lobbying's defensive aspects (Congress threatening legislation
that groups pay to avoid), and concludes that much of the political process can
be better described as rent-extraction instead of rent-creation.
n51 A series of papers in the economics literature, meanwhile, tries to improve on
the simple bribery model with information theory, asserting that lobbying works
through the selective presentation of information.
n52 Despite these refinements, however, lobbying continues to be studied as a
change mechanism - a tool that delivers or prevents legal change for a price.
[*695] The process of achieving legal change through litigation has also, though less
often, been studied as an investment model. In Professors Landes's and Posner's
first analysis of the independent judiciary, litigation served as a means of
extending the value of the legislative bargains made between interest groups
and the legislators.
n53 Professor Jeremy Rabkin, in a 1989 work, broadly argued that, through their
litigation strategies, interest groups determine or radically influence the
regulatory agendas of agencies.
In a 1991 essay Einer Elhauge argued that the litigation process was equally,
if not more, susceptible to interest group influence.
n55 He argued that, generally speaking,
"the same interest groups that have an organizational advantage in collecting
resources to influence legislators and agencies also have an organizational
advantage in collecting resources to influence the courts."
"Increasing the lawmaking power of the courts may only exacerbate the influence
of interest groups."
n57 Whether Elhauge's specific conclusion is right or wrong, he demonstrates that
litigation campaigns can also be interpreted as investments in legal change.
This literature shows that mechanisms of change can be viewed as an alternative
to mechanisms of evasion for lowering the costs of law.
3. Summary: The Change/Avoidance Choice
This Part has suggested that groups and individuals face a choice between
avoidance and change mechanisms when deciding how to react to burdensome laws.
Very simply, if a law is a cost on its subject, then avoidance and change
mechanisms, the subjects of the compliance and political choice literatures
respectively, can be pictured as different directions of reaction, as follows.
[SEE FIGURE IN ORIGINAL]
As identified in the discussion above, within each broader category of
mechanism, are specific subcategories, such as lobbying or litigation in the
case of change mechanisms, and evasion and avoision in the case of avoidance
mechanisms. Finally, while the model here focuses on law as the regulatory
modality, the basic framework of analysis is meant for any source of regulation.
The following table summarizes the signal features of avoidance and change
Table 1: Change
[SEE TABLE IN ORIGINAL]
C. Group Dynamics, Collective Action
The distinction between a group's choice of a change or avoidance strategy is
fundamental to understanding how groups deal with laws they do not like. This
Section links that choice to questions of group dynamics and problems of
In 1964, Professor Mancur Olson made a well-known contribution to the study of
interest group behavior.
n59 Using the logic of collective action, he divided those affected by regulation
into two main groups - those capable of effective political action, and the
"forgotten groups" who, he argued,
"suffer in silence."
n60 The dividing line lay in the ability to overcome collective action problems.
Olson asserted that effective political action would generally represent a
problem of collective action, making small groups and those organized for some
other purpose (like unions) effective political actors and rendering large and
disorganized groups essentially victims of the legislative process.
n61 His model predicted that lobbies
[*698] representing business, labor, agriculture, and professionals would enjoy a
perpetual advantage, leaving consumers and other latent groups forgotten and
The change/avoidance dichotomy suggests a different conclusion. Forgotten
groups do not necessarily suffer in silence; instead, they avoid laws with
which they disagree, so long as doing so is convenient. In the terms used here,
the groups Olson identified as incapable of collective action will generally
lack the capacity to invest in change mechanisms. But that does not necessarily
make them inert when faced with burdensome laws. Rather, their recourse is
limited to investing in avoidance mechanisms to decrease the costs of laws. One
may better understand Olson's dichotomy between groups as an indication of who
can take advantage of change mechanisms.
This follows because change presents a collective action problem, while
avoidance does not. Changes in laws display the classic attributes of public
goods. The repeal of the prohibition on alcohol in the Eighteenth Amendment,
n63 for example, benefited all drinkers, not just those who contributed to the
effort to repeal it.
n64 Nor was there any possibility that the repeal would be consumed or dissipated
by overuse. As a result, economic theory predicts a free-riding or collective
action problem: The beneficiaries of the change will wait for others to invest
in it and will subsequently free-ride on those efforts.
None of this is true of avoidance mechanisms. When a thief wears a mask to rob
a bank, he is the sole and direct beneficiary of his investment. The driver
using a radar detector keeps the benefits for herself. When a firm invests in a
complicated tax avoidance scheme, its competitors do not benefit. In other
words, investments in avoidance mechanisms create excludable, rivalrous goods.
In general, avoidance mechanisms will side-step the problems of collective
action inherent in change mechanisms.
[*699] As a consequence it behooves third parties to sell avoidance to diffuse
groups. A third party can invent a mechanism for reducing the costs of a given
law, and then sell it to members of a diffuse group for profit or fame. This is
what happens when drivers buy radar detectors, companies hire tax lawyers, or
when music listeners download file-sharing software. A legal entrepreneur
invests in creating a means of lowering the costs of law, and then sells it to
groups that would otherwise comply.
A final complication with respect to avoidance and internal group dynamics is
worth stating. This Part, for simplicity's sake, has modeled all laws simply as
a cost to a regulated group, from which they derive no benefit. But many laws
provide both benefits and costs, and this fact makes a difference for
understanding the attraction of avoidance mechanisms. Avoidance mechanisms can
be used to lower the cost of a given legal regime, while continuing to enjoy
the benefits, through the rational exploitation of the compliance of the rest
of the regulated group. The successful bank robber wants to steal money, but
also wants to benefit from a healthy financial system. Tax dodgers want to
avoid paying taxes while ideally enjoying public services paid for by everyone
else. And, as the P2P filesharing case study explores in greater depth, getting
music for free probably works best when most of the population continues to pay
D. Deciding to Quit
Groups do not spend all their time avoiding laws or trying to change them;
most people comply with most laws most of the time. When do individuals or
groups decide to quit obeying the law and instead invest in some way to way to
avoid or change it? The basic deterrence model discussed above suggests that
this happens when the cost of compliance exceeds the expected cost of
punishment. Theorists supplement that model by accounting for compliance
stemming from costs associated with social norms and other sources. One may
derive a more complete answer by introducing the option of investing in
mechanisms to decrease legal
n66 or other costs. The following discussion will show two things. First,
compliance can be understood to depend less on punishment than on the cost of
mechanisms of change or avoidance. Second, this discussion will demonstrate the
effect of a group's ability to act collectively, pooling resources to invest in
First, examine a basic case where groups obey the law when expected costs of
disobedience exceed expected benefits and where there are no mechanisms to
influence the law. If a traffic law mandates a fifty-five mile-per-hour speed
limit, the expected benefit of ignoring the law and driving eighty
miles-per-hour might be $ 50, while the expected cost will be the price of the
speeding ticket multiplied by the chance of getting caught (say, 20% x $ 500 =
$ 100). With these parameters the driver will not speed. The result is
compliance and the law is a
[SEE FIGURETABLE IN ORIGINAL]
[*701] Now, allow for the option of investing in a mechanism that influences the
expected costs of the law. As discussed above, Becker and Stigler's original
example was the bribe; for a certain fee, a bribe reduces the expected costs of
a law to zero (by eliminating any chance of detection).
n67 There are, however, a wide variety of mechanisms beyond bribes that will
accomplish the same effect. For the driver, there exists a strategy of
avoidance and one of change: investing in a radar detector and lobbying to
repeal the speeding law, respectively.
Individuals and groups will invest in a mechanism of legal influence when it
becomes cheaper to do so than to simply comply with the law. Entities will
invest in such mechanisms when the expected benefits exceed the sum of the
response strategy cost and the expected costs of non-compliance (as reduced
through the mechanism).
One may describe this dynamic with a very simple equation. Groups that have the
option of purchasing mechanisms of legal influence will do so when:
> (Expected Costs - Mechanism Effect) + Cost of Mechanism
Apply this framework to two of the preceding examples: radar detectors and
lobbying. First, consider a $ 40 radar detector that eliminates any chance of
being caught speeding. For the driver discussed above, this is a worthwhile
investment. For the price of the radar detector ($ 40), he gets to drive at
eighty miles-per-hour (benefit $ 50) and is therefore $ 10 ahead. The driver is
pleased, but the regulator is not; the law that was once a
"success" is now a
[SEE FIGURE IN ORIGINAL]
This example demonstrates that if the mechanism of legal influence is 100%
effective, like our radar detector, the expected cost of legal sanctions is
reduced to zero, and thus can be eliminated from the basic investment equation.
Therefore, given perfectly effective mechanisms, the only relevant inputs are
the expected benefits and the cost of the response strategy, and the equation
can be simplified as follows:
> Cost of Mechanism
In other words, in a world where avoidance or change is entirely effective,
compliance with current law has little to do with punishment, but is instead a
direct function of how much it costs to buy a way out.
Consider a few implications of this analysis. The first example involves an
avoidance strategy. If the speed limit were one hundred miles-per-hour, and
hence not much of a burden, few individuals would buy the perfect $ 40 radar
detector. Conversely, if the speed limit were lowered to ten miles-per-hour, an
onerous burden, everyone would want a perfect radar detector, even if it cost $
500. Finally, notice that if the price of the perfect radar detector suddenly
[*703] falls to $ 1, it may become a worthwhile investment, even for the nearly
costless one hundred mile-per-hour speed limit.
The second example involves a lobbying campaign. Assume it would cost $ 100,000
to organize a campaign to repeal the speeding laws. For the individual driver,
the lobbying campaign is not a worthwhile purchase. The benefit of driving at
eighty miles-per-hour is only $ 50. The cost of the campaign would leave the
driver $ 99,950 in the red, unless he were somehow able to charge his fellow
drivers for the successful repeal, an unlikely prospect.
[SEE FIGURE IN ORIGINAL]
Would it make sense for the affected group (all drivers) to invest in a
campaign to repeal the speeding laws? Assume that there are 100,000 drivers in
the lawmaking jurisdiction (a state). If the drivers organize themselves so as
to divide the costs of the repeal campaign, they pay $ 1 each, and such an
arrangement is clearly a good deal for all involved. Stated otherwise, the cost
of compliance for the group is $ 50 times 100,000 drivers, or $ 5 million. The
lobbying campaign is, therefore, a bargain.
[SEE FIGURE IN ORIGINAL]
If these numbers are even close to realistic, then why are there traffic laws
or any other laws that large groups find disagreeable? As already demonstrated
and as basic political choice theory teaches, the answer is that groups such as
drivers are not organized and have no effective mechanism to divide the costs
of a campaign to change the law.
n70 This demonstrates the conclusion urged above: Groups incapable of collective
action tend toward avoidance mechanisms, while the organized invest in
mechanisms of change.
E. Avoidance, Change, and Regulatory Competition
This Article has until now focused on first-generation reactions - those of an
interest group to a disagreeable law. This Section adds
"reactions to the reaction" to show how regulatory competition between two opposing groups develops, with
each investing in efforts to influence the law in its favor. For this analysis,
the model of rent-seeking competitions is a useful descriptive, though not
necessarily normative, guide.
The model has thus far treated laws exclusively as exogenously imposed costs on
regulated groups. A more realistic model recognizes that the content of laws is
a function of group interests, so that for every regulated group there exists a
n71 For example, if a law bans noisy sound trucks then the law regulates
[*705] advertisers in the interest of town residents.
n72 Successful efforts to avoid or change the law may, therefore, inspire the
beneficiary group to invest in its own mechanism of legal influence in an
effort to restore the lost benefit. This investment, in turn, may inspire the
regulated group to reinvest in mechanisms of influence, leading to a
full-fledged cycle of regulatory competition. The cycle continues as long as
each group values sufficiently the prize of a law tailored in its favor.
Just as group identity and dynamics influenced the actions of the regulated
group, we should expect them to do the same for the beneficiary group. An
organized, politically effective beneficiary group faced with evasion may turn
to the legislature with a request to
"restore the balance." On the other hand, diffuse beneficiaries may do little to react effectively.
Consider the following contrast. The P2P story features a subset of music
consumers, in ferocious competition with the music industry, trying to avoid
copyright laws. Faced with a threat to their
copyright rents, the industry reacted with litigation, lobbying, and even technological
countermeasures (detailed in Part III). In contrast, avoidance of state
taxation through online and mail-order catalogues is now a regular phenomenon.
Yet the diffuse beneficiaries of state taxation have done little to resist the
eroding collection of state value-added taxes.
n73 Unsurprisingly, the organization of the beneficiaries matters as much as the
organization of the regulated.
The notions of regulatory competitions are a favorite subject of the
rent-seeking literature, and it is tempting to cast matters in such terms.
Professor Anne Krueger's original description of rent-seeking suggested that
laws create rents and that people will compete for them in various ways:
"sometimes, such competition is perfectly legal. In other instances, rent
seeking takes other forms, such as bribery, corruption, smuggling, and black
n74 Arguably, any group interested in changing a law to minimize its regulatory
costs is engaged in a form of rent-seeking. The battle
[*706] between P2P programmers and the recording industry, described in Part III, can
be described as a gigantic dissipation of rents created by the monopolistic
Groups reacting to law are acting in a self-interested fashion, and this may
lead to a competition to influence the law's effects. For several reasons,
however, I am hesitant to cast the questions studied in this Part within the
normative framework of rent-seeking. Rent-seeking is a useful tool when it
suggests that certain models of regulation will encourage wasteful behavior and
should therefore be avoided. In other words, the study of rent-seeking is the
study of waste management. The goals of this Part, however, are different. They
are to develop a positive model describing the choices that groups face under
burdensome regulation. Determining whether the reduction in rents is
"worth" any particular legal regime is beyond this Part's scope.
In addition, the interests of the rent-seeking literature are different than
those of this Article. What makes a tool interesting to the rent-seeking
literature is its potential for generating waste and the existence or absence
of any socially valuable byproduct. Hence, what scholars study for
rent-dissipating effects can range from research and development (rent
dissipation in pursuit of patent follow-ons)
n75 to follow-on creation in
n76 to efforts to monopolize.
n77 It is nonetheless extremely difficult to evaluate whether alternative
mechanisms of undermining legal systems have less or more valuable byproducts.
n78 Is investing in a tax shelter more or less socially wasteful than lobbying?
Such questions seem nearly impossible to answer. What this Part examines is not
the relative wastefulness of mechanisms used to influence law, but their
relative cost and relationship to group dynamics.
F. How Code is Used to Avoid Law
The premise of this Article is that
"law-busting" code should be studied as a mechanism of legal influence. That is to say, it
can usefully be studied alongside litigation, lobbying, tax avoision, and other
ways groups seek to influence the law in their favor. This final Section asks:
how exactly does code influence the effects of law? And how does it fit within
the avoidance/change dichotomy just described?
The hint of an answer comes from existing work that tries to understand the
role code plays in the legal environment.
n79 In Code and Other Laws of Cyberspace, Professor Lessig writes that
"in cyberspace we must understand how code regulates ... . Code is law."
n80 Similarly, writers like Professors Tom Bell or Kenneth Dam, interested in
"technological self-help," are primarily concerned with the use of code as a substitute for contract,
copyright, or other legal systems.
Even though this work is interested in code
"as law," its depiction of how code achieves regulatory effects if useful. The idea is
that code regulates by directly constraining behavior. Lessig argues that code
"constitutes a set of constraints on how you behave;"
"constrains some behavior by making other behavior possible, or impossible."
n83 Just as a brick wall built in the middle of the road modifies behavior, code
regulates by specifiying, in advance, what behavior is and is not possible.
Similarly, I propose that code can influence the effects of law by redesigning
behavior for legal advantage. That is to say, the reason that code matters for
law at all is its capability to define behavior on a mass scale. This
[*708] mean constraints on behavior, in which case code regulates, but it can also
mean shaping behavior into legally advantageous forms.
In this view, the code designer acts like a tax lawyer. He looks for loopholes
or ambiguities in the operation of law (or, sometimes, ethics). More precisely,
he looks for places where the stated goals of the law are different than its
self-defined or practical limits. The designer then redesigns behavior to
exploit the legal weakness.
Code design, as we have seen it, is a mechanism of avoidance rather than a
mechanism of change. Nothing the code designer does rewrites laws. Instead,
code design defines behavior to avoid legal sanctions. This description of how
"works" to influence law's effects, I suggest, fits most of the major efforts to use
code for legal advantage. Consider four examples:
Virtual Child Pornography. Congress passes a law banning child pornography,
citing a compelling interest in preventing harm to children. Programmers create
child pornography that involve no children in its production. The behavior has
been reshaped to adapt to the limit on government's power in the First
Overseas Gambling. Laws banning gambling are territorial in jurisdiction.
Casinos place their servers overseas. The conduct of gambling has been reshaped
to avoid the law's self-defined jurisdictional limits.
Junk Email. Unsolicited advertising by mail and fax are regulated by laws
specific to the mail system and fax machine, respectively. Advertisers design
programs to transmit electronic mail and pop-up advertisements. The use of junk
email gives advertisers an unregulated partial substitute for the mail or fax
P2P Filesharing. The legality and ethics of
"home copying" are somewhat ambiguous, and
copyright has no record of enforcement against end-users. Designers build software that
shapes the mass distribution of copyrighted works into a form resembling home
None of this, of course, is a comment on whether these strategies will be
successful in the long term. Each, as previous sections suggest,
[*709] may incur a reaction to the reaction - an effort to change the law to
"restore the balance." But it is clear from these examples how code design achieves its effects.
This basic theory of mechanisms underlies the claims in the rest of the
Article. Part II examines the important example of P2P filesharing to show how,
in practice, the design of code influences the effects of law.
On December 8, 1999, a group of eighteen record companies announced that they
had sued a small startup company for
n85 The Recording Industry Association of America ("RIAA") forecast that it could do 100 million dollars in damage to sales,
n86 yet the company was virtually unknown. In the mainstream press the company had
previously drawn only a blurb, described by Fortune magazine as
"a unique online MP3 trading community ... that enables users to trade songs
This unknown company was Napster. Its product was an application that
facilitated the trading of music files. Napster functioned like a
"bazaar," alleged the plaintiffs,
n88 but one where the goods were all free. Users logged in, searched a central
database of songs that other users had made available, and then took the files
they wanted directly from other users.
n89 Lawyers for the recording industry accused the little company of operating a
"haven for music piracy on an unprecedented scale" and an
"online bazaar" for illegal trading.
n90 Napster responded that it simply provided a
[*710] If not as ruinous as the recording industry suggested it would be,
n92 Napster emerged as a powerful force in the distribution of music. At its
height, Napster claimed sixty million registered users and as many as
twenty-six million active ones.
n93 By February of 2001, analysts estimated that Napster users were trading nearly
three billion songs, or the equivalent of two hundred million CDs, in a single
n94 The economic effects of Napster on the music industry were, naturally,
disputed in litigation.
n95 According to some figures, global music sales tumbled nearly half a billion
dollars in 2000.
n96 Sales of CD singles (the clearest Napster competitor) declined nearly forty
percent that year.
n97 In contrast, other studies suggested that Napster actually led its users to
buy more CDs.
How did any of this happen? How did a simple program have such a powerful
effect on levels of compliance with
[*711] Everyone knows the basic story, but students of enforcement and compliance
lack an explanation for why the
copyright regime, relative to other sets of laws, proved so vulnerable to code-based
attack. What is it about the enforcement structure of the
copyright system that made it so easy to defeat? And does it share characteristics with
other legal enforcement systems?
This Part argues that the success of P2P depends on two powerful and often
unrecognized weaknesses of the
copyright regime. The first is the law's dependence on a gatekeeper enforcement regime.
The second is a severe and unusual lack of normative support among the
These weaknesses suggest several conclusions about the nature of P2P and code
design as mechanisms of avoidance. P2P, in particular, probably implicates the
specific weaknesses of the
copyright system more than it implicates vulnerabilities in other sets of legal rules.
As a general rule, code design will depend on identifiable weaknesses in legal
Copyright and Its Gatekeepers
Common intuition dictates that laws can be vulnerable to mass disobedience,
whether at rock concerts or during tax time. These problems stem from the
limits and costs of
"primary" enforcement (enforcement against individual violators). The costs of raising
punishments increase while the benefits exhibit diminishing returns. Theorists
explain these limits as stemming from administrative and third party costs, the
limited net worth of defendants, the lack of any punishment beyond the death
penalty, and even the constitutional prohibition on cruel and unusual
Due to the limitations of primary enforcement, many legal regimes charged with
mass regulation come to depend on supplemental enforcement measures. A chief
example is what Professor Kraakman termed a
n100 To supplement direct enforcement of a law, the state attaches liability to the
[*712] specialized goods or services, disrupting misconduct in advance.
n101 Doctors, for example, are gatekeepers for prescription drugs. By withholding
their provision of drugs to would-be abusers, doctors aid in the enforcement of
the laws regulating controlled substances.
Copyright law's long dependence on a gatekeeping regime is under-recognized.
copyright law regulates a large and disparate group of content consumers, such as music
listeners and book readers. The solution to mass disobedience in this area has
involved one such gatekeeper regime. That is,
copyright law achieved compliance through the imposition of liability on a limited
number of intermediaries - those capable of copying and distributing works on a
mass scale. The gatekeepers were book publishers at first; later gatekeepers
included record manufacturers, film studios, and others who produced works on a
mass scale. Their role resembled that of doctors with respect to prescription
drugs - they prevented evasion of the law by blocking the opportunity to buy an
infringing product in the first place.
[*713] That intermediaries play some role in
copyright enforcement is widely recognized
n103 - it could not be otherwise after the United States Supreme Court's decision
in Sony Corp. of America v. Universal City Studios.
n104 Writers have hinted at the potential dependence of
copyright on a gatekeeper system. As Professor Jane Ginsberg noted in 1995:
Copyright owners have traditionally avoided targeting end users of copyrighted works.
This is in part because pursuing the ultimate consumer is costly and unpopular.
But the primary reason has been because end users did not copy works of
authorship - or if they did copy, the reproduction was insignificant and rarely
the subject of widespread further dissemination.
There is evidence to suggest that
copyright was in fact entirely dependent on gatekeeper enforcement until quite recently.
Unfortunately, academic study of
copyright enforcement is sparse.
n106 What we can learn about enforcement patterns comes largely from the few
hearings and congressional studies on
copyright enforcement and the case record itself.
Reflecting an interest in bigger targets,
copyright laws reflected an indifference to private, home copying in the 1960s and early
1970s. In 1971, Congress commented that
copyright was never meant to
"restrain the home recording, from broadcasts or from tapes or records, of
n107 Congress described the practice of non-commercial home recordings as
n108 In the 1973 photocopying case Williams
& Wilkins Co. v. United States, the United States Court of Claims similarly
"It is almost unanimously accepted that a scholar can make a handwritten copy of
an entire copyrighted article for his own use ... . These customary facts of
copyright-life are among our givens."
Even in the 1976
Copyright Act, Congress made the decision to limit the exclusive right of performance of
audiovisual works to public performances, thereby excluding private or home
n110 In recommending this limit, the
Copyright Office explained that
"new technical devices will probably make it practical in the future to
reproduce televised motion pictures in the home. We do not believe the private
use of such a reproduction can or should be precluded by
n111 The law's indifference toward home copying was evident in the obvious lack of
enforcement. The case record is perhaps the strongest evidence of the operation
of the old regime. One is pressed to find any example of
copyright law being enforced against individuals for home copying (as opposed to
commercial activity) prior to 1990. In the 1979 Sony Betamax case,
copyright owners added a representative individual to the complaint, but they did not
seek relief against him.
n112 Beyond this limited example, individualized infringement actions were absent
until the 1990s.
The Supreme Court's decision in Dowling v. United States and others like it
come closest to primary enforcement against individuals.
[*715] Dowling featured two Elvis enthusiasts who pressed unreleased recordings
without permission - so-called
n115 But these bootleggers actually created sizable distribution channels. The two
hobbyists grew to do
n116 eventually functioning just like regular record-sellers themselves. They
printed catalogs and advertisements, and they sold and distributed thousands of
n117 Were these Elvis bootleggers gatekeepers in the enforcement sense? They were,
in the sense that the end-users of the Elvis bootlegs would be unable to obtain
their product without the cooperation of Dowling and company.
Mass home copying became an issue in the late 1980s and prompted some
examination of how
copyright enforcement worked.
n118 As the Congressional Office of Technology Assessment stated in its 1989
copyright law, including the
Copyright Act of 1976, proceeds on the assumption that effective and efficient copying
is a large-scale, publicly visible, commercial activity, and therefore, that
legal prohibitions against unauthorized copying are enforceable."
n119 This report, echoed by hearings on
copyright enforcement in the 1980s, confirmed that the existing pattern of enforcement
by the RIAA and the motion picture industry targetted large-scale commercial
n120 After clarifying
copyright's long reliance on a gatekeeper system, one may specify more precisely why the
changes of the 1980s and 1990s altered the face of
B. The Erosion of the Gatekeeper System
Gatekeeper regimes have an obvious weakness: They depend on a specialized good
or service remaining specialized. For the 270 years following
copyright's 1710 debut, this remained the case for copyrighted works - copies could not be
produced by just anyone. As demonstrated by Dowling, there could and did arise
corruptible publishers who would produce illicit copies (just as corruptible
doctors hand out illicit drugs), but so long as the costs of finding such
corrupted intermediaries remained reasonable, gatekeeper liability continued to
The erosion of
copyright's gatekeeper system is an ongoing and incomplete process. The erosion proceeded
in several steps, culminating in the advanced versions of P2P filesharing
networks evident today.
Digitalization - the ability to make perfect digital copies of content - was
the beginning of a real problem for the gatekeeper regime. It made copying
certain forms of content possible for anyone with a computer. As the Office of
Technology Assessment documented in 1989, the extent of an individual's copying
power was mainly limited to computer software and analog taping of television
programs and music.
n121 By the 1990s, an individual's ability to copy spread to music (with the advent
of powerful compression algorithms) and, to some extent, books and film.
It is important to understand that digitalization itself did not mean the end
of the gatekeeper system: It simply put home copying within easy reach. Mass
distribution, however, remained (and still remains, for most works) a gate kept
by a few. So long as mass distributors of content remained identifiable and
easy to sue - retail outlets, publishers, and so on - the gatekeeper regime
could remain effective.
Hence, the mass popularity of the Internet in the mid-1990s was another step
toward the erosion of the gatekeeper system. But it is also a mistake to
confuse the potential of the Internet as a mass dissemination system with the
development of an application for such purposes.
n122 Web-based Internet outlets - say, online retailers
[*717] like Amazon.com - were and are no less amenable to being
copyright gatekeepers. It took the design of P2P filesharing systems, however, to
realize the full extent of the network's structural challenge to a gatekeeper
A pure P2P design is the logical corollary to a gatekeeper enforcement system.
The design goal of a pure P2P network is the complete elimination of
intermediaries. Such a pure P2P network is a network of perfect equals, each of
which is both a consumer and a distributor of copyrighted materials. Such a
network would force those who enforce
copyrights to rely exclusively on primary enforcement, with its attendant difficulties.
Today's successful P2P filesharing applications approach, but do not achieve, a
pure P2P model. The following Section explains why.
C. Elements of Peer Design
The design of P2P applications to avoid
copyright presents a technical challenge with implications not fully appreciated by
n123 The technical study of P2P design shows that designing a P2P filesharing
network to avoid
copyright requires important deviations from the optimal design for speed, control, and
usability. The programmers of a
copyright-resistant P2P network must balance an interest in avoiding legal liability
against the competing interests of ensuring performance on a mass scale,
maintaining system stability, and fostering network trust. These matters all
require control over the network, while a pure peer design eliminates control
as much as possible.
The goals of peer filesharing applications are a good place to begin the
discussion. Two people can trade files easily, using email or a floppy disk,
but what about one million people? The general goal of a P2P filesharing
network is to enable millions of home users to trade files amongst themselves,
quickly and easily. Such a program generally requires three elements. First, it
requires a program that regular home users can download - a program that,
running on their computers, can locate other users, creating a network of
[*718] peers. Second, it requires a way for each user to search the network (or parts
of it) to determine what content others are making available. Third, it
requires a way for users to send files to each other once they have found
Designers accomplish these filesharing goals using a P2P design. Formally, a
P2P network is an application architecture where each
"node," or computer, has equivalent rights and responsibilities.
Figure 1: Design of a Peer-to-Peer versus a Client-Server Network
[SEE FIGURE IN ORIGINAL]
This design, as the name suggests, makes a P2P network one of equals, or
peers. This network architecture should, usually, be distinguished from a
"client-server" network in which one computer (the server) specializes in serving the needs of
others (the clients).
Real-world metaphors help capture this important distinction. Consider the
difference between a study group comprised entirely of students and a lecture
led by a teacher. On the one hand, the study group is a peer network. Each
member has both the responsibility to share materials and the right to take
materials from others. On the other hand, the classroom is a
[*719] The teacher specializes in teaching the students. The students do not teach
the teacher or each other. The network is centralized, and each node is
A pure peer design is
"flat," with equal, non-specialized members. Client-server designs are hierarchical,
with a specialized server. Each design has it own uses, but only peer networks
threaten the gatekeeper structure of
D. Purity in Peer Design
The distinction between peer and client-server designs is critical to
understanding the challenge of building a network that resists
copyright enforcement. The closer a network comes to a pure P2P design, the more
disparate the targets for
copyright infringement and the greater the threat to a gatekeeper system.
Why not always build the most decentralized design possible? The general answer
is that it is difficult. Indeed, within the technical community, variations
"purity" are so commonplace that there are healthy debates over what should even be
considered a peer network.
Pure peer networks are a design challenge because eliminating intermediaries
decreases control over the network. The loss of control makes it difficult to
ensure performance on a mass scale, to establish network trust, and even to
perform simple tasks like keeping statistics. As networks grow, these problems
become more pronounced. It is simple, in other words, to build a pure P2P
network for six friends interested in trading, just as it is simple to maintain
a study group with six members. It is difficult, however, to make the same
design work for ten million people.
In practice, there are four recognized classes of application design. They are
pictured in Figures 1 and 2 and are summarized in Table 2. Figure 1 depicts the
two extremes. The Internet's most important application, the World Wide Web,
represents an archetypal
[*720] client-server model.
"Pure" peer design, meanwhile, is what the early version of the Gnutella peer
filesharing programs adopted to avoid infringement liability.
It is often useful in a peer design to have at least one central server in
which to store user information, search databases, and create a system of
trust. Such a design forms the
"centrally coordinated" peer network, pictured on the right of Figure 2. Napster used this
architecture, as do popular chat programs like AOL Instant Messenger.
Figure 2: Hybrid Designs
[SEE FIGURE IN ORIGINAL]
To complete the classification, many of the most well-known networks are
hybrids that balance control and decentralization. They appear to be P2P
networks to the end-users but they are actually only P2P between specialized
"hierarchical peer-to-peer" network, pictured on the left of Figure 2, supports regular Internet Protocol ("IP") email, the Domain Name System
[*721] ("DNS"), and the classic newsreader
n127 With email, no central authority controls delivery of messages. Rather, a
particular university's or company's servers communicate with other
institutional servers in a P2P fashion.
Table 2: Types of Network and Examples
[SEE TABLE IN ORIGINAL]
As this discussion shows, what is called a peer network may be decentralized
in only certain respects. Examining the life cycle of a node in a peer network
shows how often intermediaries are needed to smooth the functioning of even the
most basic network. Of course, every intermediary becomes a potential legal
To begin life as a peer node, a user needs to install the appropriate software.
This usually means downloading it from an intermediary (typically a web site).
The node must find at least one peer to join the peer network, but how can this
location be done without knowing a peer in advance? Again, the solution is
[*722] on some intermediary, such as a
"host cache," that grants the peer node one peer address so that the user may begin to use
To be useful, the peer node must have some ability to discover what content is
available on the network. For example, in a network meant to share music, a
user needs to know what songs are actually available, preferably by searching
by artist, song title, etc. The very volume of search traffic thus generated,
however, can strain a network design to the point of collapse.
n129 Designers may minimize this effect if they design the network to access a
finite amount of content (for example, hit songs). Nonetheless, designing a
network remains a fundamental challenge. It is easiest to store search
information in one place, but if search information is centralized, as it is in
the Napster design, it creates yet another specialized intermediary.
Finally, peer networks need to provide for connections among peers. Here, the
greatest problems for non-centralized peer models come from user abuse of
anonymity. In a music network,
copyright owners could potentially send around fake files. In network terms, this is the
"trust." Trust systems are difficult, if not impossible, to create without some
centralized system of verification.
The preceding description is a summary of the challenges facing P2P technology.
The point is that P2P design represents a serious challenge for designers
because it requires compromise. Fewer intermediaries means fewer targets for an
infringement lawsuit. The existence of fewer intermediaries, however, makes it
harder for users to use the system, creates a greater risk of system crashes,
and increases the risk of anonymous attacks. There is a tension between an
optimal P2P filesharing network and the goal of avoiding
copyright liability. This condition will bear strongly in the examination of P2P
programming incentives. The next Section considers how P2P designs have
sidestepped social norms that might have prevented
Copyright and Social Norms
According to a 2000 Pew Internet Project study, seventy-eight percent of those
who download music do not consider it to be
[*723] stealing and sixty-one percent do not care if the music they download is
n130 A survey reported by two economists showed that only fourteen percent of
respondents considered illegal copying of software to be a serious crime,
compared to thirty percent who felt that way about driving forty miles per hour
in a twenty-five miles-per-hour zone.
n131 These statistics suggest that P2P applications have not only undermined
copyright's gatekeeper regime, but have also successfully sidestepped social norms that
might otherwise bolster compliance with the
copyright regime. This Section describes how code designers structured their
applications to avoid social norms.
As discussed above, theorists have suggested that the possibility of state
punishment provides an incomplete explanation for observed compliance with
n132 Rather, they suggest that other systems of social control, including social
norms, account for compliance.
n133 While accounts differ, the arguments contend that some mix of the threat of
external social sanctions,
n134 the fear of sending the wrong signals to others,
n135 and the internalization of ethics
n136 creates compliance that exceeds what would be observed as a simple reaction to
the threat of punishment.
Those who benefit from
copyright laws benefit from the norm that physically stealing a CD or DVD is socially
unacceptable. They are hurt, however, by the norm that makes copying the same
CD at home acceptable. Despite their cosmetic differences, economically
[*724] speaking, each instance of copying represents approximately the same economic
loss in the form of a lost potential sale.
Therefore, the system of social norms, like the gatekeeper regime, is an
alternative mechanism for creating compliance with a given legal rule. If norms
track the substance of legal rules, it stands to reason that a rational,
widespread effort to reduce the costs of regulation may sidestep the
enforcement of legal rules by manipulating social norms. If it were considered
disgraceful to download music on the Internet,
copyright compliance could be achieved without active, primary enforcement. The design
of P2P networks, however, successfully exploits the status of
copyright norms, taking full advantage of an existing ambiguity as to whether home,
non-commercial copying is
In one of the few disinterested studies of its time, the Congressional Office
of Technology Assessment conducted a 1989 survey regarding attitudes toward
n138 The study found a simple norm: people think copying for friends is okay, but
copying for money is wrong.
n139 More precisely, it found that large majorities (sixty-three percent) of
consumers considered making a taped copy of audio materials for a friend to be
n140 On the other hand, the greater majority (seventy-six percent) found selling
copied materials unacceptable.
n141 The survey mirrors widespread anecdotal evidence
n142 suggesting a normative difference between commercial and non-commercial
P2P filesharing exploits this distinction brilliantly. P2P clients create no
sensation or impression of stealing (the absence of this quality typifies what
Professor Strahilevitz would call
"charismatic code" design).
n143 Instead, the user is invited to a
"community" of peers who exchange song files. A user, importantly, has no sense that she
"selling" copyrighted materials. The design therefore
[*725] exploits the distinction between the acceptance of non-commercial copying and
the non-acceptance of commercial copying. While the economic consequences of
peer filesharing could be large, the superficial absence of commercial exchange
makes filesharing more acceptable under the norms of home copying.
Figure 3: The Friendly Face of the BearShare Community
[SEE FIGURE IN ORIGINAL]
As an illustrative example, consider the BearShare client pictured above.
There is little on the screen to suggest that a user is engaging in a morally
ambiguous operation or is committing an act of theft. The friendly bear in
BearShare is an icon of charismatic code.
The exploitation of social norms seems to have succeeded in facilitating a
robust filesharing community. The 2000 Pew Internet Project Survey
overwhelmingly supports the view that those who use filesharing networks do not
think they are stealing.
n144 That same study also suggests that fifty-three percent of all Internet users,
and forty percent of all Americans, think that by sharing music through the
Internet they are not doing anything wrong.
n145 Along these same lines, a 2002 survey by Business Software Alliance found that
only thirty-eight percent of Internet users claimed they would never download a
potentially pirated program to save money.
[*726] the end, P2P networks not only exploit the limits of legal enforcement, but
also dodge the system of social norms that fortifies the relevant legal rules.
This Part has demonstrated that the success of P2P depends on the presence of
certain vulnerabilities peculiar to
copyright law. Part III considers the reaction of the beneficiaries of
copyright law and the regulatory competition that followed it.
III. The Evolution of P2P Design and Regulatory Competition
The years 1999 to 2003 represented a period of regulatory competition between
P2P users and the incumbent industry. At stake were substantial rents - the
monopoly rents obtainable when the
copyright law is enforced. As the succeeding narrative shows, the two groups had
different comparative advantages: one had code; the other had litigation and
legal change. In other words, the competition pitted methods of avoidance
against methods of change.
There are two outstanding aspects to this story. The first is the degree to
which code design evolved to better target the weaknesses of the
copyright regime. Part II demonstrated that P2P networks were generally designed to
copyright's dependence on a gatekeeper system and to exploit the lack of clear normative
support for the
copyright system. This Part will show that the design evolved to take advantage of a
specific legal doctrine -
copyright's contributory liability doctrine - embodied in the decision in Sony Corp. of
America v. Universal City Studios,
n147 and elaborated in A
& M Records v. Napster.
The second is the nature of the reaction to the P2P network. The recording
industry is obviously the beneficiary of the existing
copyright laws, and the erosion of the gatekeeper regime provoked an investment in
various mechanisms of legal change (investments in efforts to change
copyright law). These patterns follow the model of regulatory competition described in
A. Napster and its Predecessors
While Napster was the first laboratory for a peer response, it was itself a
reaction to an earlier model. The very first efforts at mass distribution of
copyrighted materials employed a purely client-server model - essentially, web
sites with songs available for download. The company
"MP3.com," which debuted in 1996, is one well-known example. Its
"My.MP3" service allowed users to download, among other things, copyrighted MP3 files,
provided they owned the CD that corresponded to the file in question.
n149 This service effectively gave users remote access to music that they already
The architecture of My.MP3 and other web-based services, not the fair-use
issue, is of particular interest here.
n150 My.MP3 relied on a pure client-server model. It placed a huge amount of
copyrighted material in a single space. When the recording industry sued, the
company's activities were deemed clearly illegal under the traditional model of
n151 The recording industry's case was not much different, enforcement-wise, from
the Elvis bootleggers in Dowling v. United States
n152 - both were large, centralized copiers of copyrighted materials.
Other sources of copyrighted sounds in the early 1990s were the primitive,
anonymous websites that simply made MP3s available for download.
n153 But these sites faced two serious technological problems. First, if a site
became popular it would quickly become overburdened with user traffic. Second,
there were few reliable and straightforward means for finding such sites.
[*728] Then came Napster. The beta version of Napster debuted on June 1, 1999.
Napster's revolutionary design was a response to the legal and technical
problems of the web-based companies. As one commentator noted,
"[Napster] was written to solve a problem - [legal] limitations on file copying."
Napster eliminated the intermediary that had doomed My.MP3 and others. It
designed a network that decentralized the infringing content, leaving the songs
on the hard drives of individual home users. Napster differentiated itself from
the traditional commercial
copyright pirate by styling itself as a place to trade music rather than as a place to
sell or distribute it.
Napster, however, was not completely decentralized. Napster's programmers,
Shawn Fanning and Jordan Ritter, were also aware of the challenge to P2P
networks of operating on a mass scale.
n156 Napster mixed client-server and peer elements in order to make the search for
songs a fast and scalable solution. Hence, the Napster server facilitated both
database searching and brokering of individual connections.
The design scaled impeccably. While estimates vary, at its height, Napster had
tens of millions of active users, an astonishing technological accomplishment.
n157 But the failure to remove itself as an intermediary with control over parts of
the process made Napster, the company, a target for an infringement lawsuit.
That lawsuit came on December 6, 1999.
The infringement case against Napster boiled down to a question of control,
intimately connected to the network design questions studied here. The
situation would have been different if Napster had been a form of multi-purpose
copying technology over which Napster itself had no specific power. This
relationship between technology and ownership would have put Napster in the
same position as cameras, VCRs, and other forms of
[*729] described in Sony Corp. of America v. Universal City Studios.
n159 The makers of VCRs and photocopiers obviously know that their products are
often used to infringe
copyright, but since they are powerless to do anything about these violations and because
the equipment has substantial non-infringing uses, they are not made liable.
Napster's argument - that it was a mere instrument of both legal and illegal
uses - was belied by its design. One overriding factual finding doomed the
company: The court found that
"[Napster] could block access to the system by suppliers of the infringing
This fact made Napster the sponsor, rather than just the instrument, of
infringing conduct. Instead of a VCR, Napster's design put it in the classic
position of the dance hall that chooses to allow an infringing artist to play
despite having the power to stop the performance.
n162 The Sony Court itself declared that when a defendant is
"in a position to control the use of copyrighted works by others," the
"imposition of vicarious liability is manifestly just."
After the court found that Napster exercised control, holding it to be both a
contributory and a vicarious infringer was easy. Napster's design allowed the
record industry to use the
"notice and failure to remove" formula to prove knowledge (an element of contributory
n164 The record industry sent
[*730] Napster notice of thousands of infringing files available through the system
and then proved that these files remained available for download.
On the issue of vicarious liability, the decisive legal question also involved
Napster's degree of control. As the appeals court framed it, the question was
whether Napster had
"the right and ability to supervise the infringing activity and also had a
direct financial interest in such activities."
n166 Napster's architecture again provided an answer. As the court noted,
"Napster retains the right to control access to its system."
This ruling led Napster to bankruptcy
n168 and also taught several legal lessons to P2P code designers. As the late Gene
Kan, a post-Napster developer, wrote,
"The recording industry ... is sensitizing software developers and technologists
to the legal ramifications of their inventions. Napster looked like a pretty
good idea a year ago, but today Gnutella and Freenet look like much better
n169 Napster taught peer network designers that both lack of control and general
functionality had to be comprehensive and credible to avoid contributory
liability. The relationship between developers and peer networks needed to be
more like that between Xerox and its photocopiers. The response, Napster
suggested, should take the form of a protocol rather than an application. Email
and Usenet had never been sued for
copyright infringement, despite their widespread use for illegal purposes. The lesson
was simple - Napster had not gone far enough.
There was a flurry of attempts to succeed Napster; many so technologically
unsuccessful (Napigator) or so clearly liable under Napster (Scour) as to be
unworthy of discussion. Over the years 1999-2002 there were approximately
fifty-eight different filesharing clients released to the market.
n170 Of those, only four or five have
[*731] enjoyed lasting significance.
n171 One successor was different. It was founded on concepts of radical
decentralization and was clearly designed to avoid the
copyright lawsuit that had befallen Napster. That successor was the protocol named
B. Early Gnutella: 2000-2001
"Before [Gnutella], systems were centralized and boring."
Gnutella was a child of the open-source movement. Its unusual name, non-linear
development origins, and relative difficulty of use are all hallmarks of an
open-source work product.
n173 Gnutella delivered a radically decentralized design that made it a darling of
academic study. The design was an intentional effort to create a filesharing
protocol that could avoid a lawsuit. Although it succeeded, it did so at the
expense of social and scalability problems.
Gnutella's decentralization was nearly absolute. No single node on the early
Gnutella network was different than any other. Searching, file transferring,
and peer finding were all accomplished without the creation of specialized
intermediaries. The only identifiable intermediaries were those relatively
limited sites that made the early Gnutella client (version 0.56) available for
Gnutella developers compare the network they designed to a cocktail party where
users trade files with whomever happens to be
n174 The design implements the idea that
"Gnutella is not a program, it is a protocol."
n175 In other words, Gnutella's designers created a filesharing network -
GnutellaNet - that was unowned and uncontrolled and to which various Gnutella
programs could provide access. The relationship between the application and the
network was similar to that between various email programs (Eudora, Microsoft
Outlook, Hotmail) and the one-serves-all email network that cannot be said to
be owned by anyone. GnutellaNet was designed as a general filesharing network
capable of sharing any computer file.
Gnutella was a success on the legal front. Gnutella's radical decentralization
avoided the legal liability that had plagued Napster. To date, neither
GnutellaNet nor its main application designers have been sued,
n177 despite the substantial volume of infringement they facilitate.
The early GnutellaNet, however, was plagued by stability and performance
problems attributable to its decentralized design. In late July of 2000, the
Gnutella network underwent its first major crash, leaving the network unusable
for more than a month.
n178 The 2000 crash was the first sign that the early Gnutella client design had
traded resistance to litigation for system instability.
[*733] Commentators quickly diagnosed the problem.
n179 Early GnutellaNet's stability relied on users' willingness to donate both
bandwidth and music files to a common cause and to limit judiciously their own
use of the network. Once a certain number of users joined the network, stark
differences in user bandwidth and the lack of a central mechanism for
allocating traffic to more capable users made a crash inevitable. While some
touted the theoretical scaling capabilities of Gnutella,
n180 the instability of early GnutellaNet was undeniable. In addition to the
scaling problem, there were also
"social" problems. There was no incentive (not even social incentives, given the
anonymous nature of the network) to act selflessly. A 2000 Xerox/PARC study
established that almost seventy percent of Gnutella users shared no files and
that nearly fifty percent of all responses were returned by the top one percent
of sharing hosts.
n181 While this did not necessarily matter if the goal was trading the 100 most
popular songs, Napster's deeper appeal had been the range of content it made
available. The lack of any mechanism to police selfishness in Gnutella
compromised the potential of the common solution.
The problems of Gnutella 2000 were generally recognized,
n182 yet Gnutella's failures were not the end of the peer filesharing response. The
crashes and instability led to a new generation of peer filesharing software.
These new-generation programs, bearing names such as KaZaA, Grokster, Morpheus,
and BearShare, are, for now, the latest chapter of the peer response story.
C. The KaZaA Era: 2001-Present
The legal vulnerabilities of Napster and the stability and social problems of
Gnutella inspired a new approach. Led by the enigmatic KaZaA, and its FastTrack
engine, a new generation of peer-sharing applications tried to strike a balance
between suability and scalability. Unlike the original Gnutella, they allowed
some hierarchy and made some effort to engineer polite behavior. At the same
time, they tried to avoid the centralized control that doomed Napster. The
results are programs of great sophistication, attuned carefully to the
The new generation reintroduced hierarchy among users. They created a
"regular peers" and
"superpeers" based on detected resources - in particular, bandwidth.
n183 In this hierarchy, college students are on top: high bandwidth users (college
students on university networks, home DSL, and cable users) are superpeers,
while dial-up users (home modem users) are regular peers.
Dozens of programs grew into the technological gap between Napster and
Gnutella. Only a few, however, reached mass scale for any length of time.
1. FastTrack and KaZaA
FastTrack returned filesharing to an enterprise of substantial scale. In late
2001, the FastTrack network grew to be the largest filesharing network since
Napster, with an average of two to four million users online at any given time.
n185 Dutch programmers Niklas Zennstrom and Janus Friis created the FastTrack
protocol late in 2000 and wrote a client application, KaZaA, to access the
n186 Unlike Gnutella, the protocol was never released
[*735] as an open-source standard.
n187 Instead, KaZaA insisted that companies pay to access the FastTrack network.
The companies Grokster and Morpheus
n188 did so, creating several client alternatives.
The FastTrack companies fit somewhere between early Gnutella and Napster in
their elimination of intermediaries. The protocol borrows heavily from
Gnutella. It also maintains the distinction between the protocol and the
clients; the company KaZaA, for instance, maintains no power to
"shut down" the network.
FastTrack deviates from the pure design of early Gnutella in several
significant ways. First, it implements a very sophisticated system of
superpeering designed to avoid scaling problems. This system has been a
success. The KaZaA superpeer system, from user accounts, produces much better
performance than even the next-generation Gnutella clients.
n190 Such tiering, however, means that not all users are equal; a finite number of
superpeers do the bulk of the work.
Second, the FastTrack companies have, like Napster, centralized several
functions. A central server is still responsible for maintaining user
registrations, logging users in to the system (in order to maintain
statistics), and helping the process of finding peers in the first place. As
previously discussed, efficient operation is difficult to maintain in the face
of radical decentralization.
n191 Third, at least one of the FastTrack companies (KaZaA) promotes selfless
behavior by sharing user files without telling the user. A 2002 Hewlett Packard
study demonstrated that the KaZaA client made it difficult
[*736] to know what files users were sharing.
n192 The study demonstrated that many users were sharing all of the files on their
computers, but were totally unaware of that fact.
n193 Increasing the number of shared files, of course, improves the performance of
Finally, the FastTrack companies also adopted another avoidance strategy -
n194 KaZaA's parent is incorporated in Vanuatu, a group of islands in the South
Pacific noted for its lack of a
copyright law. Grokster maintains its servers in Nevis, a thirty-six square mile
nation-state in the West Indies. Only Morpheus resides in the United States.
2. Next-Generation Gnutella
GnutellaNet, meanwhile, continued to operate on a smaller scale. Recall that
neither GnutellaNet nor any Gnutella client has ever been sued - their problems
are instead self-generated. Gnutella responded to its scaling and social
problems by adopting a superpeer design similar to that of FastTrack. The best
known of the new GnutellaNet developers are BearShare and Limewire. Both
compromise a purely decentralized design of equal users by distinguishing
between high-and low-bandwidth users and by giving the former more duties.
The continued growth of Gnutella was marked by a lack of coordination among
developers. As Kelly Truelove writes,
"Unfortunately, Gnutella has a history of aborted, failed or poorly supported
attempts to unite developers; the analogy of herding cats has rarely been so
Major Gnutella clients have also taken measures to
"engineer good behavior." For example, BearShare and Limewire block requests
[*737] from clients who do not contribute files to GnutellaNet.
n197 These efforts, as was the case with the FastTrack companies, may make these
clients easier to sue because they suggest an increased quantum of
"control" over the Gnutella network.
Finally, despite the change, Gnutella still appears to have scaling problems.
Statistics kept by Limewire show that, during the first half of 2002, the
network size rarely reached more than 500,000.
n198 By July 2002, GnutellaNet had declined to an average of 160,000 nodes.
n199 Gnutella experts point to the same general problem: no control over selfish
behavior. An anonymous source at Limewire explained the problem:
"A' may excessively query (hammer) three or more UltraPeers. While this may
produce plentiful results, the overall affect [sic] on the network is negative
as it slows queries from more reasonable clients."
n200 These concerns show the continuing difficulty in balancing decentralization
and selfless behavior. Yet the fact that GnutellaNet remains unsued endows it
with an aura of continued importance in the filesharing story.
D. FastTrack and Gnutella Go to Court
On October 2, 2001, the music industry sued Grokster, Morpheus, and KaZaA: the
three principal FastTrack companies.
n201 This ongoing lawsuit is a signal test of the viability of designing code to
avoid legal liability. Programmers wrote FastTrack and Gnutella to exploit
loopholes left by the Napster decision. The case, styled Metro-Goldwyn-Mayer
Studios v. Grokster, asks whether the P2P programmers have succeeded. The
initial answer is yes.
The music industry's complaint made every effort to stress the similarity
between Napster and KaZaA and the other FastTrack
[*738] companies. Once again it accused the companies of creating
"a 21st century piratical bazaar."
n202 It noted that the defendants grant access to
"a closed computer network, controlled by Defendants."
n203 It also put emphasis on the fact that communications are centrally encrypted.
n204 The complaint highlights these facts to support the argument that the
FastTrack companies, like Napster,
"are capable of controlling the activities of their users."
But the facts did not support this contention (by design). District Judge
Stephen Wilson, granting summary judgment in favor of Grokster and Morpheus,
n206 refused to buy the comparison to Napster (the program). The opinion suggests
that the changes in design
"worked," at least with respect to negating the element of control that sealed Napster's
Just as in Napster, the court took the issue of control as the sine qua non of
contributory liability. As the court put it:
"The critical question is whether [defendants] do anything, aside from
distributing software, to actively facilitate - or whether they could do
anything to stop - their users' infringing activity."
n207 It was here that the changes in design made a difference. Judge Wilson pointed
out, in a crucial factual holding:
Neither StreamCast nor Grokster facilitates the exchange of files between users
in the way Napster did. Users connect to the respective networks, select which
files to share, send and receive searches, and download files, all with no
material involvement of Defendants. If either Defendant closed their doors and
deactivated all computers within their control, users of their products could
continue sharing files with little or no interruption.
[*739] As noted above, Gnutella and FastTrack embody a self-conscious effort to make
P2P filesharing more like the VCR or photocopier. And the court accepted just
that rationale, concluding,
"Grokster and StreamCast are not significantly different from companies that
sell home video recorders or copy machines, both of which can be and are used
"absent evidence of active and substantial contribution to the infringement
itself, Defendants cannot be liable."
Will the judgment survive appeal? There are reasons to suspect it will not. The
district court's decision ultimately depends on Sony as interpreted by Napster.
Sony, in turn, can be read as a policy judgment aimed principally at correcting
a perceived market failure.
n211 While clearer in hindsight, it is apparent that the Sony decision correctly
addressed a market failure.
n212 The VCR broadened the addressable market for television shows (via
time-shifting) and for movies (via rentals). Though there is an argument that
filesharing helps the music industry, the desirability of the
"help" is much less apparent.
n213 Filesharing looks more like a replacement for legitimate music sales; such
reasoning may compel a court to find some way to assess liability on P2P
developers regardless of the Napster precedent. In addition, the ratio of
infringing to non-infringing use must be at the forefront of the ultimate
policy judgment in this area. If the alleged non-infringing uses retain their
de minimis character the court of appeals will presumably feel that there is
little consequence in ruling against the P2P filesharing companies.
Perhaps the only policy reason to think otherwise is an institutional argument.
Ultimate settlement of the filesharing dispute, the argument goes, is a task
for Congress; and a decision against the
copyright owners will force such settlement. Such
"settlement-forcing" decisions in
copyright have a long pedigree, from the 1908 piano-roll case White-Smith Music
Publishing Co. v. Apollo Co.,
n214 to the cable-broadcast decisions of the 1960s and 1970s.
n215 Both prompted Congressional action to settle a dispute between an incumbent
and challenger technology.
n216 Judge Wilson clearly had this in mind, writing
"while the Court need not decide whether steps could be taken to reduce the
susceptibility of such software to unlawful use ... additional legislative
guidance may be well-counseled."
n217 It remains to be seen whether the courts of appeals will think that trying to
force settlement of
copyright disputes remains an appropriate court function.
E. The Reaction to the Reaction
The recording industry's reactions to P2P filesharing are a paradigm for
understanding the modern face of regulatory competition. As preceding Sections
have shown, the filesharer's comparative advantage lay in designing code to
copyright law. The recording industry, meanwhile, has invested in a broader range of
mechanisms to influence law and its effects. The content industry invested in
changing the law (by controlling access, increasing intermediary liability, and
increasing criminal liability), in changing social norms, and in changing code
to attack P2P networks. The extent of increased investment can be seen from the
annual increases in the budget of the RIAA itself. In the early 1990s, the
RIAA's budget was estimated at $ 10 million.
n218 By 1995, the RIAA was spending $ 14.7 million. By 2000, the budget had tripled
to $ 39 million and in 2001 stood at $ 44 million.
1. Investments in Change
The recording industry's investments in legal change are most prominent. In
the 1990s, the content industry invested considerable time and energy to ensure
the passage of three critical laws to buttress
copyright enforcement: the anti-circumvention provisions of the DMCA,
n220 the ISP-liability sections of that same bill,
n221 and the enhancement of
copyright's criminal penalties in the No Electronic Theft ("NET") Act.
The anti-circumvention provisions of the DMCA reinforce various technological
techniques of preventing copying by criminalizing circumvention of copy
n223 The provisions can be understood as an effort to restore an eroding gatekeeper
system. Technological copy protection
"respecializes" the creation and mass distribution of copyrighted works, while the DMCA's
anti-circumvention law makes it a crime to undo the respecialization.
n224 The law can be understood as an effort to return content owners to the 1970s,
when they were free to sit back and police the few intermediaries licensed to
access the copy-protected content.
n225 The anti-circumvention provisions are usually discussed in conjunction with
the much-discussed possibility of effective digital rights management.
n226 Some have speculated that there may be a future where content owners manage to
encrypt content so carefully and comprehensively from the outset, and maintain
their control continuously, that the code prevents infringement ex ante.
n227 Such efforts
[*742] remain in their early stages and are highly speculative, but they would
eventually transform the economics of
The ISP-specific sections of the DMCA, Section 512 et seq., represent the
culmination of an effort to replace the lost intermediaries of times past with
ISPs. There have been a few attempts to use these sections to target
filesharing. In the summer of 2002, the RIAA filed a lawsuit against various
telephone companies who operate the backbone of the Internet, based on their
failure to contain overseas
copyright infringement, but it dropped the suit a week later.
n229 More recently, using a different section of the DMCA, the RIAA successfully
convinced a federal judge to require Verizon to identify a subscriber accused
of downloading hundreds of copyrighted files in a single day.
Finally, the efforts to pass the NET Act of 1997 and subsequent lobbying
represent an effort to turn to the criminal side of
copyright to enhance primary enforcement. Under the little-noticed NET Act, the federal
government may criminally prosecute relatively minor
n231 While this criminal statute still requires
"private financial gain," the NET Act defines
"financial gain" to include
"receipt, or expectation of receipt, of anything of value, including the receipt
of other copyrighted works."
n232 This definition makes quid pro quo filetrading potentially criminal.
Copyright owners have mounted an effort to convince the Justice Department to enforce
the NET Act against individual peer filesharers.
n233 This amounts to an attempt to increase the sanction, if not the probability of
copyright infringement. The
[*743] untested question remains whether either criminal or civil primary enforcement
will be effective in deterring illegal P2P filesharing, given the limits of
primary enforcement in producing deterrence.
2. Extralegal Investments
In addition to legal changes, the recording industry has also invested in
trying to change the social norms surrounding
copyright infringement and has made some efforts to combat P2P filesharing directly. As
n235 when it comes to copying files, people have proven to be unaffected by the
ethical tug of the
copyright statute. The software and recording industries have spent a decade trying to
change that attitude. The RIAA's
"Sound-Byting" campaign, for example, is an investment to try to change the attitudes of
college students toward
copyright infringement. The central message of this campaign is:
"Uploading and downloading somebody else's music without their permission isn't
just against the law. It's a rip-off. Simple as that."
n236 Hilary Rosen, the President of the RIAA, even participated in a
well-publicized public debate at Oxford, arguing that illegal filesharing is
n237 As the statistics cited here and the Pew Internet Project Study discussed
n238 it is unclear whether these efforts have had much success in changing public
attitudes toward filesharing.
Perhaps most interestingly, content owners may also be taking a page from the
book of P2P designers themselves, using code to influence the enforcement of
copyright law by attacking the P2P networks that undermine
copyright enforcement. Reports on the use of attacks on P2P networks are hard to verify.
There are several methods, however, through which content owners might try to
disable P2P networks. One method seeks to decrease the attractiveness
[*744] of P2P networks, often by flooding the network with dummy or broken music
n239 Users then must spend more time looking for good files, increasing the
attractiveness of conventional distribution channels. Another method, albeit
one that is probably illegal under the computer crimes laws, would simply
attack important network nodes using techniques familiar to computer hackers.
n240 More fanciful examples of this type of strategy include that of a virus
designed to detect illegally copied materials.
n241 The extent to which these methods are used today is a carefully guarded secret.
n242 The continued activity of peer filesharing networks, however, suggests either
limited success or limited usage of such techniques.
On June 25, 2002, Representative Howard Berman of North Hollywood, California
"technological self-help" should help provide the solution to
"unbridled" peer network piracy.
n243 He proposed a bill that would give legal license for
copyright owners to disrupt peer networks.
n244 Representative Berman phrased his support of the bill, interestingly, in terms
"freedom to respond":
While P2P technology is free to innovate new and more efficient methods of
distribution that further exacerbate the piracy problem,
copyright owners are not equally free to craft technological
[*745] responses. This is not fair and I believe Congress should free
copyright creators to develop and deploy technological tools to address P2P piracy.
The Berman bill, while unlikely to pass, shows the dramatic extent and even
creativity of efforts to gain advantage in the regulatory competition
The story of the competition between the RIAA and P2P users delivers a snapshot
of the future of understanding compliance and legal effects. A law's meaning
and effects, success or failure, seem ever less a function of drafting or
enforcement. Rather, the question is what forces - social, economic,
technological or otherwise - may be recruited for or against the cause.
IV. The Social Dynamics of P2P Filesharing
"As the largest grassroots effort in the history of the world, file trading is
essentially the average person's way of saying we don't agree with the status
Over the last four years, P2P networks have provided a sub-group of media
consumers with the equivalent of a temporary repeal of
copyright laws for the technologically inclined. How can one explain the growth and
popularity of the peer filesharing movement? This final Part analyzes the
particular fit between P2P filesharing and its beneficiaries. It shows first,
that P2P may represent the rational exploitation of the larger group of music
consumers by a subset of computer savvy P2P users, and second, that peer
filesharing uniquely suited the disorganized nature of
copyright consumers as a group.
Copyright's Divided Subjects
One reason P2P filesharing may have been successful is because users
"regular" consumers who lack the knowledge or resources to use P2P networks. In the
[*746] sometimes disputed) account,
copyright law is said to serve the interests of content consumers.
n247 The law provides financial and, debatably, expressive incentives to create
materials that would otherwise not exist. If this is right, why would consumers
ever want to disobey
The intuitive answer is that everyone likes getting things for free, but the
answer from economic theory is more enlightening. While complying with some
copyright law may serve the collective interest of consumers, it is not in any given
individual's interest to comply. More generally, the logic of collective action
suggests that the ideal strategy for an individual or sub-group under
copyright law is to create a system that limits evasion of
copyright to an
"in-group," leaving everyone else to pay for the incentives to create. To defect while
others remain in compliance is to live in the game theorist's version of utopia.
In the mid-to-late 1990s, an important demographic trend favored the
development of just such a strategy. Social commentators began to use the term
n248 to refer to the fact - confirmed by empirical study - that there was a sharp
division between a relatively small number of computer literate, connected
citizens and the rest of Americans. In 1998, for instance, the Clinton
Administration found that college-educated Americans were almost ten times more
likely to own a computer than those without
[*747] any high school education (63.2% vs. 6.8%).
n249 The disparity in Internet access was even more prominent: 38.4% of
college-educated Americans had access, as compared to 9.6% of those with a high
school diploma, and just 1.8% of those without any high school education.
The existence of this division in content consumers provided ideal conditions
for the development of a
copyright evasion system that could be limited to a sub-group (the technologically
savvy). Peer filesharing networks made that system. By requiring at least a
computer connection and Internet access (and optimally broadband access and
open-source know-how), the networks guaranteed that only a certain percentage
of Americans would ever be able to take full advantage of the defection from
It is unlikely that the programmers of Napster and other applications actively
considered the dynamics of collective action before writing code. But because
filesharing remains confined to a limited group, filesharers can see that their
actions will not eliminate all incentives to create music or seriously
impoverish artists. Users of peer networks are a select group that could and
still do live by slightly different rules.
B. Disorganized Political Action
Even as a sub-group, however, P2P users remain disorganized. The second reason
that P2P was successful was that, as an avoidance mechanism, it did not require
That content consumers have not had a strong influence on the shape of
copyright law is well-documented. The lobbying process that led to the 1976
Copyright Act is a leading example. The Act was the workproduct of a
twenty-one-year-long negotiation between affected industry groups.
n251 Studies suggest, however, that groups representing consumer interests had
little or no influence on the shape of the 1976 Act. Professor Jessica Litman
"The citizenry's interest in
copyright and copyrighted works was
[*748] too varied and complex to be amenable to interest-group championship."
These studies show what is obvious: For an average consumer, lobbying for
copyright change is expensive, likely futile, and, even if successful, an impossible
change on which to capitalize. As a result, very few consumers devote
Enter P2P. Individuals who participate in a peer filesharing network
immediately capture for themselves the benefits of their investment. They save
money on the music they download for free, with no need to share those savings
with others who did not participate. Moreover, the programmers of peer
filesharing programs do not, other than sometimes adhering to a common
protocol, even necessarily need to work together or coordinate their efforts.
It might be difficult to convince users to contribute, as opposed to take, from
the common pool of shared songs. The process of sharing, however, has a
relatively low cost. Moreover, as Professor Strahilevitz demonstrates, the
design of P2P clients can lead users to believe that they are participating in
a community, triggering norms of reciprocity.
One salient question is whether the objective of collective action moves to
writing the peer application itself (the Napster program, etc.). This shift
does not seem to occur. First, provided that the program can be sold, the
programmer can appropriate some of the value produced by the evasion of
copyright law and can avoid the collective action problem. Second, even if the
collective action problem persists, the investment needed to write a peer
networking program may be small enough that the programmer is motivated to
write it if for no other reason than just to serve his own needs. Third, the
collaborative structure of open-source software
[*749] development may play a role in developing responses that rely on non-monetary
incentives. I will examine each explanation in turn.
A program is a private good. If it is sold or otherwise used to generate
returns, its developer has the appropriate incentive to respond on behalf of
the group. This incentive is, apparently, what has driven much of the peer
filesharing response so far. For Shawn Fanning, the founder of Napster, the
returns were reputational. As Time remarked, he
"reached a level of fame unprecedented for a 19-year old who is neither a sports
hero nor a pop star."
n255 But the financial incentives for writing response programs have not proved
n256 Most peer filesharing companies today depend on the dot-com model of deriving
revenue from user traffic. Some developers claim that advertising revenue is
enough to stay in business. For example, the developer of WinMX (yet another
peer filesharing application) stated,
"We stay in operation by keeping our costs low ... . We think it's smarter to
skip the spyware, generate revenue from quality ad exposures on www.winmx.com,
and spend the money on important things such as a small yet well rewarded
development team, legal contingency funds, etc."
More seasoned companies, however, question the advertising model. KaZaA, for
example, depends on selling pop-up ads
n258 and plans to harness and sell the unused computing resources of its millions
of peered users (derisively referred to as a
n259 It has freely admitted that the online advertising model does not deliver
enough revenue for it to support continued development.
[*750] Ironically, this suggests that the continuing development of peer filesharing
may itself depend on
copyright law's protection. That is to say, if other revenue models prove unsuccessful,
developers may have to turn to selling programs or selling membership.
n261 Their ability to do so will depend on
copyright protection, either against unauthorized distribution of the software client
(perhaps using a peer network) or unauthorized circumvention of a
copy-protection scheme. Peer developers may have to enlist
copyright processes in their effort to evade
copyright laws. They may then, in a further twist, find their tools of
copyright evasion turned against them.
Alternatively, programming a peer response may be inexpensive enough that some
individuals will always be willing to undertake the project for their own
personal benefit. If a college student would otherwise spend $ 500 a year on
music, and if his time is not otherwise valuable, he might consider it a
worthwhile investment to program an improved filesharing application.
Similarly, it could be that the challenge of peer networking development will
continue to attract the collaborative attention of open-source developers. How
far the open-source movement will take peer filesharing is an open question -
it depends on how interesting the problem remains to programmers.
As suggested by the change/avoidance dichotomy in Part I, one of the reasons
for the success of P2P as a mechanism of legal influence is that it avoids the
collective action problem inherent in change mechanisms. It has worked because
certain members of the group have appropriate incentives to write programs that
then lower the cost of the
copyright system for all computer-savvy users. This fact explains the mass popularity of
P2P among disorganized consumers. As a result, Napster and other programs have
become an alternative to political lobbying less by choice than by default.
Finding bold predictions for what political programming projects mean for the
future of governance is not difficult to do. John Perry Barlow's prophecies,
for example, have not been understated:
What's happening with global, peer-to-peer networking is not altogether
different from what happened when the American colonists realized they were
poorly served by the British Crown: The colonists were obliged to cast off that
power and develop an economy better suited to their new environment ... . No
law can be successfully imposed on a huge population that does not morally
support it and possesses easy means for its invisible evasion.
My own prophecies are somewhat more modest. The ways groups influence their
government and the effects of its laws are changing. But the effects are
ambiguous. At best, the story suggests that groups that have never fared well
in the political process, due to disorganization or unpopularity, will gain the
most. At worst, already-privileged computer users will simply find new ways to
123 S. Ct. 769 (2003).
n2. Declan McCullagh, Geeks in government: A good idea?, at
http://news.com.com/2010-1071-949275.html (Aug. 12, 2002) (on file with the
Virginia Law Review Association) (quoting Sonia Arrison of the Pacific Research
n3. See Lawrence Lessig, Code and Other Laws of Cyberspace 89 (1999).
n4. These claims are described and discussed in Timothy Wu, When Law
& the Internet First Met,
3 Green Bag 2d 171, 172-73 (2000). See also Tom W. Bell, Escape from
Copyright: Market Success vs. Statutory Failure in the Protection of Expressive Works,
69 U. Cin. L. Rev. 741 (2001) (arguing that the efficacy of technological self-help should allow voluntary
exit from the
copyright regime); Kenneth W. Dam, Self-Help in the Digital Jungle,
28 J. Legal Stud. 393 (1999) (arguing that technological self-help will play a positive role in the growth
of electronic commerce).
n5. See Lessig, supra note 3, at 233.
n6. See, e.g., Bruce P. Keller, The Game's the Same: Why Gambling in Cyberspace
Violates Federal Law,
108 Yale L.J. 1569 (1999) (arguing that Internet gambling should be regulated as usual); Edward A.
Morse, State Taxation of Internet Commerce: Something New Under the Sun?,
30 Creighton L. Rev. 1113 (1997) (arguing that issues of state taxation of Internet-based commerce are
familiar); James B. Speta, Internet Theology,
2 Green Bag 2d 227 (1999) (arguing that Internet publication does not justify major changes to the First
Amendment regime). One could attribute this view to Jack Goldsmith, though in
his view, unfairly. See Jack L. Goldsmith, Against Cyberanarchy,
65 U. Chi. L. Rev. 1199, 1201 (1998).
n7. E.g., Lessig, supra note 3; Bell, supra note 4. Also, the scholarship
examining the metaphors used for Internet conduct does not explain compliance
patterns. See, e.g., Dan Hunter, Cyberspace as Place, and the Tragedy of the
Digital Anticommons, 90 Cal. L. Rev. (forthcoming 2003) (noting the persistence
of the space metaphor); Orin S. Kerr, The Problem of Perspective in Internet
Law, 91 Geo. L.J. (forthcoming 2003) (arguing that technological perspectives
decide Internet cases); Timothy Wu, Application-Centered Internet Analysis,
85 Va. L. Rev. 1163 (1999) (arguing that analysis should focus on application development); Alfred C.
Yen, Western Frontier or Feudal Society?: Metaphors and Perceptions of
17 Berkeley Tech. L.J. 1207 (2002) (comparing metaphors of the frontier with cyberspace).
n8. That is to say, one individual's consumption does not diminish another user's
value of the product. I emphasize this characteristic because some scholars
have suggested that songs on peer networks display rivalrous features. See
Ramayya Krishnan et al., The Economics of Peer-To-Peer Networks at 5 (Aug. 2002
draft), available at http://www.heinz.cmu.edu/<diff>mds/ (on file with the Virginia Law Review Association).
n9. According to an Ipsos-Reid study, those who use peer filesharing networks are
predominantly between the ages of twelve and twenty-four. See Robyn Greenspan,
Making Money on Free Music, at http://www.internetnews.com/stats/article.php/
1365161 (last visited May 12, 2003) (on file with the Virginia Law Review
n10. Reinier H. Kraakman, Gatekeepers: The Anatomy of a Third-party Enforcement
Strategy, 2 J.L. Econ.
& Org. 53, 53-54 (1986).
n11. See Amanda Lenhart et al., The Pew Internet
& Am. Life Project, Downloading Free Music: Internet music lovers don't think
it's stealing 5 (Sept. 28, 2000), available at
http://www.pewinternet.org/reports/toc.asp?Report=23 (on file with the Virginia
Law Review Association); Office of Tech. Assessment, U.S. Cong.,
Copyright and Home Copying: Technology Challenges the Law 163 (Oct. 1989), at
http://www.wws.princeton.edu/<diff>ota/disk1/1989/8910<uscore>n.html (on file with the Virginia Law Review Association).
n12. Cf. Lior Jacob Strahilevitz, Charismatic Code, Social Norms and the Emergence
of Cooperation on the File-Swapping Networks,
89 Va. L. Rev. 505 (2003) (arguing that charismatic code creates an illusion of reciprocity that
accounts for why people contribute to a filesharing network).
n13. See id.
n14. See John Austin, The Province of Jurisprudence Determined 26 (1832).
n15. See, e.g., Robert C. Ellickson, Order Without Law: How Neighbors Settle
Disputes 126-32 (1991) (describing five different sources of regulation);
Lessig, supra note 3, at 86-90 (describing four modalities of regulation: law,
markets, norms, and architecture (code)). The antecedents for such general
theories are in related sociological efforts. See, e.g., Donald Black, Toward a
General Theory of Social Control, at xi (Donald Black ed., 1984) (collecting
articles). A survey of legal scholarship in this vein can be found in Lawrence
Lessig, The New Chicago School,
27 J. Legal Stud. 661 (1998).
n16. Lessig, supra note 3, at 86-90.
n17. Ellickson, supra note 15, at 4, 137-47. Oliver Williamson coined the phrase,
see Oliver E. Williamson, Credible Commitments: Using Hostages to Support
83 Am. Econ. Rev. 519, 520 (1983), although Ellickson popularized and expanded on the criticism.
n18. See Lessig, supra note 3.
n19. Id. at 86-90.
n21. See generally Lawrence Lessig, What Things Regulate Speech: CDA 2.0 vs.
38 Jurimetrics J. 629 (1998) (arguing that filters and technologies to facilitate filters might pose a
greater threat than legislation to the interests of free speech).
n22. Tom R. Tyler, Why People Obey the Law 19-20 (1990).
n23. The assumption that the content of laws is exogenous becomes difficult to
maintain when we consider changing laws as a mechanism of response. In a
subsequent Section, I consider what happens when the assumption that laws are
exogenous is relaxed. See infra text accompanying notes 72-78.
n24. Cf. Leo Katz, Ill-Gotten Gains: Evasion, Blackmail, Fraud and Kindred Puzzles
of The Law 17-30 (1996) (describing avoision of moral and ethical rules as
comparable to avoision of law). The concept of avoision is described more fully
infra note 32.
n25. While this expression of the equation is quite simple, there is a great deal
built into each side. See, e.g., Richard Posner, Economic Analysis of Law 242
(5th ed. 1998) ("The model can be very simple: A person commits a crime because the expected
benefits of the crime to him exceed the expected costs.").
n26. See, e.g., Tyler, supra note 22, at 22 ("The legal system cannot function if it can influence people only by
manipulating rewards and costs."); Ellickson, supra note 15, at 137-47 (arguing that law's punishments only
explain some of the social order we see); Eric A. Posner, Law and Social Norms:
The Case Of Tax Compliance,
86 Va. L. Rev. 1781, 1782 (2000) (observing that state punishment cannot explain tax compliance); Paul G.
& Chris William Sanchirico, Norms, Repeated Games, and the Role of Law 41-48
(2002) (unpublished manuscript, on file with the Virginia Law Review
Association), available at http://papers.ssrn.com/sol3/papers.cfm? abstract<uscore>id=311879 (suggesting that state punishment of deviants supports social orders
otherwise maintained by group sanctions). With mixed answers, some of the
empirical studies of the relationship between legal threats and compliance
include Isaac Ehrlich, Crime, Punishment, and the Market for Offenses, 10 J.
Econ. Persp. 43 (1996) (surveying empirical work in this area); Daniel S. Nagin
& Raymond Paternoster, The Preventive Effects of the Perceived Risk of Arrest:
Testing and Expanded Conception of Deterrence, 29 Criminology 561, 580-81
(1991) (arguing that certainty of punishment plays a clear but minor role in
determing compliance); Raymond Paternoster, The Deterrent Effect of Perceived
Certainty and Severity of Punishment: A Review of the Evidence and Issues, 4
Just. Q. 173 (1987) (suggesting weak correlation between perceived certainty of
detection and drug use).
n27. See E. Allan Lind
& Tom R. Tyler, The Social Psychology of Procedural Justice 230-31 (1988)
(developing a group value model to explain compliance); see generally Tyler,
supra note 22 (arguing that perception of legitimacy affects the decision to
n28. Posner, supra note 26, at 88-111 (2000). Posner points out that the normative
and self-interested models of compliance can be unified by recognizing that
effective signaling depends on laws being considered legitimate. See id. at
n29. See, e.g., Ellickson, supra note 15, at 137-47 (presenting a model premised on
iterated prisoner's dilemma); Mahoney
& Sanchirico, supra note 26 (same).
n30. See Gary S. Becker
& George J. Stigler, Law Enforcement, Malfeasance and Compensation of Enforcers,
3 J. Legal Stud. 1 (1974).
Id. at 2-6. The observation was a short stop enroute to their proposal for private
enforcement of criminal law, and the debate over their paper has focused on the
merits of private and public law enforcement. See, e.g., Mark A. Cohen
& Paul H. Rubin, Private Enforcement of Public Policy, 3 Yale J. on Reg. 167
(1985) (arguing for shifting responsibility for implementing and enforcing
public policy to private enforcement agents); William M. Landes
& Richard A. Posner, The Private Enforcement of Law,
4 J. Legal Stud. 1 (1975) (responding to Becker and Stigler's proposal to privatize criminal law
n32. This insight is described in greater depth at infra text accompanying notes
n33. See, e.g., Marsha Blumenthal et al., Do Normative Appeals Affect Tax
Compliance? Evidence from a Controlled Experiment in Minnesota,
54 Nat'l Tax J. 125 (2001) (concluding from a tax compliance study that normatively appealing to a
taxpayer's conscience via a letter had an insignificant overall impact on tax
compliance); Michael J. Graetz et al., The Tax Compliance Game: Toward an
Interactive Theory of Law Enforcement, 2 J.L. Econ.
& Org. 1 (1986) (modeling tax compliance as a game); Posner, supra note 26, at
1782 (proposing a signaling model rather than the standard state sanctioning
model to explain tax compliance); David A. Weisbach, Formalism in the Tax Law,
66 U. Chi. L. Rev. 860, 884 (1999) (arguing that anti-abuse standards would be more efficient than rules aimed at
curbing tax avoidance).
n34. See Ronald Turner, Reactions of the Regulated: A Federal Labor Law Example,
17 Lab. Law. 479 (2002) (detailing ways in which groups practice avoision of labor laws).
n35. See, e.g., Neal Kumar Katyal, Deterrence's Difficulty,
95 Mich. L. Rev. 2385, 2414-15 (1997) (noting that a deterrence model in criminal law should focus on the role of
substitute products and complements to banned products and behavior).
n36. See, e.g., Keith N. Hylton, When Should We Prefer Tort Law to Environmental
41 Washburn L.J. 515 (2002) (comparing the benefits of using tort law as a system of privately enforced
environmental protection to traditional public statute-based regulatory
n37. Compliance in international law is studied in the absence of a centralized
enforcement system, creating concerns more akin to the study of compliance with
social norms. See, e.g., Abram Chayes
& Antonia Chayes, The New Sovereignty: Compliance with International Regulatory
Agreements (1995) (studying compliance with treaties); Jack L. Goldsmith
& Eric A. Posner, A Theory of Customary International Law,
66 U. Chi. L. Rev. 1113 (1999) (studying compliance with customary international law).
n38. Some of these are ex post examples, others are ex ante. For present purposes
they are considered together.
n39. See Turner, supra note 34, at 479.
n40. See generally Katz, supra note 24 (presenting examples of avoision).
n41. See generally Katyal, supra note 35 (studying role of substitute products in
models of criminal deterrence).
n42. The effect of prices of mechanisms is discussed in infra text accompanying
n43. See Regulation of Dietary Supplements,
58 Fed. Reg. 33,690 (proposed June 18, 1993).
n44. See Dietary Supplement Health and Education Act of 1994, Pub. L. No. 103-417,
108 Stat. 4325, 4326 (1994). This Act amended the Federal Food, Drug and
Cosmetic Act ("FDCA") classifying dietary supplements as a new category of food, thereby preventing
the FDA from regulating supplements as drugs or food additives.
n45. For a summary of work in this area, see Dennis C. Mueller, Public Choice II
(1989), particularly chapters 13 and 16.
n46. See Sam Peltzman, Toward a More General Theory of Regulation,
19 J.L. & Econ. 211 (1976); George J. Stigler, The Size of Legislatures,
5 J. Legal Stud. 17 (1976); George J. Stigler, The Theory of Economic Regulation, 2 Bell J. of Econ.
& Mgmt. Sci. 3 (1971) (presenting a general interest group theory of politics).
n47. Robert E. McCormick
& Robert D. Tollison, Politicians, Legislation and the Economy (1981).
n48. Peltzman, supra note 46, at 213-14.
n49. William M. Landes
& Richard A. Posner, The Independent Judiciary in an Interest-Group Perspective,
18 J.L. & Econ. 875, 877 (1975).
n50. See Fred S. McChesney, Rent Extraction and Rent Creation in the Economic
Theory of Regulation,
16 J. Legal Stud. 101 (1987) [hereinafter McChesney, Rent Extraction]; see also Fred S. McChesney, Money
for Nothing (1997) (developing and broadening the rent extraction model)
[hereinafter McChesney, Money for Nothing].
n51. McChesney, Rent Extraction, supra note 50, at 109-12.
n52. See, e.g., David Austen-Smith
& John R. Wright, Competitive lobbying for a legislator's vote, 9 Soc. Choice
& Welfare 229 (1992) (developing a model of interest group behavior based on the
notion that such lobbying is the exercise of strategic information
transmission); Johan Lagerlof, Lobbying, information and private and social
welfare, 13 Eur. J. Pol. Econ. 615 (1997) (same); Susanne Lohmann, Information,
access, and contributions: A signaling model of lobbying, 85 Pub. Choice 267
n53. See Landes
& Posner, supra note 49; Posner, supra note 25, at 587-90.
n54. Jeremy Rabkin, Judicial Compulsions: How Public Law Distorts Public Policy
n55. See Einer R. Elhauge, Does Interest Group Theory Justify More Instrusive
101 Yale L.J. 31 (1991).
Id. at 67-68.
Id. at 68.
n58. Some people may feel discomfort at comparing change and avoidance in this
fashion, but this discomfort may be useful and instructive. One can draw a
parallel to Albert Hirschman's work on institutional feedback. See Exit, Voice,
and Loyalty, Albert Hirschman (1970). Hirschman emphasized that members of
declining institutions faced a fundamental choice between
"exit" as forms of feedback. Despite the different
"feel" of voice and exit - study by different fields of scholarship, and the sense of
disloyalty evident in the latter - Hirschman maintained that a useful picture
of organizational feedback required understanding the choice. This Part
suggests that focusing on the choice between avoidance and change for groups
faced with burdensome laws will yield similar dividends. As with voice and
exit, we want to know the conditions under which each option will prevail, and
each strategy's comparative efficiency. And if tools of avoidance are growing
in sophistication, as the example of code design here studied suggests, it
makes sense to understand what the consequences will be.
n59. See Mancur Olson Jr., The Logic of Collective Action (1965). The logic of
collective action and the problem of free-riding now underlie most present-day
studies of lobbying and interest group behavior. See, e.g., Daniel A. Farber
& Philip P. Frickey, Law and Public Choice: A Critical Introduction 17-21
& Tollison, supra note 47, at 17-18 (discussing organizing costs); Glynn S.
Lunney, Jr., A Critical Reexamination of the Takings Jurisprudence,
90 Mich. L. Rev. 1892, 1949-52 (1992) (summarizing the lobbying advantages available to a small interest group).
n60. Olson, supra note 59, at 165.
n61. Id. at 53-57, 132-34, 165-67.
n62. Id. at 133-67.
n63. See U.S. Const. Amend. XXI, 1.
n64. The repeal also cannot be
"used up" by overconsumption. Legal change is an example of what economists call a
public or collective good: It is both non-rival and non-excludable. See Olson,
supra note 57, at 14 (defining public good).
n65. A clever observer might object that this collective/private good distinction
seems to blur on further inspection. Yes, a tax avoidance scheme delivers
benefits for the schemer, but if successful, it may serve as a useful model for
others. A police officer, once bribed, might be easier to bribe in the future.
The cars behind the driver with the radar detector might guess why she brakes
suddenly. So does avoidance really present a different kind of collective
action problem than investments in change?
It does, I suggest, because all of the examples posited simply represent the
consumption of a private good that creates a positive externality. This
distinction can be illustrated by the
"popcorn/incense" example. Consider that cooking and eating popcorn will create a delicious
fragrance from which others cannot be excluded. That fact does not make the
popcorn itself a public good. The buyer of the popcorn reaps the reward of her
investment, while also conferring a benefit on her peers. Hence, diffuse
unorganized groups should be expected to eat popcorn despite the collective
Replace popcorn with bribing a police officer and the same results are
obtained. The briber personally reaps the benefits of the bribe in a fashion
excludable and rivalrous, but she also confers a benefit on all future bribers.
Conversely, in the domain of public fragrance, the appropriate parallel to a
change mechanism like lobbying is the burning of incense. It costs money to
burn incense so as to produce a pleasant fragrance for the benefit of all.
Hence, unlike popcorn, only organized groups will burn incense, just as only
organized groups will invest in lobbying campaigns.
n66. A caveat is necessary. At this stage, the model that follows is admittedly
legally-centrist. For simplicity's sake, it does not include the compliance
produced by norms or other modalities of regulation.
& Stigler, supra note 30, at 5-6.
n68. Notice that for simplicity's sake, this hypothetical has neglected the
government's response: government can, as some states do, ban the radar
detector (but more on this later).
n69. The benefits of not having to comply with the law must be greater than the
cost of a response strategy for any investment to happen at all. This necessity
is a consequence of perspective; the assumption is that the individual is
complying with the law, and deciding whether to invest in some way to make it
worthwhile not to comply. In contrast, Becker and Stigler's original model
posited a criminal already in violation of the law, and suggested that
"the violator would be willing to bribe as much as [the fine] to ignore the
& Stigler, supra note 30, at 5. While the behavior of violators is of interest,
it generally seems more interesting to understand what individuals already
regulated by the law will do, instead of assuming that they will break it.
n70. See discussion of group dynamics, supra text accompanying notes 59-64.
n71. Cf. McCormick
& Tollison, supra note 47 (modeling groups in competition for legislative wealth
Kovacs v. Cooper, 336 U.S. 77 (1949).
n73. On the contrary, Congress passed the Internet Tax Freedom Act,
47 U.S.C. 151 (1998), restricting the power of states to tax Internet-based commerce.
n74. Anne O. Krueger, The Political Economy of the Rent-Seeking Society,
64 Am. Econ. Rev. 291, 291 (1974).
n75. See generally Edmund W. Kitch, The Nature and Function of the Patent System,
20 J.L. & Econ. 265 (1977) (describing patents as prospects that prevent waste in follow-on development).
n76. See generally Michael Abramowicz,
Copyright Redundancy (Geo. Mason L.
& Econ. Research Paper No. 03-03, 2003), available at
http://papers.ssrn.com/sol3/ papers.cfm?abstract<uscore>id=374580 (on file with the Virginia Law Review Association) (arguing that
copyright laws prevent wasteful redundancy).
n77. See, e.g., Richard Posner, The Social Costs of Monopoly, 83 J. Pol. Econ. 807
(1975) (modeling and estimating social costs of monopoly and monopoly-inducing
regulation in the U.S.).
n78. See id. at 811 (analyzing assumption that expenditures on monopolizing have no
socially beneficial byproduct).
n79. A common question is this: Is there any particular significance to code in
this regard, as opposed to just advances in technology and their effects on
compliance? The argument for a special relevance for code relies on the idea
that computer code has achieved a greater granularity than the technologies
that preceded it: Programmers can very precisely shape behavior using code to
match the particularized loopholes in laws. At previous levels of technology,
conversely, such questions would arise less frequently.
n80. Lessig, supra note 3, at 89.
n81. See Bell, supra note 4 (providing a model of technological self-help); Dam,
supra note 4 (same).
n82. Lessig, supra note 3, at 6, 89.
Ashcroft v. Free Speech Coalition, 122 S. Ct. 1389 (2002) (striking down ban on computer-generated child pornography).
n85. See Don Clark, Recording Industry Group Sues Napster, Alleging
Copyright Infringement on Net, Wall St. J., Dec. 9, 1999, at B18.
n87. Lauren Goldstein, Tune In: MP3 goes mainstream, but Internet music has yet to
find its perfect form, Fortune, Dec. 1, 1999, at 268.
Complaint at 2, A & M Records v. Napster, Inc., 114 F. Supp. 2d 896 (N.D. Cal. 2000) (No. C99-5183-MHP), available at http://news.findlaw.com/cnn/docs/napster/
riaa/napster<uscore>complaint.pdf (on file with the Virginia Law Review Association) [hereinafter
n89. See Damien A. Riehl, Peer-to-Peer Distribution Systems: Will Napster, Gnutella
and Freenet Create a
Copyright Nirvana or Gehenna?,
27 Wm. Mitchell L. Rev. 1761, 1768 (2001).
n90. Complaint, supra note 88, at 2.
n91. Clark, supra note 85, at B18.
n92. See Complaint, supra note 88, at 3 (alleging that
"Napster's conduct has caused and continues to cause plaintiffs grave and
n93. The estimates of Napster's use vary. See, e.g., Jon Healey, Napster CEO
Pitching a New Tune to Labels, L.A. Times, Nov. 25, 2001, at C5 (reporting
sixty million active users at Napster's peak); Napster Use Slumps 65%, BBC
News, at http://news.bbc.co.uk/2/hi/business/1449127.stm (July 20, 2001) (on
file with the Virginia Law Review Association) (reporting statistics from
Jupiter Media Metrix stating that Napster had 26.4 million active users in
February 2001 before the numbers began to decline).
n94. See Geoff Nicholson, Will the RIAA pass up Napster's $ 1 billion offer?, at
http://www.hitsquad.com/smm/news/708/ (Feb. 21, 2001) (on file with the
Virginia Law Review Association).
A & M Records v. Napster, Inc., 114 F. Supp. 2d 896, 909-11 (N.D. Cal. 2000) (summarizing the findings of several studies of Napster's economic impact). A
later study by economist Stan Leibowitz concludes that Napster's effects were
not proven in the Napster litigation, but that peer filesharing should be
expected to hurt the music industry in the long term. Stan Liebowitz, Policing
Pirates in the Networked Age 14-15 (Cato Policy Analysis No. 438 May 15, 2002),
available at http://www.cato.org/pubs/pas/pa438.pdf (on file with the Virginia
Law Review Association).
n96. Patrick Brethour, Music sales tumble 1.3% worldwide, The Globe and Mail
(Boston), Apr. 20, 2001, at B1.
n97. Jeff Leeds, Record Industry Says Napster Hurt Sales, L.A. Times, Feb. 24,
2001, at C1.
Napster, 114 F. Supp. 2d at 910 (citing several studies but refusing to rely on them); Kim Chipman, Napster
More Likely to Help, Not Hurt, Music Sales, Bloomberg News, July 21, 2000
"most attrition [cited by the RIAA] took place before Napster's launch"); Liam Lahey, Angus Reid Study: Napster is improving CD sales, ComputerWorld
Canada, Sept. 22, 2000, at 1, available at
http://www.itworldcanada.com/portals/portalDisplay.cfm?oid=E19EF5FC8783-45AE-AB14E3C8BA85856F (on file with the Virginia Law Review Association).
n99. These reasons are summarized in Posner, supra note 25, at 243-50; Kraakman,
supra note 10, at 56-57. See also Katyal, supra note 35, at 2414-15 ("But the range of sanction levels may be subject to a maximum sanction
constraint - either because there is no room for increased penalty (beyond
death) or because such equality in punishment would contravene other, moral,
theories of punishment.").
n100. Kraakman, supra note 10, at 53.
n101. In his influential 1986 article, Kraakman demonstrated that
"gatekeeper liability" could create additional deterrence relative to primary enforcement. See id. at
87-93. That article has inspired a gatekeeper literature, primarily focused on
gatekeepers in the financial services industries. See, e.g., Stephen Choi,
Market Lessons for Gatekeepers,
92 Nw. U. L. Rev. 916, 918 (1998) (arguing that analysis of reputational intermediaries remains incomplete
without consideration of a variety of additional factors); Luigi Alberto
Franzoni, Independent Auditors as Fiscal Gatekeepers, 18 Int'l Rev. L.
& Econ. 365, 365 (1998) (analyzing gatekeeper regimes in tax enforcement);
Ronald J. Gilson, The Devolution of the Legal Profession: A Demand Side
49 Md. L. Rev. 869, 883-84 (1990) (analyzing the gatekeeper role lawyers play in avoiding strategic litigation);
Frank Partnoy, Barbarians At The Gatekeepers?: A Proposal For A Modified Strict
79 Wash. U. L.Q. 491, 491-93 (2001) (arguing for a strict liability gatekeeper regime for securities fraud). None,
however, considers a statute's dependence on gatekeeper liability to be a
n102. One notable exception to this generalization is Randal C. Picker,
Copyright as Entry Policy: The Case of Digital Distribution,
47 Antitrust Bull. 423, 432 (2002). A similar notion is reflected in the distinction between
"targeted" enforcement in Rick Harbaugh
& Rahul Khemka, Does
copyright enforcement encourage piracy? (Claremont Colleges working paper in economics,
Aug. 2001), available at http://econ.mckenna.edu/papers/2000-14.pdf (on file
with the Virginia Law Review Association). One reason
copyright's dependence on gatekeepers may be under-recognized is possibly because most of
copyright law is found under the civil, as opposed to the criminal titles of the law.
Yet there is no reason to suppose from first principles that a civil regime
cannot also harness the power of a gatekeeper liability regime.
n103. See, e.g., Jessica Litman, Digital
Copyright 111 (2001) ("Our
copyright laws have, until now, focused primarily on the relationships among those who
write works of authorship and disseminate those works to the public."); Jane C. Ginsburg, Putting Cars On The
"Information Superhighway": Authors, Exploiters, and
Copyright in Cyberspace,
95 Colum. L. Rev. 1466, 1488 (1995) (discussing the role of intermediaries).
464 U.S. 417 (1984). In the Sony litigation, the broadcasting industry targeted Sony and its new
Betamax videotape recorder, as opposed to end-users, when it unsuccessfully
tried to have Sony held contributorily liable for any illegal taping of
Id. at 456.
n105. Ginsburg, supra note 103, at 1488.
n106. While many authors discuss the challenge of new technology for intellectual
property laws, it is difficult to find academic work on actual patterns of
enforcement. One student note has tackled the problem, relying principally on
congressional sources. See Jayashri Srikantiah, Note, The Response of
Copyright to the Enforcement Strain of Inexpensive Copying Technology,
71 N.Y.U. L. Rev. 1634, 1643-45 (1996).
n107. H.R. Rep. No. 92-487, at 7 (1971).
487 F.2d 1345, 1350 (Ct. Cl. 1973), aff'd by an equally divided
Court, 420 U.S. 376 (1975).
17 U.S.C. 106(4) (2000).
n111. Register of
Copyrights, 87th Cong., Report of the Register of
Copyrights on the General Revision of the U.S.
Copyright Law 30 (Comm. Print 1961).
Universal City Studios v. Sony Corp. of Am., 480 F. Supp. 429, 432 (C.D. Cal. 1979); see also
Sony, 464 U.S. at 434 ("The two respondents in this case do not seek relief against the Betamax users
who have allegedly infringed their
n113. The 1990s saw an effort by software
copyright owners to enforce
copyrights against end-users, who tend to be fairly large entities. See, e.g., Elizabeth
Hurt, Software Pirates Sued: Alleged culprits targeted online auction bidders,
Business 2.0, (Jan. 26, 2001), at
http://www.business2.com/articles/web/print/0,1650,16147,00.html (on file with
the Virginia Law Review Association). For an argument that such enforcement
actually creates more piracy, see Harbaugh
& Khemka, supra note 102, at 2.
473 U.S. 207 (1985). Other examples of enforcement against small intermediaries include
United States v. Drum, 733 F.2d 1503 (11th Cir. 1984) (enforcing against a bootlegging enterprise), and Paramount Pictures Corp. v.
Labus, No. 89-C-797-C, 1990 U.S. Dist. LEXIS 11754 (W.D. Wis. Mar. 23, 1990) (involving the operator of a small resort sued for
renting pirated movies to his customers).
473 U.S. at 210-11.
Id. at 212.
Id. at 211-12.
n118. The Office of Technology Assessment noted that the proportion of people who
made home audiotapes doubled in the 1980s.
Office of Tech. Assessment, supra note 11, at iii.
n119. Id. at 7.
n120. See Civil and Criminal Enforcement of the
Copyright Laws: Hearing Before the Subcomm. on Patents,
Copyrights and Trademarks of the Senate Comm. on the Judiciary, 99th Cong. 41 (1985)
(statement of Donald C. Curran, Acting Register of
Copyrights) ("RIAA is selective in what they refer to Justice, turning over only the most
Office of Tech. Assessment, supra note 11, at iii.
n122. See generally Wu, supra note 7 (pointing out that the Internet and its
applications should be understood separately for legal analysis).
n123. For a good summary of some of these challenges, see Theodore Hong,
Performance, in Peer-to-Peer: Harnessing the Benefits of a Disruptive
Technology 203, 205-06 (Andy Oram ed., 2001).
n124. See Michael A. Gallo
& William A. Hancock, Networking Explained 17 (1999).
n125. See, e.g., Gene Kan, Gnutella, in Peer-to-Peer:
Harnessing the Benefits of a Disruptive Technology, supra note 123, at 94, 117 ("The debate ... burning in the technology community ... [is] what is truly
peer-to-peer."); Clay Shirky, What is P2P ... And What Isn't?, The O'Reilly Networks, at
http://www.oreillynet.com/pub/a/p2p/ 2000/11/24/shirky1-whatisp2p.html (Nov.
24, 2000) (on file with the Virginia Law Review Association) (arguing that the
label describing what is happening to networks,
"peer-to-peer," does not clarify much).
n126. See Nelson Minar et al., A Network of Peers: Peer-to-Peer Models Through the
History of the Internet, in Peer-to-Peer:
Harnessing the Benefits of a Disruptive Technology, supra note 123, at 3, 17.
n127. See M. Horton
& R. Adams, The Internet Eng'g Task Force, Standard for Interchange of USENET
Messages, at http://www.ietf.org/rfc/rfc1036.txt (1987) (on file with the
Virginia Law Review Association) (detailing structure of USENET system).
n128. See P. Mockapetris, The Internet Eng'g Task Force, Domain Names -
Implementation and Specification, at http://www.ietf.org/rfc/rfc1035.txt (1987)
(on file with the Virginia Law Review Association) (detailing design of domain
n129. See Kan, supra note 125, at 112-14.
n130. See Lenhart et al., supra note 11, at 5.
n131. See Harbaugh
& Khemka, supra note 102, at 6.
n132. See supra note 26 and accompanying text.
n133. Understanding exactly how norms operate to ensure compliance with legal rules
is beyond the scope of this paper. For a new account of this issue see Mahoney
& Sanchirico, supra note 26, at 41-48 (suggesting that the state's punishments
play a role in sustaining strategies of cooperation with legal rules).
n134. A classic external sanction model is provided in Ellickson, supra note 15, at
n135. The signaling theory is presented in Eric A. Posner, Symbols, Signals, and
Social Norms in Politics and the Law,
27 J. Legal Stud. 765, 766-67 (1998).
n136. See Robert D. Cooter, Decentralized Law for a Complex Economy: The Structural
Approach to Adjudicating the New Law Merchant,
144 U. Pa. L. Rev. 1643, 1661-66 (1996) (characterizing internalization as the precondition of a norm's existence).
n137. Assuming a similar likelihood that the thief or friend would have otherwise
paid the full price for the music.
Office of Tech. Assessment, supra note 11, at 139-65.
n139. Id. at 163.
n142. Jessica Litman, for example, argues that in general people
"do not observe copyight rules in their daily behavior," because
"people don't believe the
copyright law says what it does say." Litman, supra note 103, at 111-12.
n143. See Strahilevitz, supra note 12, at 549.
n144. Lenhart et al., supra note 11, at 5.
n145. Id. at 6.
n146. See Business Software Alliance, Survey Spotlights Growing Problem of Online
Software Piracy, at http://www.bsa.org/resources/2002-05-29.117.pdf (May 29,
2002) (on file with the Virginia Law Review Association).
464 U.S. 417 (1984).
114 F. Supp. 2d 896 (N.D. Cal. 2000).
n149. See Lawrence Lessig, The Future of Ideas: The Fate of the Commons in a
Connected World 192 (2001).
n150. Because MP3.com required users to own the CD for the MP3s they were given the
right to download, there was a good argument that MP3.com's copying of the
files to facilitate
"space-shifting" was fair use. See id. at 193-94.
UMG Recordings v. MP3.com, Inc., 92 F. Supp. 2d 349, 350 (S.D.N.Y. 2000).
473 U.S. 207 (1985).
n153. See Bruce Haring, You can't stop the music on the Net: Recording industry
debates MP3 piracy issue, USA Today, Nov. 4, 1998, at 5D, available at
1998 WL 5740934 (noting the
"abundance of sites both legal and illegal").
n154. For example, the website MP3Board offered a search engine for such sites and
was quickly sued. See
MP3Board v. Recording Indus. Ass'n of Am., No. C-00-20606RMW, 2001 WL 804502, at 3 (N.D. Cal. Feb. 27, 2001) (staying a California countersuit).
n155. Shirky, supra note 125, at 28.
n156. See Jordan Ritter, Why Gnutella Can't Scale. No, Really., at http://www.
darkridge.com/<diff>jpr5/doc/gnutella.html (Feb. 2001) (on file with the Virginia Law Review
Association) (discussing scaling problems in P2P networks).
n157. See Healey, supra note 93.
A & M Records v. Napster, Inc., 114 F. Supp. 2d 896, 900 (N.D. Cal. 2000).
464 U.S. 417, 442 (1984) ("The sale of copying equipment, like the sale of other articles of commerce,
does not constitute contributory infringement if the product is widely used for
legitimate, unobjectionable purposes.").
n160. The Sony Court described this as the
"staple article of commerce doctrine." Id.
A & M Records v. Napster, Inc., 239 F.3d 1004, 1022 (9th Cir. 2001). See also
id. at 1023 ("The district court correctly determined that Napster had the right and ability
to police its system.").
n162. The classic dance hall case is
Dreamland Ball Room v. Shapiro, Bernstein & Co., 36 F.2d 354, 355 (7th Cir. 1929) (holding a dance hall liable for
copyright infringement because they hired an infringing orchestra to supply music to
paying customers). In contrast, landlords have traditionally not been held
liable for the infringements of their tenants. See, e.g.,
Deutsch v. Arnold, 98 F.2d 686, 688 (2d Cir. 1938) (refusing to hold a landlord liable for the
copyright infringement committed by a tenant on the premises).
Sony, 464 U.S. at 437.
Napster, 239 F.3d at 1020. This formula has become the favored technique for proving knowledge in service
provider cases. See
Religious Tech. Ctr. v. Netcom On-Line Communication Servs., 907 F. Supp. 1361, 1373-75 (N.D. Cal. 1995) (allowing actual knowledge to be demonstrated in this manner).
Napster, 239 F.3d at 1022.
Id. at 1022 n.6.
Id. at 1023.
n168. The Ninth Circuit's ruling on the preliminary injunction was the effective,
but not the formal, end of the litigation over Napster. See
A & M Records v. Napster, Inc., 284 F.3d 1091, 1099 (9th Cir. 2002) (affirming the district court's preliminary injunction).
n169. Kan, supra note 125, at 121.
n170. The compiled list of filesharing clients from 1999-2002 includes: Abe's MP3
finder, Aimster (now named Madster), Ares, Audio-Galaxy, AudioGnome, BadBlue,
BearShare, Blubster, CuteMX.Com, DirectConnect, eDonkey, FileAngel, Filetopia,
File Navigator, File Rogue, FileSpree, Free Haven, Freenet, Frost, Gnotella,
Gnucleus, Gnutella 0.56, Gnutmeg, Grokster, Groove Network, Hotline
Communications, iMesh, iSwipe, Junge Monkey, KaZaA, KonSpire, Limewire,
Mactella, Mojo Nation, Morpheus, MyNapster, Myster, NapMX, Napster, Nutella,
Ohaha, OnSystem, OpenNap, Phex, Phosphor, Pointera, Publius, Qtella, Qube,
Scour.com, Shareaza, Spinfrenzy, SongSpy, Taxee, Voodoo Vision, WinMX, Xolox.
Of course, many of these are clients for the same networks, as in the multiple
GnutellaNet and FastTrack clients.
n171. In focusing on the major developments, some might argue that I have
shortchanged programs like Scour.com and Aimster in the process.
n172. Kan, supra note 125.
n173. Gnutella was released in March of 2000. It was invented by Justin Frankel and
Tom Pepper, two programmers working for AOL's Nullsoft. Id. at 95. AOL quashed
the effort, but Gnutella's cause was picked up by the open-source movement. See
Andy Oram, Gnutella and Freenet Represent True Technological Innovation, at
http://www.oreillynet.com/lpt/a/208 (May 5, 2000) (on file with the Virginia
Law Review Association). Gnutella's full development followed (and still
follows) the non-linear path characteristic of open-source code. Id.
n174. See Kan, supra note 125, at 97-98.
n175. From Strategic Vision to a 10-Point Tactical Plan: A followup to The
Revolution Will Be Webcast (working paper), at
http://economicdemocracy.org/counterspinner. html (last visited Mar. 20, 2003)
(on file with the Virginia Law Review Association).
n176. This characteristic was even more evident in another network, FreeNet, aimed
at achieving the goals of the World Wide Web (storage of information) in a
decentralized, purely P2P fashion. A discussion of the methods used by FreeNet
can be found in Ian Clarke et al., Freenet: A Distributed Anonymous Information
Storage and Retrieval System, in Designing Privacy Enhancing Technologies:
International Workshop on Design Issues in Anonymity and Unobservability 46
(Hannes Federrath ed., 2001); see also Adam Langley, Freenet, in Peer-to-Peer:
Harnessing the Benefits of a Disruptive Technology, supra note 123, at 123 (describing the development and structure of Freenet).
n177. It is true that Morpheus switched to Gnutella after it was sued as one of the
three FastTrack companies, but no Gnutella developer qua Gnutella developer has
n178. See Steve McCannell, The Second Coming of Gnutella, WebReview (Mar. 2, 2000),
at http://www.webreview.com/mmedia/2001/03<uscore>02<uscore>01.shtml (on file with the Virginia Law Review Association) (detailing reasons
for the crash). Interestingly, the crash came directly in the wake of the
Napster injunction as thousands of Napster users attempted to migrate to
Gnutella. Id. The crash provided a dramatic demonstration of the difference in
scaling capabilities between the two approaches.
n179. See id; Matei Ripeanu, Peer-to-Peer Architecture Case Study: Gnutella Network,
at http://www.cs.uchicago.edu/files/tr<uscore>authentic/TR-2001-26.pdf (last visited Mar. 20, 2003) (on file with the
Virginia Law Review Association) (describing Gnutella's scaling problems);
Ritter, supra note 156; See also Hong, supra note 123, at 206-07 (summarizing a
now unavailable Clip2 study of the crash). A network engineer would diagnose
the problem as follows: Gnutella's layer 7 topology did not map carefully to
the physical network, meaning the network failed to make use of available
n180. Gene Kan, for example, argued that Gnutella would scale perfectly well, and
that the 2000 crash was caused by an inappropriate add-on technology. Kan,
supra note 125, at 109-17.
n181. Eytan Adar
& Bernardo A. Huberman, Free Riding on Gnutella, 5 First Monday 10 (Oct. 2000),
at http://www.firstmonday.dk/issues/issue5<uscore>10/adar/index.html (on file with the Virginia Law Review Association).
n182. See Hong, supra note 123, at 206-07; McCannell, supra note 178; Ripeanu, supra
n183. Names vary: BearShare groups users into
"leafs." See BearShare, Gnutella Good Citizen Tips, at
http://www.bearshare.com/help/citizen.htm (last visited Feb. 9, 2003) (on file
with the Virginia Law Review Association).
n184. Some of the more major programs from this period not discussed here include
Audio-Galaxy, Aimster (now named Madster), WinMX, iMesh, and OpenNAP.
n185. This number is based on Active Users Statistics, at http://www.slyck.com/
index.php (July 22-Aug. 8, 2002) (on file with the Virginia Law Review
n186. Kevin Maney, Fight over digital music filesharing keeps getting weirder, USA
Today, Sept. 25, 2002, at B3.
n187. It has been reverse-engineered by several groups, who create clients that
access the FastTrack network without permission. A prominent example is giFT
(giFT isn't FastTrack). See generally What is the giFT project?, at
http://gift.sourceforge.net/ docs.php?document=whatis.html (Sept. 14, 2002) (on
file with the Virginia Law Review Association) (describing giFT and OpenFT).
n188. See Benny Evangelista, Morpheus software morphing: Maker of filesharing
program to put limits on MP3 swapping, S.F. Chron., Mar. 14, 2002, at B1.
Morpheus later reverted to Gnutella, after licensing disagreements with KaZaA.
n189. See Amy Harmon, Music Industry in Global Fight on Web Copies, N.Y. Times, Oct.
7, 2002, at A1.
n190. See, e.g., Morpheus 2.0 - Revisited, Slyck, at
http://www.slyck.com/newsaug2002/ 081902b.html (Aug. 19, 2002) (on file with
the Virginia Law Review Association) (discussing loss of performance when
Morpheus switched from FastTrack to Gnutella network).
n191. See supra text accompanying notes 172-82.
n192. Nathaniel S. Good
& Aaron Krekelberg, Usability and privacy: a study of Kazaa P2P file-sharing, HP
Laboratories, at http://www.hpl.hp.com/techreports/2002/HPL-2002-163.pdf (June
5, 2002) (on file with the Virginia Law Review Association).
n194. See Harmon, supra note 189, at A1.
n195. See id.
n196. Kelly Truelove, Gnutella: Alive, Well, and Changing Fast, OpenP2P.com, at
http://www.openp2p.com/pub/a/p2p/2001/01/25/truelove0101.html?page=2 (Jan. 25,
2001) (on file with the Virginia Law Review Association).
n197. Namely, the clients Gnute and Gnutella.it allowed users simply to use
GnutellaNet to download files. See id.
n198. Gnutella's Decline, Slyck, at http://www.slyck.com/newsjuly2002/071702a.html
(July 17, 2002) (on file with the Virginia Law Review Association).
Complaint for Damages and Injunctive Relief for Copyright Infringement at 2, 8, Metro-Goldwyn-Mayer Studios v. Grokster, 2003 WL 186657 (C.D. Cal. Jan. 9, 2003) (No. Civ.01-08541) (seeking damages and injunctive
copyright infringement), available at http://www.mpaa.org/Press/KaZaA<uscore>Complaint.htm (last visited Feb. 9, 2003) (on file with the Virginia Law Review
n202. Id. at 2.
n203. Id. (seeking damages and injunctive relief for
n204. Id. at 2-3.
n205. Id. at 10.
n206. See Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd.,
<uscore><uscore>F. Supp. 2d<uscore><uscore>,
2003 WL 1989129 (C.D. Cal. Apr. 25, 2003). Default judgment was entered against a shell
company named KaZaA BV, holding no relevant assets, who declined to defend the
lawsuit. See id. at 4 n.2. Sharman Networks, the current operator of the KaZaA
system, was not a party to the motions. See id. at 6.
n207. Id. at 19.
n208. Id. at 23-24.
n209. Id. at 27.
n211. See Wendy Gordon, Fair Use as Market Failure: A Structural and Economic
Analysis of the Betamax Case and its Predecessors,
82 Colum. L. Rev. 1600 (1982) (describing fair use as a mechanism for correcting market failure).
n212. See id.; see also Alfred C. Yen, A Preliminary Economic Analysis of Napster:
Copyright Liability, and the Possibility Of Coasean Bargaining,
26 U. Dayton L. Rev. 247, 260-63 (2001) (giving the basic economic argument that Napster be held liable and suggesting
n213. For studies supporting this position, see Chipman, supra note 98; Lahey, supra
209 U.S. 1 (1908).
Teleprompter Corp. v. Columbia Broad. Sys., Inc., 415 U.S. 394 (1974);
Fortnightly Corp. v. United Artists, 392 U.S. 390 (1968).
17 U.S.C. 111, 115 (cable and mechanical compulsory licenses).
<uscore><uscore>F. Supp. 2d<uscore><uscore> at 33.
n218. See Bill Holland, Tougher RIAA gives pirates chase but still running uphill,
BillBoard, Mar. 14, 1992, available at
1992 WL 11645300.
n219. See Bill Holland, Performers Give Testimony Before Judges And Lawmakers,
BillBoard, Sept. 22, 2001, available at
2001 WL 24692410.
17 U.S.C. 1201 (1998).
17 U.S.C. 512 (1998).
n222. No Electronic Theft (NET) Act, Pub. L. No. 105-147, 111 Stat. 2678 (1997)
(codified as amended at
17 U.S.C. 101-803 (2000)).
17 U.S.C. 1201 (1998).
n224. A more recent example in the same vein is the well-known
"Hollings Bill." Consumer Broadband and Digital Television Promotion Act, S. 2048, 107th Cong.
(2002). The bill would require all
"digital media devices" to include copy protection technology in their designs. Id. 5(a). It can be
otherwise described as an effort to place the burden of preventing
copyright infringement on electronics manufacturers.
n225. It is worth briefly noting, however, that there is a problem with the DMCA
strategy as a response to filesharing. Unless completely successful in blocking
access, digital protection schemes can simply make legal, protected products
even less attractive than the competitors available through filesharing
n226. See, e.g., Lessig, supra note 149, at 177-99; see also Raymond Ku, The
Creative Destruction Of
Copyright: Napster And The New Economics Of Digital Technology,
69 U. Chi. L. Rev. 263, 275-76 (2002) (describing digital rights management systems).
n227. See Lessig, supra note 149, at 177-99.
n228. Cf. Ku, supra note 226, at 275-76 (arguing against
copyright protection for digital works because the economics of digital technology
undercuts prior assumptions about the efficacy of a private property regime for
n229. Alex Pham, Tactics Toughen on Music Piracy, L.A. Times, Aug. 21, 2002, at C1;
Alex Pham, Technology RIAA Drops Suit Targeting Piracy Site, L.A. Times, Aug.
22, 2002, at C5.
In re Verizon Internet Services, No. Civ.A.02-MS-0323, 2003 WL 141147 (D.D.C. Jan. 21, 2003).
17 U.S.C. 101, 506 (2000).
n232. Id. 101.
n233. See Benny Evangelista, Casting a wider net: Recording industry may target
individuals in online piracy battles, S.F. Chron., Aug. 22, 2002, at E1,
2002 WL 4028698 (recounting efforts to have the Justice Department enforce the criminal side
n234. See Lisa M. Bowman, File-traders in the crosshairs, CNET News, at
http://news.com.com/2100-1023-943881.html (July 15, 2002) (on file with the
Virginia Law Review Association) (reporting that the recording industry is
considering a program of lawsuits against end-users).
n235. See discussion supra Section II.E.
n236. See Soundbyting Home Page, at http://www.soundbyting.com/html/who<uscore>we<uscore>are/ are<uscore>index.html (last visited July 24, 2002).
n237. See Matt Bai, Hating Hilary, Wired 11.02 (Feb. 2003), at http://www.wired.com/
wired/archive/11.02/hating<uscore>pr.html (on file with the Virginia Law Review Association).
n238. See supra text accompanying note 130.
n239. For an entertaining account of how anonymity can be used against peer
networks, see Doug Lichtman
& David Jacobson, Anonymity a double-edged sword for pirates on-line, Chi.
Trib., Apr. 13, 2000, at 25.
n240. For example, the industry might employ agents to bombard or flood important
P2P nodes with an overload of traffic. This technique is usually described as a
"denial of service" attack. Problematically, such conduct is probably illegal under the laws of
many states. See Neal Katyal, Criminal Law in Cyberspace,
149 U. Penn. L. Rev. 1003, 1017-19 (2001) (collecting state computer crime statutes).
n241. See Michael Adler, Note, Cyberspace, General Searches, and Digital Contraband:
The Fourth Amendment and the Net-Wide Search,
105 Yale L.J. 1093, 1098-1100 (1996) (presenting the hypothetical of a program that roamed the net searching for
n242. See generally Todd Woody, The Race to Kill Kazaa, Wired 11.02 (Feb. 2003), at
http://www.wired.com./wired/archive/11.02/kazaa-pr.html (on file with the
Virginia Law Review Association) (surveying methods of technological
n243. Press Release, Representative Howard Berman, Berman Announces Legislation To
Foil Peer To Peer Piracy, at http://www.house.gov/berman/pr062502.htm (June 25,
2002) (on file with the Virginia Law Review Association).
n244. To amend Title 17, United States Code, to limit the liability of
copyright owners for protecting their works on peer-to-peer networks: Hearing on H.R.
5211 Before the House, 107th Cong. (2002) (statement of Rep. Howard Berman).
n245. Press Release, supra note 243.
n246. Richard Menta, RIAA and MPAA sue Morpheus, Grokster and KaZaa,
MP3newswire.net, at http://www.mp3newswire.net/stories/2001/sue<uscore>morpheus.html (Oct. 3, 2001) (on file with the Virginia Law Review
copyright does indeed encourage creative expression is a question beyond the scope of
this study of response. I therefore do not address the position held by some
copyright retards the creation of content. For examples of such positions see, e.g.,
Eben Moglen, Liberation Musicology, The Nation, Mar. 12, 2001, at 5; Mark S.
Nadel, Questioning The Economic Justification For (and Thus Constitutionality
Copyright Law's Prohibition Against Unauthorized Copying: 106 (unpublished manuscript),
at http://www.aei.brookings.org/admin/pdffiles/Nadel.pdf (Jan. 2003) (on file
with the Virginia Law Review Association); cf. Stephen Breyer, The Uneasy Case
Copyright: A Study of
Copyright in Books, Photocopies, and Computer Programs,
84 Harv. L. Rev. 281 (1970) (questioning whether granting
copyrights in books and computer programs is really necessary to provide incentives to
create and publish them).
n248. The question of who coined the term
"digital divide" remains something of a mystery. See Sharon Foster
& Adrianna Borkowski, Who Coined the Term? Origin of
"Digital Divide' Escapes Even the Experts, at http://www1.soc.american.edu/
students/ij/co<uscore>3/digitaldivide/history.htm (last visited Feb. 8, 2003) (on file with the
Virginia Law Review Association).
n249. See Nat'l Telecommunications and Info. Admin., Falling Through The Net II: New
Data On The Digital Divide 4 (July 1998).
n251. See Litman, supra note 103, at 48-63 (discussing the negotiations behind the
1976 Act); see also Jessica Litman,
Copyright Legislation and Technological Change,
68 Or. L. Rev. 275, 279-82 (1989) (same).
n252. Litman, supra note 103, at 52.
n253. The creation of the protocols does represent a collective action problem if
they are open (free for anyone to develop around). Interestingly, the major
open peer filesharing protocol, Gnutella, was produced by an open-source
programming effort. Open-source programming, motivated by technological
challenges, has proven its ability to create public goods. See Peter Kollock,
The economies of online cooperation: gifts and public goods in cyberspace, in
Communities in Cyberspace 220, 230-35 (Marc A. Smith
& Peter Kollock eds., 1999) (examining the creation of the Linux operating
system as an example of a public good created online despite potential
collective action problems).
n254. See Strahilevitz, supra note 12, at 547-71.
n255. Karl Taro Greenfeld, Meet the Napster, Time, Oct. 2, 2000, at 60.
n256. See John Borland, Rocky financial road awaits file swappers, CNET News.com, at
http:news.com.com/2102-1023-273245.html (Sept. 21, 2001) (on file with the
Virginia Law Review Association) (describing the failure of file swapping
programs to make any money).
n257. WinMX Interview with Kevin Hearn, President, Front Code Technologies, Slyck,
at http://www.slyck.com/newsjuly2002/071002c.html (July 10, 2002) (on file with
the Virginia Law Review Association).
n258. See Erick Schonfeld, The True Cost of Free Music, Business 2.0 (May 24, 2002),
at http://www.business2.com/articles/web/print/0,1650,40816,00.html (on file
with the Virginia Law Review Association) (describing KaZaA's business model).
n259. This strategy is referred to as
"spyware" because it pretends to be performing one function while actually performing
another. Spyware also sometimes refers to programs that collect and store
information about the user.
n261. For example, BearShare, at www.bearshare.com, already sells a
n262. Opinions on what motivates open-source programmers vary. See, e.g., Kollock,
supra note 253, at 220-39 (describing a gift model); Eben Moglen, Anarchism
Free Software and the Death of
Copyright, 4 First Monday 8, at http://www.firstmonday.dk/issues/issue4<uscore>8/moglen/index.html (Aug. 2, 1999) (on file with the Virginia Law Review
Association) (arguing that economics cannot explain why people write
n263. See John Perry Barlow, The Next Economy of Ideas, Wired 8.10 (Oct. 2000).
Prepared: July 3, 2003 - 5:02:29 PM
Edited and Updated, July 4, 2003
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