Intellectual Property Use Fee (IPUF); KaZaA takes the offensive

KaZaA's legal representation in DC has sent href="http://www.grouter.net/ipuf/BidenReportLetterBA.htm">a strongly
worded letter to Joseph Biden, the Chairman of the Senate Foreign
Relations Committee, who released a report titled href="http://www.senate.gov/~biden/IPREPORT.pdf">"Theft of American
Intellectual Property: Fighting Crime Abroad and at Home" on
February 12. Biden's report was not tame by any means -- by my count
there are 48 mentions of theft and 99 mentions of piracy in the 52
page document -- and neither is the letter sent by KaZaA's
representative. For example:

• "We must comment on the ironic incongruity of permitting the Recording Industry Association of America to testify at a hearing focused on the �Theft of American Intellectual Property�. After a decade of rampant consolidation, five major labels that collectively control nearly ninety percent of the industry�s output dominate the recording industry. Four of the five members of this recording industry oligopoly are not U.S. companies but subsidiaries of foreign-based multimedia conglomerates.[2] These companies, which dominate the RIAA�s policy-making process, routinely strip U.S recording artists of all copyrights in their creative output as a standard aspect of the industry contract."
• "The only technology cited as possibly displacing record sales is that of CD-R burners. [...] Yet the recording industry continues to litigate against file-sharing software companies and attempt to scapegoat them for its current difficulties (which are largely a result of its growing inefficiencies), as they apparently find small, underfunded technology startups more tempting litigation targets than the large information technology hardware and software firms that produce and actively market CD-R burners and related programs."
• "Were the courts to hold KaZaA guilty of contributory infringement the results could be devastating for the entire technology sector, as any and all could be the next victims of the content industry�s ongoing litigation witch hunt. "

The letter goes on to suggest a means to generate revenues for artists: "KaZaA is ready and willing to join with all other
parties who benefit from the availability of digital content in a
discussion of how to best compensate rights holders and creators. It is
our view that a combination of a new compulsory license with a broad-based
Intellectual Property Use Fee (IPUF) would be the best means of generating
substantial new revenues that help preserve the incentive goals of
copyright law."

This is an idea that has been making the rounds for a little while. I first heard it from Sergueie Osokine at the O'Reilly Peer-to-Peer and Web Services Conference, and he has developed it into a high level of detail in a paper titled A Quick Case for Intellectual Property Use Fee (IPUF). The idea is basically to have a surcharge on ISP accounts. He has two main points:

1. Collecting revenues for content shared via decentralized networks is a classic communal problem in need of a communal solution. Like street cleaning, where most people litter sometime and most people want clean streets, filesharing should be a universally shared cost and a universally shared good.


2. DRM that controls the spread of digital goods on a per-copy basis is impossible, but DRM that monitors the spread of digital goods is not. When monitoring fails the only damage is a slight misallocation of royalty payments; there is no incentive to evade the system and there is no requirement that the system work perfectly.

In the KaZaA letter, they support the IPUF idea as follows:

"

We
suggest that it is time for Congress to step in and halt the �whack-a-mole�
litigation excesses of the music and movie industries through new legislative initiatives that compel content availability, while establishing a compensation
scheme that requires a contribution from all the many industry sectors beyond
P2P software that benefit from content availability.

[snip]

The Audio Home Recording Act provides a model for the undertaking
that needs to be considered. That 1992 statute mandates a small
royalty on digital audio recorders and recording media, with the
proceeds of that levy redistributed to content creators. A similar
levy � an Intellectual Property Use Fee (IPUF) -- applied to a much
broader base of parties, could provide a significant new revenue
stream to copyright owners to compensate them for the inevitable
�leakage� resulting from Internet distribution.[31] We do not
minimize the difficulty. [...] Yet there is already ample precedent,
especially in the music realm, for the need for and workability of
such compulsory license and royalty schemes. We also realize that some
would prefer a market solution negotiated by private parties, yet the
content marketplace is already a landscape littered with content and
broadcasting oligopolies[...] Whatever the difficulties may be in
pursuing this concept, they are nothing compared to the present
practices of the content industries that are stifling innovation,
retarding the necessary rollout of broadband, and threatening the
innovative freedom of the information technology industry. "

As insane as it sounds, I think that this is a good idea. There are a lot -- a lot -- of problems with the details, but it's the only practical solution yet offered. It's simple, it's feasible, it avoids draconian regulation, it does provide a revenue stream for artists, it doesn't depend on the fiction of DRM, and it stops the game of whack-a-mole.