Before the ubiquity of the Internet, technology prognosticators spoke longingly of “digital convergence”—a future in which computers would be as likely to play music, record a television show or place a phone call as they were to balance a checkbook or print a letter.

To a surprising extent, their predictions are coming true. But while technologists may have been well prepared, lawmakers seem to have been caught by surprise. Statutes and legal rulings simply did not anticipate the scope or speed of this sea change, leaving widespread uncertainty about how the law treats digital information.

Nowhere is this uncertainty more evident than in the entertainment industry. Widespread broadband Internet access, recordable CDs and DVDs and increasingly powerful PCs have given the public the tools necessary to copy and distribute their music and movie libraries with pristine perfection. But confusion about the legality of doing so abounds, with industry executives taking every opportunity to denounce such activities as illegal.

Rules regarding the right to copy songs and movies may seem complex and inconsistent. But although the law in this area is still developing, there are some answers to be had. They usually derive from one of three sources:

• The “fair use” doctrine ensconced in the federal Copyright Act
  
  
• The Digital Millennium Copyright Act of 1998 (DMCA)
  
  
• The Audio Home Recording Act of 1992 (AHRA)

The source that provides the most direct guidance is also the narrowest in reach: the AHRA. It was enacted in 1992 in response to the development of the digital audiotape (DAT), a media that, for the first time, permitted consumers to make exact digital audio recordings.

The AHRA was intended as a compromise between those who wanted to codify a consumer's right to home taping of music and those who wanted to ensure that the advent of perfect digital copies did not bring about industry-crippling piracy. The Act offers consumers and digital audio equipment manufacturers immunity from suit for noncommercial copying of music, and it requires that digital audio recording devices incorporate technical measures to permit only “first generation” copies of digital music files. In other words, the devices must not allow copies of copies to be made.

The AHRA, which preceded the commercialization of the Internet and the recordable CD, failed to provide a lasting solution to the digital recording quandary. Its limitations became evident in a 1999 case challenging the legality of the first portable MP3 player.

Examining definitional language in the Act, the Ninth Circuit Court of Appeals in RIAA v. Diamond Multimedia Systems, Inc. concluded that the AHRA did not apply to music stored on computer hard drives because the “primary purpose” of computers was not to make digital audio recordings and the hard drives contained computer programs in addition to music files. As a result, the AHRA does not legally require computers to incorporate circuitry preventing them from making additional copies of music stored on their hard drives.

By extension, individuals who use computers to duplicate digital music files presumably do not enjoy the AHRA's immunity from suit. Because virtually all copies of digital music today have been “ripped” or downloaded onto computer hard drives, the AHRA has been left with little role to play in today's digital tumult.

While the AHRA has provided little return for the music industry, the movie industry has had more luck in its backing of the DMCA. Controversial since its inception, a key aspect of the DMCA restricts the use and distribution of devices designed to bypass encryption schemes or other “technological means” that limit access to copyrighted content.

Most commercial DVDs employ an encryption scheme known as CSS (Content Scrambling System), which is intended to prevent the movies on the discs from being copied or played on unauthorized machines. The encryption scheme is weak and was cracked by a Norwegian teenager in 1999. Movie studios argued that although the teen's “DeCSS” decryption software made it technically possible to unscramble DVDs, using it (even to simply watch, and not copy, a DVD) was illegal under the DMCA.

In 2000, a New York judge sitting in the case of Universal City Studios, Inc. v. Reimerdes bought the argument and enjoined a Web site from posting the decryption software and making it available to the public. Reimerdes and decisions following it have effectively kept the tools to decrypt DVDs out of the hands of all but the most technically savvy computer users.

The third source of guidance, embodied in the doctrine of “fair use,” is perhaps the least clear but most sweeping. It is this doctrine that says that some degree of unauthorized copying, in the appropriate circumstances, is permissible under federal copyright law.

Fair use exists in both commercial and noncommercial contexts, although it is given much more latitude in the latter than the former. In the entertainment arena, fair use took a huge leap forward in 1984 when the Supreme Court reached its decision in Sony Corporation of America v. Universal City Studios, Inc. The court held that the public's use of VCRs to tape television broadcasts qualified as fair use, because it amounted to no more than “time shifting” the content to a period more convenient for the viewer.

In Diamond Multimedia, the Ninth Circuit took that a step further, suggesting that the ripping of CDs and the transfer of the resulting music files to a portable MP3 player would qualify as fair use because it amounted to mere “space shifting.”

Fair use has its limits, however, and courts have been loath to allow large-scale copying and sharing of copyrighted content on the Internet. In one early case, UMG Recordings, Inc. v. MP3.Com, Inc., a federal district court judge in New York rejected a “fair use” argument from a company that had purchased thousands of music CDs and copied them to its servers without permission.

The idea was to “stream” the songs over the Internet to users who had previously “proved” they owned the music in question by registering their CDs with the defendant's system. The court dismissed as irrelevant the argument that the copying was acceptable because the songs were heard only by individuals who had already purchased them.

Similarly, in two series of judicial opinions addressing the legality of online file sharing services—the Napster decisions and the Grokster decisions—the courts had little trouble concluding that the anonymous sharing of music between individuals using those systems constituted illegal infringement. Those cases instead turned on whether the defendant companies could be held responsible for their users' infringing behavior.

In the A&M Records, Inc. v. Napster, Inc. line of decisions, the court concluded that the company's involvement was sufficiently direct to make the company liable. While Napster did not actually store or copy the music files being illegally traded, the company's servers did maintain and manage the index of available songs and provided a central hub to which all users connected. This was an important factor in the court's decision to essentially shut the business down.

In contrast, the court in MGM Studios, Inc. v. Grokster, Ltd. found that the defendants were more removed from the sharing and trading process. Consequently, the court concluded that the defendants were not responsible for infringing activity that took place on their networks.

A picture is finally beginning to emerge, although it is not yet in focus. The entertainment industry is looking to both technology and the law to limit the bite that piracy takes out of its bottom line.

For protected content (such as CSS-scrambled DVDs and copy-protected CDs), the DMCA provides a strong club for copyright owners to limit unauthorized copying—even in a noncommercial setting. The music industry is still struggling to find a copy-protection technique compatible with the millions of CD players already in the hands of consumers, however. That leaves music largely unprotected by the DMCA and open to questions of fair use.

While there may be support for the proposition that some private duplication of music will qualify as “fair use” (such as taping a CD to permit it to be played in a car's cassette player, or creating a “mix” of songs already owned by the consumer), it likely will be up to the courts to define the limits of these activities.