A new report by Associate Professor Michael A. Carrier of Rutgers University School of Law has shed light on some of the tactics employed by Big Music to hamper innovation, in the years following the demise of Napster.
With interviews with 31 leaders of some of the biggest names in the digital music industry, including former CEOs, VPs and founders of companies like Napster, Imeem, Real Networks, Gracenote, MP3Tunes, and even former RIAA CEO Hilary Rosen, professor Carrier has been able to show the systematic approach the music industry took to fight off innovation.
By selectively suing new start-ups, Big Music was able to bring almost a decade of chilling effect against innovation in the music industry. According to professor Carrier, a legal "Ponzi scheme" was developed whereby funds obtained from one successful lawsuit was used to sue other start-ups.
And by selectively selling licensing rights to start-ups, the music industry was able to cull those that were a threat to its business model, while profiting from others that were destined to fail. Those start-ups that had great ideas would be denied licensing rights due to their lack of traffic, but once traffic did arrive, labels would sue them for infringement. Instead, labels got "big, up-front fees" of "10, 20 million bucks" with start-ups that were clearly not going to make it, and as such, were no threat to the industry's outdated business models. Some demands were also designed specifically to "cripple the companies by demanding such advances and guarantees that they go belly up."
And even for the companies willing to play ball, willing to provide Big Music with a "blank check" in regards to any and all copyright enforcement techniques, companies were still refused licensing rights, and were told to either shut down or face lawsuits. Lawsuits that would often be aimed at individuals associated with the company, as opposed to the company itself, to intimidate innovators into submission.
Some of those interviewed by Carrier even speak of actual physical intimidation.
In his conclusion, Carrier finds that "Overaggressive copyright law and enforcement has substantially and adversely affected innovation" and that "Any discussion of the appropriate role of copyright law must consider the effects on innovation."