Testing Copyright Limits

Jennifer Urban, a law professor at USC, wanted to watch home movies of her 7-month-old nephew Peter in England, but nothing seemed to work. The videotapes and DVDs were in the wrong format, and the digital movie files were too big to e-mail.

Then Urban hit on a software program called Grouper. And in addition to movies of her nephew, Grouper offers Urban, who specializes in copyright law, insight into how technology is testing the boundaries of copyright in a digital age.

Like Kazaa and other popular file-sharing programs, Grouper allows Urban to copy movies and pictures of young Peter directly from her brother and sister-in-law’s computer without worrying about formats or oversized e-mail attachments. Unlike those global networks with millions of users, though, Grouper also lets Urban pick and choose with whom she shares online -- and sets a strict limit of 30 people per group.

“I’m very attracted to the privacy afforded by having a private group protected by encryption, particularly for sharing letters, family photos, movies, etc.,” Urban said. “This isn’t the case with other peer-to-peer networks.”

What makes Grouper troubling to some entertainment industry executives are the other things people can do with it. For example, the program lets people copy bootlegged Hollywood movies and listen to songs on one another’s computers, all without paying a dime to the studios, artists or songwriters.

Grouper Network Inc.’s founders, Josh Felser and Dave Samuel, say the built-in limits of their peer-to-peer software make it a poor substitute for more controversial file-sharing programs such as Kazaa and Grokster, which are hotbeds for piracy. In addition to limiting the size and accessibility of groups, they say, their program requires songs to be streamed -- that is, played through the Internet -- not downloaded.

Those limits may not add up to a legal service, argues Nicolas Firth, chairman of BMG Music Publishing Worldwide.

“I’m not so sure that I see a big distinction between this and, say, Grokster because you’re at 30 people,” Firth said. “Where are you going to draw the line at what constitutes unlicensed use of copyrighted music?”

Firth’s question has no clear answer yet, copyright experts say. Nor have the courts settled many issues surrounding streaming, such as whether streaming a song to a private group online violates a songwriter’s copyright over “public performance.”

This murkiness has opened the door for Internet entrepreneurs like Felser and Samuel to test the limits of copyrights.

Their innovation supplies a steady stream of new ways to access, use, store and copy digital goods, raising a succession of unanswered questions about how laws from the era of turntables and tape recorders apply to a digital age when virtually every device can connect to and share with other devices.

The Supreme Court is expected to clear up a few knotty issues later this year when it issues a ruling in the major studios and record companies’ lawsuit against Grokster and StreamCast Networks Inc., the company behind the Morpheus file-sharing software. Although that ruling probably will affect a variety of technologies that can be used both for legal copying and piracy, its most direct effect will be on file-sharing programs that enable people to download whatever they please from an unlimited number of anonymous people online.

Grouper, by contrast, is part of an emerging trend in the file-sharing world to let people swap digital goods with a limited audience of invited guests. Even if the justices rule against Grokster and StreamCast, their decision will not necessarily affect these more constrained approaches.

And Mill Valley, Calif.-based Grouper is just one of many new faces in the ever-evolving world of file sharing. Like water behind a dam, technological innovation continually flows through the cracks in the legal shield erected around copyrighted works.

Felser and Samuel’s previous effort had been San Francisco-based Spinner.com, a pioneering online radio outlet. The pair sold Spinner to America Online in 1999 for $320 million worth of AOL stock. They continued working for AOL for a year or two before dropping out of the high-tech world -- Felser said he thought about buying a carwash, and Samuel got into the high-end toilet business.

They got back into the software business a few years later, Felser said, because they kept running into problems similar to professor Urban’s.

The last straw came in 2003 when Felser returned to the Burning Man festival, an annual party for artists and others in the Nevada desert east of Reno.

“I couldn’t share all the video clips I had with my friends,” said Felser, an annual Burning Man pilgrim whose festival nickname is “the Frog Prince.”

The two set about developing a way to link people’s hard drives into private groups. The idea was to let people use the Internet to show off their homemade goods and music collections, just as they might do in their own homes.

The company’s free software lets people invite others into secure networks where each member can browse through the others’ computers and download files. Users are not anonymous, however; in compliance with a new California law, the software requires people to reveal a real e-mail address.

The company, funded by $3.5 million from private investors, plans to make money by selling premium versions of the software, presenting targeted advertisements and offering users the chance to buy images, music and other digital goods.

To deter piracy, Grouper does not let users search for items outside the groups they’ve been invited to join. And MP3 files may only be streamed, not downloaded, although the program cannot stop users from copying songs in some other formats.

“We try to limit the opportunities for people to use our technology in ways that might put us in legal hot water,” Felser said. He added that as the technological and legal environment changed, Grouper would do whatever it was required to do to stay on the right side of the law.

What the company does not want to do, he said, is monitor or control what users do with its software.

“It’s a friends’ network. We shouldn’t be involved at all in what they’re sharing,” he said.

A spin through the directory reveals a number of groups with seemingly innocuous titles along with several others with eyebrow-raising descriptions, including ones devoted to sharing episodes of the “Lost” and “Veronica Mars” TV programs and bootlegged DVDs.

“Any swapping of copyrighted materials on the Internet is a cause for concern,” said Kori Bernards, a spokeswoman for the Motion Picture Assn. of America. “We hope Grouper will adapt its program to prevent the unauthorized distribution of copyrighted material.”

A spokesman for the Recording Industry Assn. of America declined to comment.

One Grouper backer is Strauss Zelnick, a former top executive in the music and movie industries who now is a partner in Zelnick Media, a wide-ranging media and advertising company. To Zelnick, Grouper promotes “fair use” of media by limiting the size of groups and enabling streaming, not downloading, of MP3s.

“Fair use is beneficial to the record companies, I think,” Zelnick said. “Sampling is what music marketing is all about.”

Still, Zelnick said the same was not true for movies because one viewing might be enough for most people. “When you share a movie, you’ve kind of stolen the intellectual property,” he said.

Although the courts have yet to rule on the issue, several copyright-law experts said there was little difference legally between file-sharing with large groups or small ones.

“There’s no family-and-friends exception in copyright law,” said attorney Robert Schwartz of O’Melveny & Myers, a Los Angeles firm that has several entertainment-industry clients.

“Every time you make a copy, technically it’s a copyright law violation,” said attorney Mark Radcliffe, a copyright expert at DLA Piper Rudnick Gray Cary in Palo Alto. “But for a long time, there’s kind of been an unspoken agreement that if you make copies for your friends, people weren’t going to go after you. There’s been an argument that that might be a fair use in some way.... The whole issue of private copying is a big challenge to American copyright law.”

Urban of USC said Grouper appeared to have been designed to fit into several exemptions that copyright law provides for nonprofit or educational uses. “They really have mined the Copyright Act for all the opportunities for sharing digital files,” she said.

To Urban, though, the most compelling thing about Grouper has nothing to do with copyright infringement.

“I want to see my nephew crawl,” she said. “That’s non-profit-infringing.”