Commentary: Sure, Protect Copyrights But Not With A Tax

French Cultural Minister Catherine Tasca knows what it feels like to step in a hornet's nest. On Jan. 15, she unveiled a proposal to slap a fee on PC hard drives and other electronic memory to recover artistic royalties lost through unauthorized digital copying.

Organizations representing musicians, writers, and artists loved the plan, but it evaporated the next day under a storm of political pressure. Prime Minister Lionel Jospin was infuriated by the idea, which would have raised PC prices and potentially undermined his efforts to promote technology in France. His country already lags behind other major European powers in PC and Internet penetration.

And so the scheme died. End of story? Hardly. Europeans are still wrestling with the best way to protect intellectual property rights from digital thievery. Just like their counterparts in the U.S., Euro-teens are merrily swapping copies of recorded music through Napster, downloading songs onto portable audio players like the Diamond Rio, and scanning copyrighted photos--all with never a worry about paying royalties to the creators whose work they swipe. Forrester Research figures such piracy could cost music publishers alone more than $3 billion in forfeited profits worldwide by 2005.

ROYALTY FUND. European authorities want to recover some of these lost profits. In fact, part of Tasca's plan has already taken effect. As of Jan. 22, France imposes a surcharge ranging from 52 cents to 69 cents every time a piece of "virgin" digital recording media--recordable CDs, minidisks, etc.--is sold. The proceeds go into a royalty fund for artists. A half-dozen other European countries, as well as the U.S., charge such levies, too. The thinking is that most blank disks will end up storing the latest pirated copy of Britney Spears or Limp Bizkit. So why not impose a fee?

Tasca's more radical proposal of a surcharge on PC storage hasn't gone away either. Over the vigorous objection of PC manufacturers, German intellectual property rights activists are pushing for a royalty fee on PCs that would add as much as $48 to their price. The Danes, too, are close to implementing a fee on hard drives similar to Tasca's plan. The drawback of such schemes is that many PC buyers are filling up their hard drives with digital snapshots of their vacations, not songs filched from EMI.

Yet Tasca deserves some credit. She was trying, however crudely, to address the looming erosion of royalty payments as the world moves away from analog tapes to far more easily copied digital media. "Without remuneration for artiststhere are neither musical works nor images," Tasca proclaimed.

The real problem with her proposal is that it was backward-looking. The answer to today's piracy problem doesn't lie in complex, bureaucratic royalty-recovery programs but in better, smarter technology. Digital content, by its very nature, can be identified and protected using technologies such as digital tags or watermarks. Rather than forcing all users of PCs and other digital devices to kick royalties back to artists, industry and governments should embrace technologies that effectively protect content while charging consumers for precisely what they use.

Such techniques will become even more essential as high-speed broadband communications enter wider use. With broadband, a tax on PC storage could be rendered meaningless, given that users will be able to receive streaming content without ever saving it on their own machines. A technique that meters actual use of copyrighted material would be far more preferable, assuming that privacy concerns are addressed.

IBM, for instance, unveiled on Jan. 22 a new software system that lets people share--and pay for--legal copies of digital content. Major record companies are evaluating the system, which would let them encode sharing and payment "policies" into the content itself. Ultimately, the burden of monitoring consumption should probably fall on the people who serve it up over the Net--whether they're charging pay-as-you-go fees, or a flat "subscription" rate like the scheme worked out between Napster Inc. and German publisher giant Bertelsmann.

Tasca also hurt her case by acting unilaterally. The ubiquity of the global Internet means that no country can effect a meaningful solution to copyright protection in isolation. Tasca's intentions were noble, but in the name of protecting artists, she stood to damage consumers. A more technically sophisticated and internationally sanctioned solution could protect them both.

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