The iPod Tax: Why the Digital Copyright System of American Law Professors' Dreams Failed in Japan

Abstract

It's an iPod world, and we just live in it. Or so goes the not-necessarily-unjustified hype. But with the benefits of technological change can come the cost of legal conflict. In particular, a sizeable literature has sprung up focused on the risks that Internet filesharing and digital copying pose for the copyright holders of the recording and film industries.

A number of prominent American law professors have endorsed the notion of a tax on digital recording and music filesharing - call it an "iPod tax" - with the proceeds to be paid into a fund. A clearinghouse representing rights holders would monitor which and how often works were downloaded, and perhaps, used. The clearinghouse would then use a formula to translate this data into a gauge of the relative popularity of musical works. Finally, the clearinghouse would divvy up the iPod tax revenues to the individual rightsholders. The clearinghouse approach addresses important concerns. On the one hand, it directly addresses the so-called "piracy" concerns of the recording and film industries. On the other hand, it creates clear legitimacy for users' noncommercial recording. In doing so, the clearinghouse proposals allow users to freely choose among competing content.

In fact, Japan has actually run a very similar system since the early days of digital recording in 1993. The Japanese system imposes a tax on recording media such as blank CDs and DVDs that consumers can use to engage in private home recording. That revenue is then split among copyright holders in the recording and film industries based on measures of the popularity of their works. Just as the American proposals come as a response to widespread Internet filesharing and unauthorized use, the Japanese system was born in the wake of a burgeoning CD rental industry that threatened recording industry coffers. But after a dozen years of experience, faced with the iPod and similar computer memory-based devices, the Japanese decided not to extend their system beyond blank CDs and DVDs to hard-disk based devices, cellphones and more. On the advice of a committee dominated by academics, especially law professors, the Japanese government stopped their digital recording media tax from morphing into an iPod tax.

This Article looks at the nature of the proposed American clearinghouse model, and compares it with that of the existing system in Japan. It focuses on how Japanese experts decided that regulatory failures merited killing an extension of their existing system to include a proposed iPod tax. In particular, the Article draws on the Japanese debate to propose a "friendly amendment" to structure an American clearinghouse as a user-owned cooperative to reduce the chances of repeating Japan's mistakes.

Keywords: copyright, Japan, DRM