Tax charges to thwart illegal file trading?

An interesting debate stirred up recently between people who believe that a compulsory licensing system is a viable alternative to record company litigation against file traders and those who believes that such a tactic simply rewards legal bullying.

The main proponent of the licensing scheme is pundit William Fisher. Under the scheme, the creator of a recording would register their works with the U.S. Copyright Office and receive a unique file name that could allegedly be used to track transmission of the work around the Internet. The government would then tax devices and services used to access digital entertainment, especially ISPs. In Fisher’s scheme, CD burners, blank CDs, and MP3 players would also be taxed.

Fisher proposed the scheme as an alternative to the threat by the Recording Industry Association of America that it will soon file thousands of lawsuits against people who make large numbers of songs available on P2P networks.

Fisher notes that the decline in CD sales and falling record company revenue are only partly due to file trading. He further notes that the RIAA’s legal strategy has many perils. It will be expensive. It will be ineffective since many file traders use proxy servers, offshore P2P sites and encrypted file exchange. And, most importantly, it will further alienate the record industry’s target audience of music fans.

Fisher also endorses techniques, pioneered by American and European performing-rights organizations, in which government agencies estimate the frequency with which each song is downloaded and then have the song’s creators compensated in proportion to its popularity.

I appreciate Fisher’s optimism that such a system could help recast the current interpretation of copyright law and eliminate the ban on the “unauthorized” reproduction, distribution, public performance, adaptation, and encryption circumvention of published music recordings. I agree with him that his compulsory licensing scheme might well lower the cost of music and better compensate musicians who make their work available to the public.

But I think there are huge, and potentially insurmountable barriers to such a system technically, politically and ethically. It is technically difficult to accurately track a piece of music through the Internet and estimate how many times it has been downloaded. Even if such a tracking system could be set up and administered, it will likely be quickly disabled or bypassed, just like most digital rights management software. Then there is the issue of administrating such a system.

And let’s not forget the potential of political resistance from the recording industry, which contributes mightily to political reelection campaigns to make sure its sizable piece of the music distribution system is protected.

But perhaps the biggest problem with Fisher’s idea is that many people who use ISPs, CD burners, blank CDs, MP3 players, etc., aren’t trading copyrighted music and shouldn’t be financially punished for using the latest technology. ISPs may see this as a way to raise their rates, but device manufacturers will fight this proposal tooth and nail. Many people who have raised this point add that they don’t want their taxes subsidizing a recording industry, which they believe puts out poor quality, overpriced music. Raising taxes is never a popular proposal and it not a good strategy for ending the file trading war.