Right now, excerpts from newly published books are available at Amazon.com for potential on-line customers to read. Also, Towerrecords.com offers potential on-line customers opportunities to listen to portions of songs from the newest CD releases. If customers are considering an on-line purchase of Monsters, Inc., the number one animated film of the year, in DVD or video format they can go to Blockbuster.com, Amazon.com, Towerrecords.com, and Disney.com. However, potential on-line customers will only be able to see a trailer of Monsters, Inc. at Disney.com. At the three other web sites potential customers can see a poster-like image for Monsters, Inc. and read a synopsis about the film before purchasing the DVD or video. Why should there be any concern that there is not a trailer for Monsters, Inc. available at Blockbuster.com, Amazon.com or Towerrecords.com? Customers who want to see trailers for this new release before they make an on-line purchase of a video or DVD copy of Monsters, Inc. can simply go to Disney.com.

The scenario above shows signs of limiting the Internet's capacity to be an "environment of creativity" as a new method of distribution of feature length motion pictures.2 One company that prepares trailers for use in video rental and retail stores states that "streaming previews attract[s], hold[s the attention of] and sell[s to]" customers.3 The company credits its success to the fact that its clients "report that an average of 55 percent of their customers who watch [the company's previews rent or buy the movie, game or music."4 Even though both established motion picture studios and Internet video retailers stand to gain benefits from the Internet as a viable film exhibition venue, the revenue available from film distribution on the Internet is still an unknown quantity. The established motion picture industry wants to maintain a stable revenue base and market dominance. Video retailers and want to gain access to the Internet to promote their products to customers. More specifically, they want to expand their distribution scheme to take advantage of the new Internet market.

Because cyberspace is not real space, there are different barriers to innovation and product distribution.5 Lawrence Lessig, a cyberspace law scholar, points out that "new modes of distribution (including the removal of barriers to distribution) induce the creation of new markets for existing products."6 The Internet has the potential to be a viable new market for motion pictures. "[T]he most dramatic potential for [the Internet] affecting creativity is...the lowering of the transaction costs of distribution."7 This paper advocates the use of the Internet to provide a new market for the distribution of outstanding but virtually unknown motion pictures. Lower transaction costs of distribution dramatically increase opportunities for these types of films to be seen by an audience.

Before the possibility of film distribution on the Internet, outstanding, low-budget films were most likely to find audiences in one or more of four types of venues. These venues are more likely to value and foster an appreciation for the craft of film making than venues more focused on box office grosses. They include: cable and public television channels, art house theaters (mostly located in large cities like New York and Los Angeles), film festivals and movie rental and retail stores. The long-term goal of this paper is to raise awareness around the issue of possible anti-competitive distribution of motion picture trailers on the Internet. This awareness can increase the likelihood that venues like the four types listed above will be equipped to finance Internet distribution of outstanding, low-budget films utilizing broadband technology. (Broadband technology and streaming technology are described in more detail in Part II.)

This paper has three short-term goals. The first short-term goal is to describe how judicial interpretation of contracts can hinder the possibility of widespread film distribution via broadband technology. The specific types of contracts that are of interest here are those where the contracting parties are either major Hollywood studios and video rental and retail stores or major Hollywood studios and some other party that prepares trailers for use in video rental and retail stores. These contracts permit Hollywood studio-owned trailers to be shown in video rental and retail stores. However, these contracts do not mention the use of these same Hollywood studio-owned trailers by video rental and retail stores on their web sites.

Since over 70 percent of a motion picture's profits accrue after exhibition in theaters on average, video retailers have reason to use trailer streaming on their web sites. These pre-Internet contracts between video rental and retail stores and Hollywood studios were silent as to video rental and retail stores using the trailers they are permitted to use in their stores on their web sites. However, as a matter of policy they should be permitted to do so in the short-term to insure that Internet broadband technological development is not a luxury that only a few Hollywood studios can fund and profit from. The second short-term goal of the paper is to show how one Hollywood production studio used copyright law to persuade a California court to limit the use of its trailers on the Internet.

Finally, the third short-term goal is to propose an alternative legal approach where the parties mentioned above did not contemplate the use of trailers on-line when they contracted to allow the use of trailers in video rental and retail stores. Part IV proposes a temporary compulsory licensing scheme as a short-term solution for the distribution of trailers on the Internet. With this temporary solution film distribution that utilizes broadband technology -- which offer a better quality image than streaming technology -- may become a viable option for more film makers.

A. The "Environment of Creativity"8

In his book "The Future of Ideas", Lawrence Lessig calls for a revival of the concept of the Internet as it was originally conceived. He asserts that "the environment of creativity that the Internet produced [is] worth [protecting]."9 According to Lessig, those in economic power, such as Hollywood motion picture studios, want to maintain the Internet's present technological architecture as the status quo.10 He goes so far as to use the power of illusion through reference to the former Soviet Union; those in power who want to reign in control over the Internet are like the "old Soviets" - driven to maintain a quality of life and status quo which is profitable for them.11

 As an illustration of his idea, Lessig tells of AT&T's "gatekeeping"12 of streaming technology. Streaming is possible under the restricted bandwidth now commonly available.13 Streaming technology does not require that the viewer make file copies prior to viewing.14 Users of this technology can forego the time it takes to download files and simply "stream [the content they desire] and play it at the same time".15 "Cable companies have a conflict of interest [with Internet development] - they are restricting"16 cable streaming video services to their customers because they want to keep their cable customers tuned into cable television - with relatively know profits - rather than the Internet.17 Cable companies keep this conflict of interest from their customers by using the technological rationalization that the companies simply do not have the capacity "for all customers to use streaming video at the same time."18 An AT&T executive was "reported to have said,"19 "[W]e didn't spend $56 billion on a cable network to have the blood sucked out of our veins."20 This AT&T executive's point is that companies do not want to risk a potential revenue loss as a result of customers switching from cable television use to the new technology of cable Internet.

 The Internet, Lessig argues, must remain "free"21. He outlines his concept of "free" in detail. For the purpose of simplification, here consider free to mean that the Internet should be free from the use of "market power [on the part of Hollywood studios] to chill the willingness of innovators [like video rental and retail stores] to challenge" the status quo22. Here free does not mean that copyrighted content should be free of cost.23 It means that major Hollywood motion picture studios should not be allowed to engage in anti-competitive, on-line motion picture promotion to the detriment of video rental and retail stores who want to use their revenue to show motion pictures on the Internet via broadband technology.

B. Competing interests: Established motion picture studios and video rental and retail stores

 In February 2002, Michael Eisner, CEO of Disney, said that Monster's, Inc. was being unlawfully distributed on the Internet. The film was not released for sale in video or DVD format until September 2002. Disney.com has a prominent link to the Motion Picture Association of America.

  Some legal scholars, like Mark Torpoco, argue that the Motion Picture Association of America (MPAA) should expand its current leadership role in the motion picture industry into the Internet.24 Lessig says that "Hollywood has used [its fear of market fluctuations stemming from technological change] to control the development of new distribution technologies" like the VCR.25

    1. The Hollywood motion picture studios' position

 One of the responsibilities of Jack Valenti, the MPAA President, is to advocate copyright protection for film. Recently, his Congressional testimony and his press releases have emphasized his theory that "if you cannot protect what you own, you don't own anything".26 Since the revenues from copyright protected material contributes approximately 5 percent of the nation's GDP, since "it takes in more international revenues than automobiles and auto parts, than aircraft, and than agriculture," Valenti says that the copyright woes of the MPAA should be heeded by America. Valenti advocates that the industry should be closely protected by the Internet piracy laws. 27

In 1979, Valenti testified that "the VCR was the 'Boston Strangler' of the American film industry". 28 It is true that in the late 1970s, VCRs were considered to be a threat to the copyright protection of motion pictures and therefore revenue. Today, the film industry reported in 2000 that it gets approximately four-fifths of its revenue "from home video and pay-TV".29 As it turned out, Hollywood adapted to the technology of the VCR and even secures a major portion of profits from its legal, non-copyright infringing use.

    2. The position for the use of Hollywood studio trailers on video rental and retail stores' web sites

 In 1948, because of anti-trust concerns, motion picture distributors were required to spin off their affiliated motion picture theaters.30 The United States Supreme Court affirmed a New York district court's holding that pre-established licensing agreements between motion picture distributors and theaters violated anti-trust law.31 Motion picture licensing acts were created in an attempt to escape this monopoly as they were seen as "abusive film distribution practices".32 The U.S. Supreme Court found ongoing, exclusive relationships between motion picture distributors and theaters to be in violation of the Sherman Act in 1948. The exclusive, parent-subsidiary licensing relationships between major motion picture studios, like Disney, and their wholly owned distributors and home video exhibitors, like BVHE, are equally anti-competitive with respect to trailers on the Internet.

The limitations on video streaming of motion picture trailers are one example of how control is exercised over the Internet.33 As the market changes through fluctuations in supply and demand, if the Internet is free, as described in Part I, it is more likely to evolve through competition for consumer dollars in the market.34  Once broadband connections, compression formats and movie file sharing over the Internet becomes a greater possibility, it will become increasingly possible to view motion pictures by downloading feature length films through the Internet.

The leaders of the motion picture industry are working to make the improvements in broadband technology on the Internet a reality in order to show feature length films to customers. In a recent press release, Valenti stated that: "Broadband is an opportunity to make available to consumers another delivery system for transporting visual entertainment to their homes. This means more freedom of choices for consumers."35 Does it mean a more advanced, free Internet, or an Internet controlled by organizations like MPAA to maintain revenues via anti-competitive behavior? Video Pipeline claims to be the world's biggest provider of promotional trailers. Over 60 percent of Video Pipeline's previews are watched by users with broadband connections to the Internet.36

It is important to respond to the possibly anti-competitive behavior of Hollywood motion picture studios with respect to trailers on the Internet before the balance of control of broadband technological development for film gets even more disproportionate. One scholar, Alfred Yen, describes the recording industry's motivation in Napster as a desire to control the technology that distributes recorded music on the Internet even though the dispute was based on copyright violations.37 Napster enabled the use of peer-to-peer file sharing. Peer-to-peer file sharing allows strangers to share music even though no money is exchanged. Hollywood does have reason to protect against copyright infringement on the Internet. However, what established leaders in the recording industry and the Hollywood motion picture industry seem to fear most is the "removal of the middleman".38

Their first concern is related to Internet technology that enables blatant profiteering based on theft of copyrighted material. Media "digitization" permits perfect reproduction of their product. As soon as anything is digitized it is easier to make copies and to therefore violate copyrights in a way that cuts into revenue. Their second concern is that advances in the Internet and in the way consumers use the Internet allows artists to sell directly to consumers. This practice could permit artists to limit their need for affiliation with large production companies.

A. Lamb v. Starks

 In Lamb v. Starks39, the court denied the defendant's motion for summary judgement after finding that the promotional use of a trailer of a copyrighted film was not a fair use but rather an unauthorized use of a derivative work.40 Starks was the president of a company that made and sold a product that allowed television viewers to watch films in three dimensions when they wore special 3D glasses that Stark's company manufactured. The plaintiff, Lamb, produced the 1976 movie "The Starlets". Starks approached Lamb to request permission to use a trailer of the film for the promotions of his company's product but Lamb denied him the necessary permission.

Determined to use Lamb's film for promotion, Starks went ahead and used footage from Lamb's film anyway. Starks reformatted the trailer and showed it on his company's equipment. As a result, the court found that Starks copied a derivative work to which Lamb had exclusive rights. Under 17 U.S.C. § 106(2) copyright holders have exclusive rights to prepare derivative works based on their copyrighted work.41 Even though Lamb made no showing of damages as a result of Stark's use, the Lamb prevailed.

B. Video Pipeline, Inc. v. Buena Vista, Inc42

 The court in Video Pipeline v. Buena Vista granted Buena Vista's motion for a preliminary injunction. As a wholly-owned subsidiary of The Walt Disney Company (Disney), Buena Vista Home Entertainment (BVHE) had an exclusive license from its parent corporation to distribute Disney's products in the home video market.43 Video Pipeline was founded in 1985 with the purpose of compiling and organizing promotional previews (or trailers) at the request of entertainment companies that own motion picture copyrights and want to promote their motion pictures at home video retail and rental stores. Once organized by Video Pipeline, promotional preview videos containing the entertainment company trailers are sold to video retailers for display in their home video retail and rental stores. Almost every home video retail and rental store has previews playing at various strategic locations throughout their stores; according to Video Pipeline, most of these promotional displays are Video Pipeline's work products.

In 1988, Video Pipeline and BVHE entered into an agreement that gave Video Pipeline permission to use many of BVHE's trailers in Video Pipeline's promotional videos.44 Shortly after home video retailers began marketing videos on the Internet, Video Pipeline began marketing its promotional videos to on-line video retailers.45 Ironically, after Video Pipeline completed three years of successful marketing to 25 on-line video retailers, BVHE sought to enforce its rights as outlined in the 1988 agreement.46 In 2000, BVHE contacted Video Pipeline and informed them that they did not have BVHE's permission to use "studio-supplied trailers on the Internet".47

Video Pipeline filed suit seeking a declaratory judgement that "its use of promotional materials provided by BVHE [...] did not violate any of BVHE's rights under federal copyright law or any other law."48 BVHE countered by terminating the 1988 licensing agreement and demanding that Video Pipeline return all of BVHE's trailers.49 After complying with BVHE's demands, Video Pipeline made its own trailers of BVHE's copyrighted  motion pictures.50 Determined to continue to supply promotional trailers to Internet video retailers, Video Pipeline edited promotional trailers it previously sold to its retailer customers. These "new" trailers still contained BVHE copyrighted material.51
In its opinion, the court draws similarities between Lamb v. Starks and this case. Granted, both decisions dealt with motion picture promotion through the use of trailers and both decisions found that there was copyright infringement. Also, both Video Pipeline and Starks created their own trailers without the permission of the respective motion picture copyright holders. However, the factual distinction that is most important to this paper is the role that the Internet plays in Video Pipeline.

The decisions based on the same salient facts immediately following the 1996 Lamb v. Starks decision were based on a fitting fair use analysis. The Video Pipeline court's fair use analysis comes up short of showing harm to the potential market for BVHE's copyrighted works. Furthermore, the court indicates that Video Pipeline's use could even enhance the potential market for Buena Vista's copyrighted works.52 Decisions based on the same salient facts (precluding unauthorized creation of a derivative trailer from the studio-provided trailer) immediately following Video Pipeline will not be based on suitable copyright law unless there is a legislative adjustment that accounts for and promotes the development of the Internet. This adjustment in the law must foster the technological progress of the Internet so that the Internet's unique capabilities to further "the progress of science and the useful arts"53, the purpose of copyright law, may be better utilized.
A detailed description and analysis of the Video Pipeline court's application of the doctrine of fair use follows.

    1. Copyright Infringement: a two element standard

         a. Ownership of copyrighted material: 17 U.S.C. § 102

Proof of copyright infringement requires a two-part standard. First, "the plaintiff owns the copyrighted material"54. Video Pipeline did not contest that it Disney owns the copyright "of the full-length motion picture on which Video Pipeline's clip previews are based."55 Furthermore, Video Pipeline's licensor, BVHE, had "exclusive rights reserved as copyright owner under § 106 of the Copyright Act." 56

        b. Exclusive Rights in Copyrighted Works: 17 U.S.C. § 106

 To meet the second element of the two part copyright infringement standard the defendant must have "engaged in unauthorized 'copying' within the meaning of § 106 of the Copyright Act."57 Section 106 of the Copyright Act grants copyright owners five exclusive rights in copyrighted works. "The author [here BVHE in the place of Disney] of a copyrighted work holds a bundle of exclusive rights in the copyrighted work, among them the right to incorporate the work into derivative works."58
Under § 106(2), BVHE had exclusive rights to prepare derivative works based on the copyrighted motion pictures. BVHE argued that Video Pipeline's "reproduction of the video clips provided by BVHE infringe[d] all five of the exclusive rights"59 granted to copyright holders under § 106. The court finds that Video Pipeline "most likely"60 created a derivative work under § 106(2) when it created and distributed its own promotional trailers using Disney's copyrighted materials.

    2. 17 U.S.C. §107 - Fair Use

 Even if a defendant is found to have infringed a copyright, the allegedly infringing party may assert an affirmative fair use defense and still prevail in court. The fair use defense was originally a creation of the judiciary. It is now codified in § 107 of the Copyright Act. Congress' intent in codifying the fair use defense was to restate the judicial doctrine of fair use, "not to change, narrow, or enlarge it in any way."61 The fair use defense was created to serve as "an equitable rule of reason, which permits courts to avoid rigid application of the copyright statute when, on occasion, it would stifle the very creativity which [the copyright law] was designed to foster."62

 Section 107 of the Copyright Act states that the fair use limitations on exclusive copyright rights "shall include" four factors: (1) the purpose and character of use; (2) the nature of the copyrighted work; (3)  the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use on the potential market for the copyrighted work.63

    3. The court's application of the fair use factors in Video Pipeline v. Buena Vista

 First, the court considers "the purpose and the character of the use" of Video Pipeline. The court states that while the first fair use factor can weigh in favor of the alleged infringer even if the user's "sole motive of the use is monetary gain".64 However, since the Video Pipeline's purpose in making and using the video previews was "to promote video sales and rentals for profit",65 the court finds that the first fair use factor weighs against Video Pipeline.

 The court quickly dispenses with the second factor: nature of the copyrighted work. "The law generally recognizes a greater need to disseminate factual works than works of fiction or fantasy."66 Since the court is more often willing to weigh the second factor in the alleged infringers favor when the copyrighted material used is factual rather than fictional, and since Video Pipeline used Disney's copyrighted fictional works, the court finds that the second factor also weighs against Video Pipeline.

 The third factor considers whether the amount and substantiality of the portion of the copyrighted material used weighs more in favor of the copyright holder or the alleged infringer. If the "heart of the work" is used, no matter how small the portion of the copyrighted work used, the third factor will not weigh in favor of the alleged infringer.67 The court says that in this case, "the clip previews' quantitative aspect must be viewed in conjunction with its qualitative value".68

The court goes on to compares the facts of Lamb with this case when considering whether the substantiality of the portion of the copyrighted material used by Video Pipeline weighs for or against Video Pipeline. For example, the court states that the scenes used by Video Pipeline were "used to provide the potential customer with some idea of the plot of each motion picture, its overall tone, and a glimpse of the leading characters".69 The court states that even though the amount of the copyrighted film used by Video Pipeline was only a matter of seconds when compared with the copyrighted work as a whole, from a qualitative standpoint Video Pipeline's "reliance on the expressive value" of  "providing a description of the copyrighted motion pictures to potential customers" weighed against Video Pipeline.70

The court finds that the fourth factor the "effect of the use on the potential market for the copyrighted work" weighs neither for nor against Video Pipeline. The court says that there is truth to both BVHE and Video Pipelines arguments. On the one hand, BVHE has the exclusive right (but for Disney) to determine the use of the copyrighted motion pictures. "On the other hand, the market for the copyrighted films may well be enhanced by Video Pipeline's clip previews, because they tend to promote the films to a broadened market of potential customers."71

In summary of its consideration of these four fair use factors, the court "finds that the first and third factors significantly weigh against the applicability of the fair use defense,"72 while the second factor only has a minimal effect and the fourth factor has no effect because of its neutrality.73

    4. Problems with the application of 17 U.S.C. §107 in Video Pipeline v. Buena Vista

 There are two major flaws in the court's analysis of the facts of Video Pipeline under the four main fair use factors. First, the court's suggestion that there are alternative ways for Video Pipeline to accomplish its distribution of promotional previews to online video sales and rental retailers is hollow.  The court claims that Video Pipeline should "consid[er] the plausible alternatives of using still images" or other promotional vehicles that can be covered in the scope of the fair use defense.74 Video Pipeline advertises itself as a purveyor of an opportunity to "try it before you buy it".75 By their virtue, motion pictures cannot be "tried" before purchased if the sample comes in the form of a still image.

 Secondly, even though the fourth fair use factor is frequently considered neutral for lack of  evidence of actual market harm, the possibility that the positive effect of Video Pipeline's use of BVHE's trailers on the internet is potentially gigantic. The court even weighs and then dismisses the evidence that "the online video sales market is a multi-million, if not multi-billion, dollar industry".76

 In addition, the fact that the court states that the fact that the 1988 agreement between BVHE and Video Pipeline "did not provide for previews to be viewed in connection with online sales or rentals is telling".77 This "fact" could tell that BVHE had the foresight to not include online trailer promotions in the 1988 agreement just as easily as it could tell that BVHE not only got free promotion online via Video Pipeline, but that it also go three years of market research at no cost.

 Even if the court's fair use analysis could have weighed the first factor in favor of an affirmative defense for Video Pipeline, and even though the fourth factor leaves a huge question unanswered, it is unlikely that the court would have decided differently than it did. Simply put, the doctrine of fair use just does not by its very nature provide a satisfying resolution to the facts of Video Pipeline.

 The intent of the framers of the United States Constitution with regard to Copyright Law "was [to] assur[e] the widespread distribution of thought, not profit."78 Both courts in Lamb and Video Pipeline, supra, stress that the purpose of copyright is to balance the tension between the interest of the copyright holder and the interest of society's access to that copyrighted work. As we saw with the MP3 controversy, "[new markets for the music industry can be created], while maintaining a demand for existing music products (CDs, tapes, etc.) and increasing overall sales"79

What cannot be denied is that it is more realistic to continue to foster a free Internet - as defined in Part I - than it is to try to control the Internet. If the entertainment industry does not support a free Internet and if the motion picture industry does not offer its products at competitive, low prices, they will face financial losses and decreases in the value of their goodwill. This is because as soon as they shut down one Napster-like site, another will pop up. No matter whether they are illegal, these types of web sites "will take control of the Internet and essentially make copyright laws moot."80 Customers who previously did not purchase infringing copies of copyrighted works will most likely turn a deaf ear to an industry that will not adjust their prices. The best counsel is to let the free Internet market thrive.

B. A "free" Internet for film trailers: technological benefits without economic harm

    1. Grateful Dead

 The Grateful Dead legacy offers proof that content can be free and still provide revenues.81  The Dead allow fans to tape live concerts in special, designated sections of the concert venue.82 The only proviso the band makes is that fans must not use the tapes for commercial use.83 In addition, the Dead issued a 1999 press release stating that fans could share concert recordings over the Internet but only for noncommercial use.84 The Grateful Dead are able to make their revenues from concert ticket, recording and merchandise sales.85

    2. MyMP3.com

 MP3.com makes its revenues by entering into agreements with music producers and groups and by charging users for each song they download.86 Music artists have allowed MP3.com to sponsor their tours in exchange for stock.87 Internet entrepreneurs are flourishing. Middlemen beware: "[we are operating our Internet site] consistent with our mission to create a reciprocal sense of community between artists and music enthusiasts."88

C. Compulsory Licensing

In 1948, motion picture licensing acts proved effective at "alleviating inequities in film distribution."89 Similarly, a federal compulsory licensing system for motion picture trailers on the Internet can be expected to alleviate some of the tension surrounding current copyright statutes and the current climate of rapid technological change.90 Compulsory licensing offers a way to keep rights balanced with sensitivity to technological change. They "enable payment to [motion picture studios] while assuring access to the work produced".91

While there is not room within the scope of this paper for a detailed discussion of compulsory licensing in the United States, some general information is necessary. In 1976, Congress revised compulsory licensing for phonorecords of copyrighted music in the 1909 Copyright Act. These changes resulted largely from competition between major recording companies and songwriters and their publishing companies.92
Major recording companies wanted to maintain their control of the market for music by not increasing royalty payment rates for compulsory licensing.93 They justified their argument with the reasoning that they would have to pass along the increase in royalty rates to consumers in the cost of records.94 However, songwriters and publishing companies knew that without increases in royalty rates, smaller record companies would be forced out of business.95 In 1980, Congress created the Copyright Royalty Tribunal. The Tribunal was charged with reviewing royalty rates to insure fair compensation for music artists and cable television.

In 1993, Congress transferred the work of the Copyright Royalty Tribunal to the Library of Congress via The Copyright Royalty Tribunal Reform Act of 1993.96 The Copyright Office adopted the Act and created procedures to put the legislation into action.97 In 1997, the National Music Publishers' Association, the Songwriters Guild of America, and the Recording Industry Association of America agreed on a proposal for a royalty rate increase from January 1, 2000 through 2006.98

Compulsory Licensing also applies to secondary transmissions by cable television systems. In addition, the Digital Performance Right in Sound Recording Act of 1995 made compulsory licensing available via digital phonorecord delivery on the Internet.99 Why not permit the copyright law statute to encompass compulsory licensing for motion picture trailers on the Internet within §115? Then, the use of copyrighted, non-derivative work trailers would be freely used in home video sales promotion on the Internet for the benefit of Internet retailers, major motion picture production studios, emerging independent filmmakers and the overall technological growth of the Internet as an "environment of creativity".100

D. A Concrete Alternative: the Harry Fox and VideoPipeline.com

The best solution to the problem that Video Pipeline presents is the adoption of a compulsory licensing system for motion picture trailers on the Internet. The fair use defense could be expanded to encompass more factors specifically in the case of the Internet. However, [judicial expansion of the doctrine of fair use under 17 U.S.C. §107 is not a desirable means] "for dealing with the Internet's influence on copyright law."101 A uniform federal law or licensing practice is necessary to provide the nationwide consistency needed to develop a broadband technology for film distribution on the Internet.102

States cannot act alone. A federal, legislative change is needed. This proposal for alternative legislation is not intended to include the creation of derivative work trailers by potential licensees or any other copyright violations.103 Rather, motion picture studios should be required to comply with a compulsory licensing scheme so that licensees - here video rental and retail stores - may use copies of trailers on their web sites without infringing on the studios' copyrights in the trailers. Licensees like Video Pipeline will no longer see their only alternative as creating their own promotional trailers from motion picture studio trailers. Once applicable compulsory licensing procedures are in place for motion picture trailers on the Internet, if licensees do not comply with compulsory licensing procedures, then they should be liable for copyright infringement, ordered to discontinue infringing trailer distribution, and potentially be liable to pay damages. Distributing motion picture trailers on a non-exclusive licensing basis keeps control of the Internet and broadband technological development with respect to motion pictures out of the hands of a few Hollywood studios.

Many participants make for a more diverse and potentially higher quality motion picture (traditional Hollywood and independent) industry. In 1999, independent filmmakers in Los Angeles were able to "remov[e]... the middleman"104 and still successfully market their film to major production studios.105 Putting just a short clip of film on the Internet can give artists greater access to the funding they need to participate in filmmaking licensing opportunities.

The established procedure for obtaining compulsory licenses under § 115(b) is as follows: the prospective licensee serves notice of intent to copy on the copyright holder "before or within thirty days after making, and before distributing any phonorecords of the work."106 Then, the licensee pays the required royalty to the Copyright Office which it subsequently pays to the copyright holder.107

A similar procedure worked for "on-demand digital audio stream[ing]"108 through the Harry Fox Agency. The licensing agreement made between music publishers and record producers through the Agency "states that the parties agree that the section 115 compulsory license applies to on-demand streaming music services".109

Opponents of these types of agreements, made without legislative intervention, argue that the problem with these types of licenses is that they do not address the fact that "'buffer copies' are made in the user's computer as part of the transmission".110 While this may be true for some streaming situations, Video Pipeline expresses no such concern about streaming through Videopipeline.com. Their "previews can be viewed but cannot be downloaded by Internet users."111 Those who want to stream trailers on the Internet can wait for legislation or make agreements like those made through Harry Fox Agency for streaming digital music.

Video Pipeline has an established streaming fee scheme.112 The streaming services that Video Pipeline supplies to its Internet-based retailer customers accrue charges "per Mega Byte actually shown to [Internet-based retailer] consumers".113 These fees are expensive now114, but the more companies like Video Pipeline are employed to stream trailers, the less expensive this service will become. Furthermore, as the number of companies looking for more efficient ways to show trailers for motion pictures over the Internet increases, the likelihood that Internet technology will improve to accommodate motion pictures beyond on-demand streaming also increases.

As a matter of practicality, major motion picture studios should be especially interested in taking advantage of the possibility of having their older motion pictures promoted though video rental and retail store web sites through a compulsory licensing scheme. Motion picture copyright holders have not marketed their motion pictures in years by any other means or possibly do not have the capital to market would benefit greatly from this scheme.

E. A concluding word

Opponents to a free Internet argue that fears of an economic monopoly in the music industry were warranted under the 1909 compulsory licensing scheme but unwarranted after the 1976 changes to the Act.115 A parallel argument does not stand up to the current climate for motion picture trailer distribution on the Internet. In fact, this paper points to evidence that there is an economic monopoly by major motion picture studios over trailer distribution on the Internet, and therefore on broadband technological progress of the Internet. Action must be taken now to prevent this monopoly from increasing its control over creativity. 

1 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 146.
2 Id.
3 http://www.videopipeline.com/internet/internet_home.asp?nav=Internet
4 Id.
5 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 120.
6 Id at 126.
7 Id.
8 Id at 146.
9 Id.
10 Id.
11 Id.
12 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 156.
13 Id at 127.
14 Id.
15 Id.
16 Id. at 157.
17 Id.
18 Id.
19 Id. at 158.
20 Id. (citing David Lieberman, "Media Giants' Net Change: Major Companies Establish Strong Foothold Online," USA Today, December 14, 1999, B2.
21 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 146.
22 Id.
23 Id at 254.
24 Mark S. Torpoco, Mickey and the Mouse: The motion picture and television industry's copyright concerns on the internet, 5 UCLA Ent. L. Rev. 1, 1.
25 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 254.
26 http://www.mpaa.org/jack/2002/2002_02_28b.htm.
27 http://www.mpaa.org/jack/2002/2002_02_12a.htm
28 Universal City Studios, Inc. v. Sony Corp. of Am., 480 F. Supp. 429 (1979). Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 195.
29 "Napster All Over Again? - Movies and the Internet", The Economist, March 23, 2002.
30 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 293 (citing United States v. Paramount Pictures, Inc., 85 F. Supp. 881 (S.D.N.Y. 1949).
31 Id. (citing United States v. Paramount Pictures, Inc. 334 U.S. 131, 149-53).
32 Id. at 318.
33 Id. at 156.
34 Id. at 159.
35 http://www.mpaa.org/jack/2002/2002_02_28b.htm.
36 Id.
37 Alfred C. Yen, A Preliminary Economic Analysis of Napster: Internet technology, copyright liability, and the possibility of coasean bargaining, 26 U. Dayton L. Rev. 247, 276.
38 Dan Skolnik, Private Use Out of Control: Disintermediation in the music business, while the band plays on, 5 NO. 2 Intell. Prop. Bull. 13, 13.
39 Lamb v. Starks, 949 F. Supp. 753 (1996).
40 Id. at 755-756.
41 17 U.S.C. §106(2).
42 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., No. 00-5236, 2002 U.S.Dist. LEXIS 5400, (U.S. Dist. March 28, 2002).
43 Id.
44 Id. at *6.
45 Id.
46 Id.
47 Id. at *8.
48 Id. (citing McQueen Cert. P 8; Original Compl. at 1.).
49 Id.
50 Id.
51 Id.
52 Id. at *16.
53 U.S. CONST. art. I, § 8.
54 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., No. 00-5236, 2002 U.S.Dist. LEXIS 5400, at *11 (U.S. Dist. March 28, 2002).
55 Id. at *12.
56 Id.
57 Id. (citing Ford Motor Co. v. Summit Motor Prod., Inc., 930 F. 2d 277, 290-91 (3rd Cir.)).
58 Lamb v. Starks, 949 F. Supp. 753 (1996), 756 (quoting Stewart v. Abend, 495 U.S. 207, 110 S. Ct. 1750, 109 L.Ed.2d 184 (1990)).
59 Id.
60 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., No. 00-5236, 2002 U.S.Dist. LEXIS 5400, at *13 (U.S. Dist. March 28, 2002) (citing Lamb v. Starks, 949 F. Supp. 753 (1996)).
61 Id. at *27 (quoting Campbell, 510 U.S. at 577).
62 Id. at *27-*28 (quoting Stewart v. Abend, 495 U.S. 207, 236).
63 17 U.S.C. § 107 (2002 Statutory Appendix).
Section 107. Limitations on Exclusive Rights: Fair Use states in full:
"Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for the purposes of criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include -
 (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
 (2) the nature of the copyrighted work;
 (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
 (4) the effect of the use on the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.
17 U.S.C. §107 (2002 Statutory Appendix).
64 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., No. 00-5236, 2002 U.S.Dist. LEXIS 5400, at *31 (U.S. Dist. March 28, 2002) (quoting Harper & Row, 471 U.S. at 562).
65 Id at *34.
66 Id. at *37 (quoting Harper & Row, 471 U.S. at 563).
67 Id. at *37 (quoting Harper & Row, 471 U.S. at 565).
68 Id. at *40.
69 Id. at *41.
70 Id. at *42.
71 Id. at *47.
72 Id. at *51.
73 Id. at *51-*52.
74 Id. at *n2.
75 http://www.videopipeline.com/about/about_home.asp?nav=about
76 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., No. 00-5236, 2002 U.S.Dist. LEXIS 5400, at *46 (U.S. Dist. March 28, 2002) (citing Horovitz Aff. P 13).
77 Id.
78 John Perry Barlow, "The Economy of Ideas: A framework for patents and copyrights in the Digital Age. (Everything you know about intellectual property is wrong)", Wired, 2.03 - March, 1994.
79 Sonia Das, The Availability of the Fair Use Defense in Music Piracy and Internet Technology, 52 Fed. Comm. L.J. 727, 748.
80  Sarah H. McWane, Hollywood vs. Silicon Valley: DeCSS down, Napster to go?, 9 CommLaw Conspectus 87, 87.
81 Lonny L. Kolln II, Note. MP3 Technology and the Evolving Law Around It, https://www.nicholasjohnson.org/cls01/kolln3.html (2001).
82 Id.
83 Id.
84 Id. (citing http://www.wdirewolff.com/deadlob06.html: Press Release May 11, 1999 - Grateful Dead Sanction Free MP3 Format).
85 Lonny L. Kolln II, Note. MP3 Technology and the Evolving Law Around It, https://www.nicholasjohnson.org/cls01/kolln3.html (2001).
86 Id. (citing http://www.geek.com/news/geeknews/q22000/gee200010119002662.html:MP3.Com Keeps on Settlin').
87 Id. (citing http://pr.mp3.com/pr/10.html).
88 Id.
89 Id. at 318.
90 Jessica D. Litman, Copyright Legislation and Technological Change, 68 Or. L. Rev. 275, 275.
91 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 254-255.
92 Robert A. Gorman and Jane C. Ginsburg, Copyright: Cases and materials (New York: Foundation Press, 2002), 502.
93 Id.
94 Id.
95 Id.
96 Id. at 503.
97 Id.
98 Id.
99 Id.at 504.
100 Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001), 146.
101 Vincent J. Roccia, What's Fair Is (Not Always) Fair on the Interent, 29 Rutgers L. J. 155, 198.
102 See generally Lawrence Lessig, The Future of Ideas: the fate of the commons in a connected world (New York: Random House, 2001).
103  Id.
104 Dan Skolnik, Private Use Out of Control: Disintermediation in the music business, while the band plays on, 5 NO. 2 Intell. Prop. Bull. 13, 13.
105 Hugh Hart, "Movies: New Media, Old Methods", The Los Angeles Times, February 18, 2001, 4.
106 Robert A. Gorman and Jane C. Ginsburg, Copyright: Cases and materials (New York: Foundation Press, 2002), 503 (citing 17 U.S.C. § 115(b)).
107 Id. at 504.
108 Id. at 505.
109 Id.
110 Id.
111 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., No. 00-5236, 2002 U.S.Dist. LEXIS 5400, at *6 (U.S. Dist. March 28, 2002).
112 http://videopipeline.com/custom/hosting_home.asp?nav=custom
Add Index Points - maximum of one point per minute of video. (See attached Index Point Table)
Consumer-to-Consumer $500 per fifteen (15) minutes per six (6) months. Unlimited viewing.
Business-to-Business $500 per fifteen (15) minutes per three (3) months. Unlimited viewing.
Business-to-Consumer $500 per fifteen (15) minutes per month as advance against streaming fee:
IF MB TRANSFERRED ARE OVER $/MB FOR ALL MB
0
.12

20,000
.11

40,000
.10

80,000
.09

160,000
.08

320,000
.06

640,000
.04

1,200,000
.02

2,400,000
.01
All services include Digitizing, Encoding, Hosting, Indexing and Streaming of video content in Windows Media format at 28, 56, 100 and 300 kbps streams. Charges for time over 15 minutes are pro-rated by the minute.
113 Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., No. 00-5236, 2002 U.S.Dist. LEXIS 5400, at *7 (U.S. Dist. March 28, 2002) (quoting Horovitz Aff. P 26).
114 Id.
115 Robert A. Gorman and Jane C. Ginsburg, Copyright: Cases and materials (New York: Foundation Press, 2002), 504.