Managing Peer-to-Peer Traffic with Digital Fingerprinting and Digital Watermarking

This Article proposes the joint use of digital fingerprinting and digital watermarking to solve the long-standing P2P infringement issue, while the graduated response system is becoming popular. The war on P2P is essentially about the control over content rather than revenue. The graduated response system will aggravate the misuse of the notice-and-takedown procedure and strengthen the content industry’s control over content. Digital fingerprinting and digital watermarking, on the other hand, enable conduit ISPs to deter P2P infringement neutrally and should be given more attention. This Article proceeds in six parts. Part II introduces the three grounds for third-party liability: contributory liability, vicarious liability, and inducement. Part III briefly reviews the war on P2P. It discusses the inadequate protection afforded by the Digital Millennium Copyright Act (“DMCA”) and copyright owners’ private attempts to thwart P2P infringement, such as massive lawsuits, DRM, and the graduated response system. It analyzes the drawbacks of the notice-and-takedown procedure and proposes modifications to § 512 of the DMCA. This Part also proposes the “filter-counter notification-notice with a bond” procedure to mitigate the misuse of a § 512 notice. Lawmakers should probably substitute the John Doe litigation for the subpoena power and the policy of terminating repeat infringers. If filters are installed, litigation should only be used against intentional and outrageous infringers such as those circumventing filters and uploading copyrighted works. Part IV discusses whether failure to filter should be considered as a factor of inducement. It also analyzes the desirability of imposing a duty to filter. Part V explores the cheapest cost avoider test and concludes that online copyright infringement is a joint-care, unilateral accident, where copyright owners and ISPs should cooperate to reduce the monitoring cost. This part also analyzes the costs and benefits of encryption in P2P. This Part proposes that ISPs should be allowed to assert an affirmative defense that they have installed filters to prevent copyright infringement. Part VI discusses the possible criticism of the cheapest cost avoider test. Part VII reviews the history of formalities, critically examines Professor Lawrence Lessig’s proposal of more formalities and proposes a watermarking regime. To reduce the distortionary effects on subscribers, an ISP can design a pay-per-download plan for subscribers who download watermarked works