A Harvard Law School research team has issued a green-paper report of initial findings looking at how copyright law affects the digital media business, using Apple's iTunes Music Store as a case study.

"In recent months, iTunes, Apple's Online Music Store, has become the pacesetter in the digital media marketplace," they say, observing that Apple's business model "responds to many of the current legal and technological challenges in online media distribution".

The report looks at the laws affecting copyright, consumer sales contracts and technology in different countries in an attempt to figure out how iTunes and other services are likely to succeed in the different legalistic set-ups.

The researchers – from the Berkman Center for Internet and Society at Harvard identify an "international trend toward convergence on many of the basic principles in these domains."

However, the researchers do not observe the trend observed by Stanford Law School Professor Lawrence Lessig. He has identified a trend in terms of US foreign trading policy to encourage other nations to adopt copyright laws he describes as equivalent to US laws. This leads to sometimes-inappropriate harmonization, he told a Royal Society of the Arts conference looking at digital copyright in January.

The Harvard report does observe that digital media firms often resort to contract law (couched in terms of service or license agreements) to govern how consumers use digital content.

Consumer rights

"License agreements may override rights consumers would otherwise enjoy under contract law" they state, adding: "In both Europe and Japan, these provisions often prohibit users from reselling, lending, or transferring songs – actions which are ordinarily protected under the first sale doctrine of fair use."

The evolution of digital rights management technologies such as Apple's FairPlay, and a legalistic network (such as Europe's recent Copyright Directive) are also part of the observed matrix. An increasing move to recognize the laws affecting digital content in the country of sale within international law is also spotted, so called "first sale" rights.

Harmonization does not yet exist, the researchers say. "Many European nations are still in the process of determining exact implementation of the EU directive," they point out.

Differences in what are construed as "fair-use rights" internationally may also affect iTunes Music Store's business success.

"These differences may have two important effects on online music services. First, broad fair use privileges might decrease the record industry’s willingness to license their music to online music services. Second, and even more important, fair-use doctrines affect users' expectations regarding what they can and cannot do with purchased digital content.

"In order to be successful abroad, services like iTunes must address both the concerns of copyright holders and the different expectations of users around the world," the report says.

Local laws

Additional local laws may also affect Apple's business. For example, European consumers have the right to "withdraw from any distance contract within seven business days without penalty", a right that cannot be lost through contract law. This is because of EU legislation called the Distance Contract Directive.

Because of this law, Tiscali Music Club lets customers "return" downloaded music within seven days.

While the report's authors are not certain if this will affect US-based services like iTunes, they observe: "It will depend on the location of the store's European business centre". Apple Europe is based in Paris. France is subject to this law.

The litigious RIAA, which continues prosecutions against individual file downloaders as it seeks to demonize peer-to-peer file sharing sees "little barrier" to legal action. However, Europe's music industry seems "more reluctant" to launch suits. "Only a few raids have taken place," they say.

"The foreign recording industry places greater emphasis on developing digital rights management, drawing public attention to the illegality of file-swapping, and increasing cooperation with ISPs rather than pursuing litigation," they point out.

The EU's recent Directive on Enforcement of Intellectual Property Rights may change elements of the landscape: "It remains to be seen whether this will lower litigation barriers abroad," the researchers say.