Witnesses from MP3.com, RealNetworks, and Vivendi Universal appeared before the House Judiciary Committee yesterday to talk about intellectual property and on-line music distribution.

These companies are all developing ways to provide digital downloads in exchange for cash, and all face a major problem – the transaction costs of sorting out who owns what interests and getting the necessary permissions are crippling.  The architecture of the music copyright system, jerry-built long before the Internet was a glint in the eye of Vint Cerf, fits badly with the new world.

Robin Richards of MP3 was the most articulate.  MP3’s files have 967,000 songs, from 150,000 songwriters, 25,000 music publishers, and innumerable artists.  These are subject to prolific varieties of rights.  There are reproduction rights and performance rights.  The sound recording right is different from the song copyright.  Mechanical rights cover records or tapes, but are different from non-mechanical rights, which cover sheet music, and both differ from synch rights for TV or movie soundtracks.  “Grand” rights and “small” rights distinguish according to the elaborateness of the performance.  Rights are split among different people or shared, often with no public record of the transfer.  Records are maintained in manual systems that have changed little since the invention of the quill pen.

The witnesses talked of a legislative license coupled with an escrow fund into which payments could be made pending a sort out.  This found little favor with the Representatives, who see the idea as a ploy to cheat artists and songwriters.  (An amazing number of congresspersons, especially Californians, who never met a plot of real estate they would not confiscate on the flimsiest excuse that calls itself “environmentalism,” become fire-eating defenders of property rights when the context shifts to music or movies.) 

The songwriters are right to be wary, because once Congress steps in the battle goes to the strong and the race to the swift, or at least to the rich.  Congress has often passed special laws to deal with disparate problems, at a cost to human justice.  For example, the current statutory royalty to the writer of a song on a CD is 7.55 cents, which does seem a bit chintzy. 

But MP3 and its ilk have a good point, too, in that the current situation presents huge obstacles to on-line distribution and the public grows impatient.  Analysts who argued that Napster should be suppressed assumed that legal methods of digital downloading would soon appear and that music would become too cheap to be worth stealing.  If this is wrong, the situation will take new and unpleasant turns as pirate sites reappear, this time far beyond the reach of the U.S. courts that decided against Napster.

Compulsory licensing is always a rough-hewn and usually a bad idea, and it certainly should not be imposed on future creations.  Now that people understand the stakes, negotiated contracts can solve the problems.

But for the hundreds of thousands of existing works, most of minimal value, and considering the immense costs of sorting them out, a statutory rights system may be the only answer.  It should be possible to set up a pool, let individual copyright holders opt out if they want, and find a roughly-just formula for dividing the money according to numbers of downloads. 

No other solutions are on the horizon, and something must be done.  Music fans see themselves as having rights, too, and they certainly thirst for the downloads.  They will not sit around forever while the lawyers play their customary games of chicken.

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