Newsletters revisit ownership stake

Industry heartened by recent verdict against Legg Mason in longstanding battle against copyright infringement

July 19, 2004|By Peter Wayner | Peter Wayner,Special to

When music companies began howling about the illicit pleasure of file-swapping networks like Napster Inc., Kazaa, and, many in the newsletter industry yawned.

The publishers of the short, tightly edited missives with need-to-know information for niche markets had been living with the threat of copyright infringement since the invention of the photocopier and the fax machine.

But these yawns turned into gapes last October when a Baltimore jury sided with the small, 70-year-old Florida publisher of Lowry's Reports, fining Legg Mason Inc. $19.7 million for copyright infringement.

The jury decided that none of Legg Mason's propriety mattered much and that the unauthorized copies were just as much piracy as the acts of the teen-aged music-file swappers on the Internet.

The laws passed to protect the music industry also applied to text -- and that meant that Lowry's, based in North Palm Beach, was entitled to damages of $50,000 to $100,000 per illicit copy.

Fair use debate

The newsletter business is like a canary for the rest of the world. While music and movie lovers debate the right amount of copyright protection for the future, the newsletter publishers have played out the scenarios through to the endgame.

They've tried the different licenses, the red paper that turns photocopies black and the complicated stapling tricks.

They've worked through the options and learned that building a successful business is a delicate balance between making it easy for legitimate users to consume while making it inconvenient -- at least -- for those who'd like to steal.

"Our attitude has always been that we want to provide a fair service, and we expect the subscribers to be fair with us," said Paul Desmond, the president of Lowry's Reports Inc. "That's all that we've tried to do all along."

In the months since the verdict, Legg Mason has declined to comment in detail on the ruling. "We are appealing to the fourth circuit, but I would not comment further because it's a pending legal matter," said Maura Fox, a spokeswoman for the firm.

In court documents, Legg Mason's lawyers offered a number of legal defenses, including arguing that the copying was protected as "fair use" of their subscription.

In the end, the jury chose Lowry's definition that "fair" meant one person reading one subscription. The penalties were calculated using the newest copyright laws passed at the behest of the large movie studios and record companies.

The verdict sent newsletter publishers searching to determine what the legal cudgel means for their business.

While the case is not final because of the Legg Mason appeal, copyright owners gained additional strength earlier this year when Judge William Quarles Jr. refused to throw out the jury's verdict.

"There was evidence from which the jury could have concluded that Legg Mason's employee's conduct was unreasonable and in bad faith," the judge wrote in February in an opinion validating the jury's decision.

Extra copies discouraged

Some newsletter publishers, like Lowry's, are being very conservative and sticking with the old business model -- where one subscription delivers one copy for one person. Each subscription must be bought by one person, who is told again and again not to make extra copies for friends, relatives and colleagues.

"It would be complicated for us to do it any other way," Desmond said. "We're always getting phone calls from people who aren't listed on our client rolls.

"We can't handle that volume," he added. "We want to work directly with our clients."

Others, meanwhile, are pursuing new business models with generous licenses that make it easier for large companies like Legg Mason to buy subscriptions for their office without worrying that someone will inadvertently make an errant copy and trigger a multi-million dollar lawsuit.

'Newsletters are not donuts'

"Publishers should recognize that customers who buy information products are paying to get answers and not for the actual product," said Jakob Nielsen, head of the Nielsen Norman Group, a Fremont, Calif., consultancy. "In other words, you subscribe to a business newsletter because of the actionable information it provides -- not in order to get the pretty pictures."

Many customers buy newsletters for their jobs Nielsen said.

"This means that once a company has paid for one copy, they have really paid to get the answer to their question," Nielsen said. "It's fair enough to make them pay a little more to easily distribute this answer around the organization, but not much more.

"Newsletters are not donuts, where it definitely should cost much more to feed 100 people than to serve one person."

Nielsen's firm recently created a report on how newsletter publishers may better serve their customers. The report costs $298 for the first copy or $498 for the right to distribute unlimited copies within an organization.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.