IP owners need to consider how they can integrate DRM functionality with P2P networks so that they can offer their customers P2P functionality while also protecting themselves from copyright abuse. If we look at the history of IP owners' business models on the Internet, we draw the inevitable conclusion that P2P is really an evolutionary extension of the user-oriented features that IP owners have been obliged to offer since the beginning of Internet commercialization.

The early digital products (including CD-ROMs and websites) produced by publishers and other IP owners were "shovelware" that merely contained repurposed content from the companies' analog output. User contributions to websites were confined to the kind of letter-to-the-editor sections typically found in print products. As publishers needed to find ways to overcome the liabilities of screen reading and slow, expensive dialup connections, as well as to compete with one another, they added various interactive features that included user control or user-originated content. Examples of the former include personalized content filtering, choices of look and feel, and rich search functions; examples of the latter include "community" features like discussion groups and chat rooms. Despite initial resistance from both editorial and legal departments, these features flourished and are standard on virtually all name-brand media websites today, while product formats with limited interactivity, such as CD-ROMs, are in permanent decline.

Another important step beyond shovelware is IP owners looking beyond their own websites and sending their content to places where they may find more audiences for it. Two important manifestations of this development can be viewed as precursors to P2P: syndication and affiliate programs.

Syndication is one IP owner sending content to other publishers on a formal, regular basis -- for example, a restaurant reviewer syndicating its content to travel websites. Several vendors created tools for automating syndication relationships, and the open standard protocol ICE^[3] (Information and Content Exchange) was developed to promote interoperability. ICE has constructs that let publishers describe the rights they are conveying to subscribers, but no mechanism to enforce those rights; ICE-compliant (and other) syndication software merely automates publish-subscribe relationships that are controlled by legal contract terms. With syndication, in other words, the publisher has to know and trust the subscribers.

Affiliate programs provide another key step forward for IP owners, although they are more closely associated with general online retailing than with content. Perhaps the most famous user of affiliate programs is Amazon.com; in addition, many other retailers -- including IP owners like Sony Music and Scholastic -- have affiliate programs through the LinkShare network. In an affiliate program, operators of special-interest websites "stock" products from retailers by placing special links on their sites; for example, a website devoted to stamp collecting may feature various books and have links to their pages on Amazon.com. If a user clicks on one of those links and purchases the book, then the stamp collecting website gets a commission.

When used with content products, affiliate programs approximate Superdistribution -- which is similar to peer-to-peer but is more controlled and implies that there is an IP owner that originates the distribution^[4] -- except that the Superdistribution is only done to two levels. Although most products purchased through affiliate networks are physical, there is no reason why they can't be digital -- that is, delivered in digital form to the buyer as part of the purchase process.

If one were to look at extending both syndication and affiliate networks for content, one may well want capabilities that allow distribution of content to arbitrary (and arbitrarily many) parties, with technological controls over usage supplanting contractual ones because the trustworthiness of the other parties is unknown. One would also want the ability to facilitate e-commerce among all levels in the network. Put these requirements together, and you get P2P with integrated DRM.

Participants in a P2P network can bring lots of legitimate value to both IP owners and users. IP owners have been bemoaning the need to "compete with free," but they are coming to realize that there is much more to a positive user experience than merely claiming to have a certain item of content available for those who specifically look for it. There is a huge difference, for example, in looking for a song on KaZaA and having to put up with decoys, poor-quality encodings, spyware, and so on, versus finding the same song on a legitimate online music service, playing it in its entirety with good quality, finding artist information and recommendations for similar music, getting technical support, and having one's privacy respected.

There are many types of services around content that might appeal to users. It's unrealistic to think that IP owners' websites will provide them all; it's also unrealistic to think that all desirable content-related services even fit the business-to-consumer model in general. For example, DRM-integrated P2P networks make a lot of sense for certain types of corporate applications, such as knowledge management and collaboration, where maximum dissemination of data is paramount but so is security, and in the distribution of video and other large-sized content, where it's desirable to offload corporate servers.

In general, peer-to-peer data exchange models provide IP owners with more ways to add value to content, including ways that the IP owner may not think of on its own. At the same time, P2P networks do provide large, scalable opportunities for abuse. The architecture that solves this problem, while scalably facilitating value-added services for content, is P2P with integrated DRM.

At the same time, DRM technology must meet certain criteria to be acceptable to P2P participants. The two most important requirements are easy to state, if not to implement:

• The DRM technology must support users' reasonable usage expectations. At a minimum, this includes a user's right to use content in any format on any device she owns. Ideally, it also includes legal fair-use rights such as copying for research or criticism purposes.
• The DRM technology must also be seamless and unobtrusive. This includes installation with no extra effort on the user's part, no adverse effects on the user's device or platform, and operation in the background as much as possible.

In next section, we will look at technical requirements of DRM technologies that enable them to meet the above criteria and others.