06/25/2013 01:18 pm ET

Now Streaming on a Website Near You

In a relatively short period, the universe of online music and video streaming options has grown at a rather impressive rate. In just a few years, Americans have witnessed the creation of on-demand music services, ad-based Internet radio, and the rise of streaming-video subscription services that have provided consumers with new and flexible ways to access their favorite songs or movies through legitimate online outlets.

The popularity and economic contributions of this burgeoning industry are simply staggering. In a recent Arbitron study, 45 percent of survey respondents reported tuning into online radio on a monthly basis; while 43 percent reported watching online video each week. In 2012, on-demand and ad-based music services collectively generated more than $800 million dollars in performance royalties for record labels, music publishers and their artists. And, streaming-video subscriptions services - not to be outdone - generated approximately $2.83 billion in revenues in 2011 and some believe the sector has the potential to grow to $6.68 billion by 2016.

Notwithstanding these impressive figures, this success hasn't come without challenges. Online music services still face a licensing regime better suited for the pre-Internet era, and online video service providers remain subject to a 'windowing process' under which the studios select only certain outlets to show their films first -- thereby making it more difficult to compete against legacy pay-TV service providers. The biggest challenge of late however comes from recent proposals to raise the current set of criminal penalties associated with the unlawful streaming of copyright protected works from a misdemeanor to a felony.

At first glance, the notion of raising the criminal penalties associated with the unlawful streaming of digital content is quite attractive. Rogue websites are the bane of every legitimate online service provider's existence. They siphon-off potential customers, make it difficult to effectively monetize content and essentially make it impossible to build a successful online business that appropriately rewards creators. However, developing a viable solution to this problem is more complicated than it may first appear.

Recent advances in technology, particularly the advent of cloud-based music and video services, have made it more difficult to distinguish the types of streams that are covered under copyright law. For example, streams of a public nature (i.e. "public performances") are protected; while "private performances" are not.

Nowhere is the difficulty in distinguishing between public and private performances more apparent than in the Second Circuit's recent Cablevision decision. In Cablevision, a regional cable company was sued for their launch of a new remote DVR system that allowed subscribers to record and store the programming of their choice on Cablevision's servers - programs could then be played back to those customers remotely at a time more suitable for viewing.

In response to the release of the new DVR, a group of networks sued Cablevision arguing, among other things, that the remote playback of the programs constituted a "public performance" of their copyrighted works. However, the district court and court of appeals disagreed; essentially equating the remote playback of the computer-stored content to the same private viewing experience enjoyed by millions of Americans who routinely record and watch programs using the DVR located in their household living rooms.

The Cablevision case isn't unique. A dispute over the distinction between private and public performances arose in a case involving Aereo, a newly released service that allows subscribers to view live or time-shifted streams of over-the-air television on Internet-connected devices. There are also similar cases involving online music stores that offer music downloads for sale. In all instances, copyright owners have yet to prevail.

The combination of these clashes illustrates a civil justice system that is filled with frivolous litigation -- or alternatively, it points to an aspect of copyright law that lacks proper clarity. Needless to say, it is certainly far more of the latter and less of the former. Regardless, these cases definitely demonstrate why Congress should proceed with extreme caution when attempting to legislate in this area.

The recent seizure of popular music blog service, Dajaz1, still leaves a bad taste in the mouths of many music fans. The online service was seized by the federal government based upon allegations of public performance violations -- only to have all criminal charges dropped and the website returned one year later with little explanation. Just imagine if your favorite online music or video service provider was subjected to a similar experience.

Ultimately, the goal of identifying and disrupting the online activities of rogue websites is important and certainly worthy of pursuit. But, it must be accomplished in a way that doesn't disturb the current pace of innovation being carried-out by legitimate online services providers.