Wake up and smell the copyright

SAN FRANCISCO (Fortune) -- A key tenet of life in Silicon Valley is that the technology industry is different from other businesses.

Employee compensation in the stock option culture is different. Accounting typically follows its own set of rules. Performance metrics that businesspeople elsewhere wouldn't recognize are coin of the realm here. It's an obnoxious attitude that nevertheless undoubtedly fuels a good deal of the tech industry's outsized success.

This distinct form of exceptionalism was on display at last week's Web 2.0 Summit in San Francisco during a particularly illuminating panel discussion, "The Pirate and the Suit." It featured DJ-mashup artist Eric Kleptone, who created the wildly popular "A Night at the Hip Hopera," and David Munns, vice chairman of EMI Music.

EMI is the label that brought us Queen, the band whose song Kleptone borrowed for his artistry. The moderator of the panel was the irrepressible tech conference impresario John Battelle, a pirate wannabe in jeans and a sport coat (metaphorically, in other words, a suit).

The debate - really a two-on-one - was where EMI gets the nerve to stop artists like Kleptone from practicing their craft - in other words, enforcing their copyright. "What's the damage?" Battelle asked Munns, given that Kleptone didn't try selling the "Hip Hopera." He merely put it online.

"It's not so much a question of damage," Munns responded. "It's a question of rights. You don't have the right to use that material without permission." Amen.

Half a decade after Napster, we're still arguing about who's got the right to use someone else's intellectual property. And there's big money to be made - Google (Charts) has built a $10 billion empire by using content it doesn't own to its extremely profitable advantage.

As if that weren't enough, Google is in a fight with book publishers, who don't want the search giant firm scanning their books without permission. Google is happy to exclude books from its search index if the publishers request that - a so-called opt-out provision - and Google only shows snippets of copyrighted books. Still, it's a little like saying, "If you don't want me to barge into your home and borrow your property, you've got to ask me not to."

The tech crowd, empowered by its success, still doesn't get it. Battelle asked Munns what's to stop him from singing a modified version of a copyrighted song in front of the conference audience. This forced Munns to lecture Battelle, who in a different panel seemed surprised that technology companies have registered lobbyists in Washington, on the basics of copyright law.

"You're supposed to pay a public performance fee," Munns said, noting that the Palace Hotel, where the conference was being held, would pay such a fee if it was piping Muzak through its hallways.

"This is not a new concept of ownership and paying for its use." It was a point Munns was forced to make repeatedly. "There's no ambiguity about copyrighted material," he said. "It's either owned or not owned."

Munns got props for his willingness to represent his industry on hostile territory. He pointed out that change is hard, that EMI collected virtually no revenue from digital sales three years ago and that that figure could hit 13 percent this year. It's the reason the company changed its name from EMI Records to EMI Music. He acknowledged that EMI certainly is talking to YouTube's new owner, Google, about how EMI will be compensated when its artists' songs are played without permission on the video site.

Change is hard, indeed. Pirates, after all, eventually have to govern the territories they plunder.

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More Google lawsuits possible