Tenenbaum appeals, Bono appeals …… who should pay for what in the digital age … if anyone should pay at all?

February 2010

Internet, record labels

Joel Tenenbaum, who was ordered to pay $675,000 for illegally downloading 30 sound recordings after his jury trial in the USA, is to ask for a re-trial. Among other claims, lawyers for Tenenbaum say that the verdict was unconstitutionally excessive –  the argument being that a penalty of $22,500 a song is “obviously unreasonable” – although it is (of course) well within statutory limits. Tenebaum’s lawyer, Charles Nesson, the Harvard academic, is using an argument from the ninety year old Supreme Court decision in St. Louis, I.M. & Sou. Ry. Co. v. Williams, 251 U.S. 63 (1919) to support the appeal. The US Copyright Act allows penalties ranging from $750 to $150,000 per infringement at the jury’s discretion. Indeed the jury’s decision in the Tenenbaum case is not without precedent: in the USA’s first major file sharing claim, single mum Jammie Thomas-Rasset was ordered by a Minnesota court to pay $1.92 million for file sharing 24 songs. But remarkably, the Thomas-Rasset’s jury damages have been reduced – by 97%, with US District Judge Michael Davis calling the jury’s penalty “monstrous and shocking” and reducing the $1.92 million to $2,250 per song, or about $54,000 saying “The need for deterrence cannot justify a $2 million verdict for stealing and illegally distributing 24 songs for the sole purpose of obtaining free music”. However, whilst reducing the quantum of damages Judge Davis denied Thomas-Rasset’s request for a new trial. He gave the Recording Industry Association of America seven days to either accept the smaller penalty or to ask for another trial to set new damages leaving the RIAA with a dilemma – accept the precedent of the reduced damages – or stir up yet more bad publicity.

Nesson wants U.S. District Judge Nancy Gertner to reduce the damages to the minimum $750 a song or give the Boston graduate student a new jury trial saying “Given the fact that Tenenbaum was one of many millions of people sharing music and that the plaintiffs have failed to show any actual damages from Tenenbaum’s particular actions, this award is obviously “so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable”. It is fair to say that the Recording Industry Association of America (RIAA) has now wound down its high profile campaign to sue individual file sharers and downloaders, but this doesn’t detract from the fact that Tenenbaum was convicted on his own admission and the jury’s award well within statutory parameters. Will Judge Gertner take a proactive role in reducing Tenenbaum’s damages like Judge Davis? Or would she be wise to leave this to Congress – albeit a Congress under constant pressure from the movie, television and music industries who are continuing to ask for greater protection and one that seems unlikely to bow to pressure to reduce statutory penalties.

Nesson is also asserting that Tenenbaum’s 2004 file sharing on Kazaa and Limewire was protected by the US fair use doctrine — a suggestion that online file sharing is permissible. Nesson argues that Tenenbaum and other music listeners could not get “exactly the songs they wanted, in exactly the format they wanted” until the music industry dropped DRM in 2007 and that the music industry is partially to blame for illegal file-sharing – it should have known (at least to some degree) that by publishing copyrighted material that it would be “ripped and shared on P2P networks,” and that by not offering alternatives to P2P, as was certainly the case back in 2004 when Tenenbaum’s alleged illegal downloading is said to have occurred, the music industry created an environment “ripe” for illegal file-sharing. We have a update on the anti-trust case against the majort labels for their early activities in the download market via MusicNet and Pressplay below but in Tenenbaum’s  Massachusetts trial Judge Gertner would not allow this defence to proceed and quite frankly it’s hard to see why this would be allowed to proceed in a second trial. Dowloading files without paying is surely never going to constitute ‘fair use’ – is it?

The US Department of Justice has submitted a filing defending the $675,000 damages award for copyright infringement arguing that Tenenbaum’s actions caused “great public harm”. “In establishing the range [of copyright damage amounts: $750 to $150,000 per infringement], Congress took into account the need to deter the millions of users of new media from infringing copyrights in an environment where many violators believe they will go unnoticed,” reads the DOJ filing. “The harms Congress sought to address, moreover, are not negated merely because an infringer does not seek commercial gain. Accordingly, the statutory range specified by Congress for a copyright infringement satisfies due process.”

In fact it seems likely that countries will in all probability move to strengthen rather than loosen copyright protection. In the US, the RIAA, the Motion Picture Association of America and others are lobbying Congress and internet service providers to adopt a “three strikes” policy in which internet access would be cut off for repeated infringement. This legislation exists in Taiwan, in New Zealand and (nearly it seems) exists in France – and has been included by Business Secretary Lord Mandelson in the Digital Economy Bill which is in the committee stage the UK. Spain has recently toughened up its copyright laws. In early January U2 frontman Bono heralded the intervention of the movie industry as a potential savior for the ailing music industry, saying that file swapping and sharing hurt the creators of cultural products. Bono argued “the only thing protecting the movie and TV industries from the fate that has befallen music and indeed the newspaper business is the size of the files” pointing out that “the immutable laws of bandwidth” indicate that technology is just a few years from allowing viewers to download entire movies in just a few seconds adding “A decade’s worth of music file-sharing and swiping has made clear that the people it hurts are the creators – in this case, the young, fledgling songwriters who can’t live off ticket and T-shirt sales”! Interestingly the singer pointed out that the US effort to stop child pornography and China’s effort to suppress online dissent indicate that it is “perfectly possible to track” internet content and felt that the movie and TV industries may succeed where the music and newspaper industries have failed saying “Perhaps movie moguls will succeed where musicians and their moguls have failed so far, and rally America to defend the most creative economy in the world, where music, film, TV and video games help to account for nearly 4 percent of gross domestic product”.

Bono certainly seems to have the ear of French President Nicolas Sarkozy. In a speech at the Cite de la Musique in Paris, Sarkozy made it clear that he is actively supporting new proposals from a committee led by music producer Patrick Zelnik to tax Google and other search engines, web portals such as Facebook and French internet service providers such as Yahoo and AOL. The so called “Google tax” would be used to provide funding for the music and publishing industries – as well as funding ‘music cards’ for French music fans so they can legally buy music (and other content such as films and books) online. In return, the French President seems keen that music sold must be able to be played ‘on all platforms’ which appears to be a reference to totally DRM free music. The French President also seems keen to investigate Google’s dominant position in online advertising as potentially anti-competitive.

ISP TalkTalk’s head of regulation Andrew Heaney responded to the Bono speech by telling reporters: “It is outrageous to equate the need to protect minors from the evils of child pornography with the need to protect copyright owners. As a society we have accepted that it is appropriate and proportionate to intrude on people’s internet use by blocking access to sites that host child abuse images. To suggest that sharing a music file is every bit as evil as child abuse beggars belief” adding “Bono obviously does not understand how simple it is to access copyright protected content without being detected. P2P file-sharing can be spotted (albeit at great cost) but there are dozens of applications and tools out there which allow people to view content for free and no amount of snooping can detect it”. ISPs currently argue that it would cost each and every ISP customer about £25 a year to reimburse ISP’s for tracking and stopping net piracy. The BPI think a new system would cost a fraction of this – about 24p a year for each customer! In a response to Sarkozy’s speech, Google France’s public affairs director, Olivier Esper, told Liberation that he hoped the government would “favour cooperation” and warned against “prolonging a path of opposition between the Internet world and the world of culture, for example, through the path of taxation”. Christine Balague, , co-president of a French Internet think tank Renaissance Numerique said “Let’s stop demonising the Internet, and let’s look at the benefits provided by the Web” adding “Neither the online portals nor the Internet providers steal from artists. On the contrary, they participate in the emergence of new and innovative economic models.

Back in the USA …. this month details also emerged that ISP Verizon Communications has penalized an undisclosed (small) number of its Internet access subscribers who failed to comply with multiple file-sharing warning letters with service interruptions. “We’ve cut some people off” a Verizon Online spokeswoman told CNETnews.com. No wonder file swappers are starting to look at new software that protects them from being found by content owners! The new IPREDator software hides user’s identities! The service, from the founders of The Pirate Bay coincides with the introduction of the controversial IPRED law in Sweden, promising users an anonymous connection to the Internet. Just as the IPRED gives the copyright holders increased power to track down pirates, the IPREDator seeks to neutralise this new ‘threat’.

As more detail of the Patrick Zelink led Creation & Internet’ report came out, it seems that a second big idea is the introduction of collective licensing in the digital domain – an increasingly talked about topic in a number of camps and highlighted at the recent 9th IBC International Copyright Conference in London. Whist the music publishing sector generally currently licenses its rights in songs to digital service providers via the collecting societies (PRS, GEMA, JASRAC, ACEM, ASCAP, BMI etc) there is no legal obligation on the record industry to do so for sound recordings and indeed the major labels have retained these rights licensing directly to new internet services, often for hefty upfront payments, although a number of independent labels collectively licence in the digital domain via Merlin. Recently Daniel Ek, the CEO of Spotify, said that his business was unsustainable unless the music industry came up with realistic licensing terms, and most start up complain about (at least) the complexity of having to approach numerous different companies to obtain clearance to use just one sound recoding on a global basis. CMU Daily reports that the Creation & Internet Report seemingly recommends the French government get involved to speed that process up, possibly by threatening to force collective licensing through legislation if the record industry can’t come up with a voluntary solution, akin to that adopted by the publishing sector. In return for a simpler licensing system, and more level playing field in terms of royalty payments, the digital service providers would be obligated to agree and stick to friendly payment terms, passing revenues onto labels, via their collecting society, within sixty days of sale or stream. The Report seems to support France’s new ‘three strikes’ law although whilst advocating an increase in VAT on internet services, the Report specifically does not support the idea of a copyright levy being applied to all ISP bills, something supported by French music collecting society SACEM.


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