All Things Digital

Back in 2000-2001, when the Recording Industry Association of America was still trying to recover from its CD price-fixing scheme with poorly reasoned justifications for CD price inflation (”Listen, if CD prices were governed by the Consumer Price Index, you’d be paying $33.86 for them instead of $12.75!”), a little company called Napster came calling. Napster had pioneered a new Internet distribution model for digital media that was revolutionizing the music industry, and it hoped to partner with RIAA member labels to create a subscription-based service.

At the time, Napster had some 20 million users worldwide and was essentially the de-facto file-sharing standard. Had the RIAA labels agreed to the alliance, they might have turned peer-to-peer distribution into a new and powerful business model, one with low distribution and marketing costs and a fast developing user base. But they didn’t. They chose another route.

Big mistake. Along came Gnutella. And increased broadband penetration and cheaper storage. Along came Kazaa. And then came BitTorrent. And, well, look at the industry now.

Given such history, it’s difficult to look at the recording industry’s plan to have a monthly fee added to consumers’ internet-service bills and not shake your head in wonderment.

Portfolio.com reports that Edgar Bronfman Jr.’s Warner Music Group (TWX) has indeed hired veteran industry consultant Jim Griffin (no relation to Peter, right?) to quarterback a plan under which consumers pay an Internet-access surcharge of $5 a month for the collective right to freely share music. Those fees would be pooled and divvied up among artists and their labels.

“Ideally, music will feel free,” says Griffin. “Even if you pay a flat fee for it, at the moment you use it there are no financial considerations. It’s already been paid for.”

Ah- charge everyone for all music. So it is Monetization Without Representation. OK. But what gives the music industry the right to tax all broadband users because it suspects some of them might illegally share its content? And if the music industry deserves that right, then doesn’t the film industry deserve it as well? And the publishing industry? And any other industry that might benefit from such a tax?

As David Barrett, engineering manager for peer-to-peer networks at Web content-delivery giant Akamai (AKAM), notes Griffin’s plan is problematic. And desperate.

Said Barrett:, “It’s too late to charge people for what they’re already getting for free. This is just taxation of a basic, universal service that already exists, for the benefit a distant power that actively harasses the people being taxed without offering them any meaningful representation.”

It took five minutes for the jury in Virgin Records America et al. v. Thomas to find Jammie Thomas guilty of illegally downloading and sharing 24 songs over the Kazaa file-sharing network. But it took five hours for it to determine damages.

This according to juror Michael Hegg, who tells Wired that one of his impaneled colleagues for hours argued in favor of $750 minimum statutory damages for each of the songs at issue in the case. And Thomas was lucky he did. Because according to Hegg–who, remarkably, claims never to have been on the Internet–at least two other jurors were intent on slapping her with maximum statutory damages of $150,000 per song. Seems they didn’t quite buy Thomas’s defense and felt she needed to be taught a lesson. Had they prevailed, the judgment would have topped out at $3.6 million.

“We wanted to send a message that you don’t do this, that you have been warned,” Hegg told Wired, adding that the jury had a tough time believing someone else had spoofed Thomas’s account and used it to distribute copyrighted audio files. “Spoofing? We’re thinking, ‘Oh my God, you got to be kidding.’ She’s a liar. … I think she thought a jury from Duluth would be naive. We’re not that stupid up here. I don’t know what the f— she was thinking, to tell you the truth. … She should have settled out of court for a few thousand dollars.”

And perhaps she should have. As the Register notes, her defense was a bit strained at times:

• Thomas used one hard drive for Kazaa … but sent a different one to the prosecution. Amazingly, they noticed. Doh!
• Thomas’s attorney claimed that her account might have been hijacked by a Wi-Fi hacker hovering outside her window. The prosecution had little trouble disproving this: she wasn’t using Wi-Fi, and they matched her cable modem’s MAC address to the Kazaa traffic. Doh!
• Thomas carefully covered her tracks–by using the same login name for Kazaa that she uses for all her email, online shopping and MySpace account. Doh!

Since September 2003, the Recording Industry Association of America has filed more than 21,000 illegal downloading suits. Yesterday, testimony began in the first one ever to go to trial.

The case is Virgin Records America et al. v. Thomas, and it pits Jammie Thomas, a single mother of two from central Minnesota, against the RIAA, which claims she distributed more than 1,700 audio files on file-sharing site Kazaa in 2005. Thomas could have settled out of court for $3,000–perhaps even through the RIAA’s handy online settlement processing site, but refused, protesting her innocence. Now, she faces a potential liability of $3.9 million in damages, plus legal fees.

“The plaintiffs don’t have the evidence that she downloaded anything,” Thomas’s attorney, Brian Toder, told jurors yesterday. “The best that they can come up with is somebody out there in cyberland … offered on Kazaa some copyrighted material.” His point: while the RIAA has the Internet protocol address it claims was used to illegally share the songs at issue in the case, it must demonstrate that Thomas was actually using it in order to win the case. And that may well prove difficult.

“In sum, the case will be the first test of the RIAA’s ability to sell a jury on its investigative methods, which have a degree of imprecision because of the anonymous nature of the Internet,” writes Jon Healey of the Los Angeles Times. “Internet protocol addresses aren’t painted on the side of a computer like a street address, and even if the RIAA were able to trace a shared file back to a specific PC or Mac, it’s not easy to prove who was sitting at the keyboard. It will also be the first chance for a judge to instruct a jury on the legality of making songs available for others to download. And it will be the first time a jury will weigh whether to bring the hefty penalties provided under copyright law down on a consumer–in Thomas’s case, one who probably spends more on music than its members do.”

Thought the principle of liability was well settled? Think again. The judge presiding over Atlantic v. Howell has ruled in favor of the Recording Industry Association of America, finding that making content available for distribution over an Internet connection is in and of itself a copyright infringement –regardless of whether that content is ever distributed.

A bit of background: In 2006 the RIAA sued Pamela and Jeffrey Howell for copyright infringement, accusing the pair of “making copyrighted works available” over a peer-to-peer network. The RIAA had no evidence that the Howells ever transferred content to a third party. It did, however, have screen shots of their Kazaa account. And that was proof enough for the court to grant its motion for summary judgment against them. “It is no defense that a Kazaa user did not directly oversee the unauthorized distribution of copyrighted material,” the judge wrote, noting that “the mere presence of copyrighted works in a shared folder is enough to trigger liability.”

So even though the RIAA couldn’t prove the Howells distributed files illegally, the mere fact that they owned a computer with a shared-files folder on it that contained copyrighted files “made available” over an Internet connection was enough to constitute infringement of the “distribution” rights under the Copyright Act.

Essentially, the Howells have been found criminally liable for what they might have done. Which is an unsettling thought in a Dick-ensian (Philip K.) sort of way. But not for the RIAA which, thanks to this ruling, no longer has to work quite so hard to provide proof of violation in these cases.

“Plaintiffs wish to establish two violations of copyright law when a person both downloads and uploads sound recordings via the Internet,” the Computer & Communications Industry Association and US Internet Industry Association wrote in an amicus brief filed in Elektra v. Barker, another RIAA “making available” case. “Proof of the download violation may be relatively straightforward when a plaintiff can establish that a recording has been copied to a person’s computer. Proof of a violation by uploading cannot, however, be established merely by showing the availability of files for potential uploading. A plaintiff must establish a connection to someone else’s actual download. That requires a plaintiff to establish a connection between an uploader and a corresponding downloader, to establish the facts of an actual transaction between the two. Although such proof may require investigation, a plaintiff should not be relieved of its burden. Since copyright holders may (and often do) seek statutory damages of up to $150,000 per work infringed, see 17 U.S.C. §504(c)(2), without having to prove actual harm, for such remedies they should be required to furnish allegations and proof of actual violations.

“The remedies provide an adequate incentive for a proper investigation. Amici believe that plaintiffs want to invoke the concept of ‘making available’ instead of the statutory elements of a section 106(3) distribution because plaintiffs perceive that the investigations needed for proper allegations and proof of uploading liability (as contributory infringement liability for another’s download) are burdensome.”