Recording Industry vs The People: Record companies threatening investors in emerging technologies.... is the last thing our economy needs

Thursday, February 26, 2009

Record companies threatening investors in emerging technologies.... is the last thing our economy needs

Commentary:

This trend the content companies are showing towards attempting to threaten the investors in technologies they feel are infringing their copyrights is alarming, especially in view of the woeful state of our economy.

The last thing this country needs is to discourage potential investment in emerging technology.

Professional investors typically:

-invest only a portion of their assets, never putting their base or personal assets at risk; and

-carefully weigh the risks and rewards before investing.

If a professional investor determines that one type of investment will put his personal assets at risk, thus potentially putting him out of business entirely, because one of the company's exposures happens to be in copyright infringement due to the unsettled state of copyright law in the 21st century... he or she will decide -- guess what -- to take a pass.

Which is exactly what the cold and calculating content cartel is hoping will happen.

They can't compete in the marketplace, and they don't know how to innovate or create anything themselves, so they are trying to use litigation as a means of choking off innovation.

This should be disturbing to each and every American.

The recent complaint filed by EMI, which is not even an American company, is an outrage.

I recommend that my readers write to the White House, and to Congress, calling for legislation to prevent this abuse.

Here is my first draft of a proposed statute:

No person or entity can be subject to secondary liability for copyright infringement by a corporation or other business organization based in whole or in part upon (a) work he or she did in his or her capacity as a member of the board of directors or committee thereof, or (b) his or her having invested in any such corporation, including any oversight, monitoring, or due diligence activities in connection therewith.

It shall be a violation of this section to name any such person as a defendant in a claim.

Any person named as a defendant in a claim in violation of this provision, shall be entitled to his, her, or its attorneys fees, trebled.

This statute shall be applicable to pending actions, except that claimants shall be afforded thirty (30) days from its effective date, as a matter of right, to withdraw or abandon any claims which are or may be in violation of the statute.

Commentary & discussion:

ZDNet
Slashdot
p2pnet.net

Keywords: lawyer digital copyright law online internet law legal download upload peer to peer p2p file sharing filesharing music movies indie independent label freeculture creative commons pop/rock artists riaa independent mp3 cd favorite songs intellectual property portable music player

6 comments:

derivative said...: On the one hand, this is clearly egregious behavior by the RIAA cartel, and should be slapped down hard by a judge.

On the other hand, I can envision alternate startup company scenarios where the corporate veil should be pierced. I don't subscribe to the RIAA's theory that every download is a lost sale, but if a startup had high-quality downloads of MP3s that they erroneously claim are "legal" then there will certainly be SOME lost sales associated with that, and if the startup has been deliberately constructed to have few assets, perhaps the copyright holders ought to be able to nail the principals to the wall.

So, the thing to avoid is the usual sort of "tort reform" which disallows plaintiffs from collecting extra for truly egregious behavior on the part of the defendant.

I would think that any new policy should be something like:

- you can't separately sue corporate principals for a tort until you have proven your case against the corporate entity, and proven that the tort was intentional and was a direct cause (e.g. not contributory infringement) of any damages.

It also seems (to this layman) that a right-thinking judge could probably implement most of this policy on his own in his own courtroom and a published decision on this issue could influence other courts.

But plaintiffs often want to sue principals. Isn't there a lot of preexisting case law on this sort of thing?

In any case, I occasionally write to my congressman asking him to "do something" about some situation or another, but this has me at a loss. What would the general outlines of legislation that would fix this problem look like?

Thanks,
derivative; February 26, 2009 at 11:33:00 PM EST
Anonymous said...: For more on this subject, I find Lessig's books a good read. Plus, they're free.

http://www.lessig.org/

-Anonymous #1; February 26, 2009 at 11:58:00 PM EST
Matt Fitzpatrick said...: I'd be outraged, too, if EMI had stated a claim against the investors somewhere in this forty-seven page complaint. :)

Readers of this blog by now know what a boilerplate copyright complaint looks like. Conclusory recitations of the copyright statute ring a bell? I'd be shocked if some of this complaint weren't cut-and-pasted from the RIAA's file sharing lawsuit boilerplate. Forty-seven pages, not one single word alleging a specific act Franks, Podowski, Lodha, or Sit undertook to infringe copyright. Do any of their names even appear in the complaint outside the caption on page 1?

Anyway, snowball's chance of surviving a 12(b)(6) dismissal motion -- nothing resembling a claim against the four individuals here. I'm already looking ahead to whether or not the individual defendants will be awarded their costs, or if EMI will file a 41(a)(1) cut-and-run dismissal before that can happen.; February 27, 2009 at 4:47:00 AM EST
raybeckerman said...: Derivative, you're not showing your usual precision thinking.

1. We are dealing with emerging technologies in areas where the law is uncertain.

2. "Investors" are not "principals".

If you think it is in the public interest to discourage investment in emerging technologies...think again.; February 27, 2009 at 9:30:00 AM EST
raybeckerman said...: There should be an amendment to the Copyright Act:

No person or entity can be subject to secondary liability for copyright infringement by a corporation or other business organization based in whole or in part upon (a) work he or she did in his or her capacity as a member of the board of directors or committee thereof, or (b) his or her having invested in any such corporation, including any oversight, monitoring, or due diligence activities in connection therewith.

It shall be a violation of this section to name any such person as a defendant in a claim.

Any person named as a defendant in a claim in violation of this provision, shall be entitled to his, her, or its attorneys fees, trebled.; February 27, 2009 at 9:42:00 AM EST
derivative said...: Ray:

That's a very good draft. I think the "secondary liability" clause takes care of my real concern. Sorry I didn't express myself clearly.

Thanks,
derivative; February 27, 2009 at 11:03:00 AM EST

Post a Comment

JUDICIAL QUOTATIONS

"[T]he Court is concerned about the lack of facts establishing that Defendant was using that IP address at that particular time. Indeed, the [complaint] does not explain what link, if any, there is between Defendant and the IP address. It is possible that Plaintiff sued Defendant because he is the subscriber to IP address .... As recognized by many courts, just because an IP address is registered to an individual does not mean that he or she is guilty of infringement when that IP address is used to commit infringing activity." -Hon. Barry Ted Moskowitz, Chief Judge, S.D. California. January 29, 2013, AF Holdings v. Rogers
"The complaints assert that the defendants – identified only by IP address – were the individuals who downloaded the subject “work” and participated in the BitTorrent swarm. However, the assumption that the person who pays for Internet access at a given location is the same individual who allegedly downloaded a single sexually explicit film is tenuous, and one that has grown more so over time." - Hon. Gary R. Brown, Magistrate Judge, E.D.N.Y. May 1, 2012, K-Beech v. Does 1-37
"The concern of this Court is that in these lawsuits, potentially meritorious legal and factual defenses are not being litigated, and instead, the federal judiciary is being used as a hammer by a small group of plaintiffs to pound settlements out of unrepresented defendants."
-Hon. S. James Otero, Dist. Judge, Central Dist. California, March 2, 2007, Elektra v. O'Brien, 2007 ILRWeb (P&F) 1555
"The University has adequately demonstrated that it is not able to identify the alleged infringers with a reasonable degree of technical certainty...[C]ompliance with the subpoena as to the IP addresses represented by these Defendants would expose innocent parties to intrusive discovery....[T]he Court declines to authorize discovery and quashes the subpoena as to Does # 8, 9, and 14" -Hon. Nancy Gertner, Dist. Judge, Dist. Massachusetts, November 24, 2008, London-Sire Records v. Does 1-4
"[C]ounsel representing the record companies have an ethical obligation to fully understand that they are fighting people without lawyers... that the formalities of this are basically bankrupting people, and it's terribly critical that you stop it...." -Hon. Nancy Gertner, Dist. Judge, Dist. Massachusetts, June 17, 2008, London-Sire v. Does 1-4
"Rule 11(b)(3) requires that a representation in a pleading have evidentiary support and one wonders if the Plaintiffs are intentionally flouting that requirement in order to make their discovery efforts more convenient or to avoid paying the proper filing fees. In my view, the Court would be well within its power to direct the Plaintiffs to show cause why they have not violated Rule 11(b) with their allegations respecting joinder. [I]t is difficult to ignore the kind of gamesmanship that is going on here.....These plaintiffs have devised a clever scheme... to obtain court-authorized discovery prior to the service of complaints, but it troubles me that they do so with impunity and at the expense of the requirements of Rule 11(b)(3) because they have no good faith evidentiary basis to believe the cases should be joined." -Hon. Margaret J. Kravchuk, Magistrate Judge, District of Maine, January 25, 2008, Arista v. Does 1-27, 2008 WL 222283, modified Oct. 29, 2008
"[N]either the parties' submissions nor the Court's own research has revealed any case holding the mere owner of an internet account contributorily or vicariously liable for the infringing activities of third persons.....In addition to the weakness of the secondary copyright infringement claims against Ms. Foster, there is a question of the plaintiffs' motivations in pursuing them..... [T]here is an appearance that the plaintiffs initiated the secondary infringement claims to press Ms. Foster into settlement after they had ceased to believe she was a direct or "primary" infringer." -Hon. Lee R. West, District Judge, Western District of Oklahoma, February 6, 2007, Capitol v. Foster, 2007 WL 1028532
"[A]n overwhelming majority of cases brought by recording companies against individuals are resolved without so much as an appearance by the defendant, usually through default judgment or stipulated dismissal.....The Defendant Does cannot question the propriety of joinder if they do not set foot in the courthouse." -Hon. S. James Otero, Central District of California, August 29, 2007, SONY BMG v. Does 1-5, 2007 ILRWeb (P&F) 2535
"Plaintiffs are ordered to file any future cases of this nature against one defendant at a time, and may not join defendants for their convenience."
-Hon. Sam Sparks and Hon. Lee Yeakel, District Judges, Western District of Texas, November 17, 2004, Fonovisa v. Does 1-41, 2004 ILRWeb (P&F) 3053
"The Court is unaware of any other authority that authorizes the ex parte subpoena requested by plaintiffs."
-Hon. Walter D. Kelley, Jr., District Judge, Eastern District of Virginia, July 12, 2007, Interscope v. Does 1-7, 494 F. Supp. 2d 388, vacated on reconsideration 6/20/08
"Plaintiffs contend that unless the Court allows ex parte immediate discovery, they will be irreparably harmed. While the Court does not dispute that infringement of a copyright results in harm, it requires a Coleridgian "suspension of disbelief" to accept that the harm is irreparable, especially when monetary damages can cure any alleged violation. On the other hand, the harm related to disclosure of confidential information in a student or faculty member's Internet files can be equally harmful.....Moreover, ex parte proceedings should be the exception, not the rule."
-Hon. Lorenzo F. Garcia, Magistrate Judge, District of New Mexico, May 24, 2007, Capitol v. Does 1-16, 2007 WL 1893603
"'Statutory damages must still bear some relation to actual damages." Hon. Michael J. Davis, Dist. Judge, U.S.District Court, Dist. Minnesota, January 22, 2010, Capitol Records v. Thomas-Rasset
"[T]his court finds that defendants' use of the same ISP and P2P networks to allegedly commit copyright infringement is, without more, insufficient for permissive joinder under Rule 20. This court will sever not only the moving defendants from this action, but all other Doe defendants except Doe 2."
-Hon. W. Earl Britt, District Judge, Eastern District of North Carolina, February 27, 2008, LaFace v. Does 1-38, 2008 WL 544992
"[L]arge awards of statutory damages can raise due process concerns. Extending the reasoning of Gore and its progeny, a number of courts have recognized that an award of statutory damages may violate due process if the amount of the award is "out of all reasonable proportion" to the actual harm caused by a defendant's conduct.[T]hese cases are doubtlessly correct to note that a punitive and grossly excessive statutory damages award violates the Due Process Clause....."Hon. Marilyn Hall Patel, Dist. Judge, N.D. California, June 1, 2005, In re Napster, 2005 US DIST Lexis 11498, 2005 WL 1287611
"[P]laintiffs can cite to no case foreclosing the applicability of the due process clause to the aggregation of minimum statutory damages proscribed under the Copyright Act. On the other hand, Lindor cites to case law and to law review articles suggesting that, in a proper case, a court may extend its current due process jurisprudence prohibiting grossly excessive punitive jury awards to prohibit the award of statutory damages mandated under the Copyright Act if they are grossly in excess of the actual damages suffered....."-Hon. David G. Trager, Senior District Judge, Eastern Dist. New York, November 9, 2006, UMG v. Lindor, 2006 U.S. Dist. LEXIS 83486, 2006 WL 3335048
"'[S]tatutory damages should bear some relation to actual damages suffered'....(citations omitted) and 'cannot be divorced entirely from economic reality'". -Hon. Shira A. Scheindlin, Dist. Judge, Southern Dist. New York, August 19, 2008, Yurman v. Castaneda
"The Court would be remiss if it did not take this opportunity to implore Congress to amend the Copyright Act to address liability and damages in peer to peer network cases.... The defendant is an individual, a consumer. She is not a business. She sought no profit from her acts..... [T]he damages awarded in this case are wholly disproportionate to the damages suffered by Plaintiffs." -Hon. Michael J. Davis, District Judge, Dist. Minnesota, September 24, 2008, Capitol v. Thomas
"If there is an asymmetry in copyright, it is one that actually favors defendants. The successful assertion of a copyright confirms the plaintiff's possession of an exclusive, and sometimes very valuable, right, and thus gives it an incentive to spend heavily on litigation. In contrast, a successful defense against a copyright claim, when it throws the copyrighted work into the public domain, benefits all users of the public domain, not just the defendant; he obtains no exclusive right and so his incentive to spend on defense is reduced and he may be forced into an unfavorable settlement." US Court of Appeals, 7th Cir., July 9, 2008, Eagle Services Corp. v. H20 Industrial Services, Inc., 532 F.3d 620
"Customers who download music and movies for free would not necessarily spend money to acquire the same product.....RIAA’s request problematically assumes that every illegal download resulted in a lost sale."
-Hon. James P. Jones, Dist. Judge, Western Dist. Virginia, November 7, 2008, USA v. Dove