Jury Awards $222K in Watershed Music File-Sharing Case

The music industry emerged victorious in the first file-sharing lawsuit to go to trial, with a federal court jury ruling a Minnesota woman was liable for swapping two dozen songs and ordered her to pay US$222,000 to Capitol Records.

The closely watched case ended Thursday after two days of testimony and closing arguments and about five hours of deliberations.

The decision is significant because the jury found 30-year-old Jammie Thomas liable for the illegal downloads even though they could not definitively say she was at a computer when the swapping occurred over the Kazaa network. In addition, a victory by Thomas may have emboldened others to take their own cases to court.

'Willful Infringement'

The jury agreed that the song-swapping represented "willful infringement" and awarded the recording industry $9,250 per song. That is well short of the more than $3 million it could have awarded, but likely tens of thousands of dollars more than Thomas would have been required to pay had she settled the case out of court.

To date, the Recording Industry Association of America (RIAA) has sued more than 20,000 individuals for song-swapping, and the vast majority of those cases have been quickly and quietly settled, usually with payments in the $2,000 range.

The RIAA "welcomed the jury's decision," it said. The judge in the case had barred RIAA President Cary Sherman from testifying during the trial.

"The law here is clear, as are the consequences for breaking it. As with all our cases, we seek to resolve them quickly in a fair and reasonable manner," the RIAA noted. "When the evidence is clear, we will continue to bring legal actions against those individuals who have broken the law."

Good Guys or Bad Guys?

In some ways, the RIAA wins simply by keeping public attention on the piracy issue, something it has managed to do for about four years since the first wave of lawsuits was filed, said Eric Garland, CEO of file-sharing and digital music tracking firm BigChampagne.

"It's hard to keep a story like this from falling off the front page," Garland told the E-Commerce Times. "You can sue some thousands of people, but to reach tens or hundreds of millions, you've got to have massive coverage. So, this is important in that respect."

At the same time, neither side is a clear winner in the case, he added.

"There is an aspect of losing by winning," Garland said. "It's ultimately damaging to the industry to be in the news for the battles with potential customers rather than because the latest Kanye (West) record was a huge hit. If you're in show business, you want the show part to come first not the business part."

The RIAA will not let up in its campaign, because it feels the carrot-and-stick approach is the best way to squelch piracy and enable what Garland called the "awkward transition" to digital distribution.

It's clear that consumer behavior has changed over the past 10 years. Not only has file sharing technology become entrenched, but people now use the Internet to casually share just about everything -- from photos to news stories, music and videos.

The music industry's larger problem is that despite the booming growth of online music sales , it hasn't been nearly enough to replace the lost revenue from plunging CD sales, which fell 20 percent in 2006. "To put that in perspective, if you have that kind of decline for five years, you don't have a business any more," Garland said.

PR Points

The labels' victory will likely cause some to question the legal defense used by Thomas, whose attorneys did not call any witnesses during the two-day trial. Thomas' attorney had sought throughout the proceedings to draw jurors' attention to the fact that the industry could not say for certain who was at the computer when the songs were allegedly posted.

While the RIAA could likely score some public relations points by reaching out to reduce the amount Thomas -- who has been widely portrayed as single working mother who may be driven into bankruptcy by the verdict -- it is more likely to use the case as a high-profile example and deterrent, Garland contends.

A key question in the wake of the verdict is how much the labels should be compensated for any piracy, JupiterResearch analyst Mark Mulligan told the E-Commerce Times.

While the jury picked an mount in the middle of the range proposed by the RIAA -- the top end of $150,000 per track could have cost Thomas well over $3 million for the 24 tracks they said she posted for swapping on Kazaa -- knowing how much piracy costs the industry is impossible, he said.

The industry cannot say how often a song is downloaded, since they use samples of all activity to estimate piracy and some users who swap songs may buy CDs after sampling music on a network. In addition, since most P2P (peer-to-peer) networks deliver users music based on location and other factors, even if the industry knew exactly how many people shared a certain track, it could not say whether an individual was responsible for all those downloads.

As a result, the jury may have chosen a middle ground based on the fact that the songs were made available for distribution, not the actual number of downloads.

The RIAA's approach is a sharp contrast to the industry's efforts in Europe. While there have been lawsuits brought in the UK and in mainland Europe, the industry seems to consider them a last resort. "They'd much rather use the carrot than the stick," Mulligan added.