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Ruling Takes Steam Out of RIAA's Legal March

For the past five years, the Recording Industry Association of America has been prosecuting people -- and threatening to prosecute many more -- for sharing copyrighted content online without authorization. Its lawsuits have been based primarily on two legal arguments:

1. downloading copyrighted content from unauthorized sources such as peer-to-peer (P2P) networks is illegal; and
2. so is placing that content online.

An admission by the federal judge presiding over the Jammie Thomas case that he made a "manifest error" during the trial has effectively put a fork in theory No. 2 -- and it's just about done.

Jammie Thomas, of course, was the defendant in the first file-sharing lawsuit ever to go to trial. Last year, a jury found the Minnesota woman liable for swapping two dozen songs, and the judge ordered her to pay US$222,000 to Capitol Records.

Symbolic Victory

The verdict was a huge symbolic victory for the recording studios. After years of collecting $3,000 settlements that amounted to fines from people it accused of copyright infringement, the Thomas case actually provided validation from the judicial system.

Plus, the specter of a $222,000 judgment no doubt made an impression on people engaged in trading music files online -- as well as those thinking of mounting a challenge to the industry's arguably heavy-handed legal tactics.

"If the court vacates its earlier judgment, it removes the largest victory the RIAA has on the books to date -- a victory that is certainly making people think twice about downloading music online without paying for it," Douglas Panzer, an intellectual property attorney at Caesar, Rivise, Bernstein, Cohen & Pokotilow, told the E-Commerce Times.

Now, though, it looks like Thomas will get another day in court.

Tangible Setback

The judge in the Thomas case, Michael Davis, said he made a "manifest error of law" in giving his instructions to the jury. He told them "the act of making copyrighted sound recordings available for electronic distribution on a peer-to-peer network, without license from the copyright owners, violates the copyright owners' exclusive right of distribution, regardless of whether actual distribution has been shown."

A pre-existing case in the Eight Circuit -- which was not cited in the Thomas trial -- conflicts with this theory. In that case, National Car Rental System v. Computer Associates, the court found that infringement "requires an actual dissemination."

The judge's admission in the Thomas case is an important setback for the RIAA, Charles Baker, a partner with Porter & Hedges, told the E-Commerce Times. "It makes its burden of proof that much more difficult. Now they have to undertake the extra step of actually proving that content was downloaded."

Judges do not admit to making mistakes very often, he added, which also underscores the importance of this new development.

Furthermore, with several courts making similar findings, it appears as though a consensus is developing.

The most recent challenge to the RIAA's opinion on this matter took place last month, when a federal judge ruled against the industry in Atlantic v. Howell.

In 2006, the RIAA sued husband and wife Jeffrey and Pamela Howell for copyright infringement, alleging that the couple had made protected music available for peer-to-peer file-sharing through Kazaa. The RIAA asked U.S. District Judge Neil V. Wake for a summary judgment, citing the presence of the content in a shared folder.

Wake denied the RIAA's request on grounds that it was unclear whether the husband or wife had put the content in the folder -- and he left open the question of whether its presence there constituted copyright infringement in the first place.

True, only the Supreme Court can render a final decision when several circuit courts disagree on a matter, and it may be that the industry will decide to push its argument all the way to the highest chamber.

That said, the legal arguments supporting a narrow definition of distribution are very strong, Dave O'Neil, a partner with O'Neil & McConnell, told the E-Commerce Times.

A brief filed by the Electronic Freedom Foundation "argues that the Copyright Act is supposed to be narrowly defined," he pointed out, "and that a judge should not expand the definition to meet a 'gut' feeling he or she has about a case."

The EFF also argues that Congress has had opportunities to expand the Copyright Act and has chosen not to do so, O'Neil added.

"The troubling aspect of these cases is that you have a perfect storm with the RIAA trying to squeeze in a loosey goosey definition of what is distribution -- and then they don't have to prove damages," O'Neil concluded.

$222,000 Club

In the event Thomas does get a new trial and is once again found liable for damages, they could well amount to less than the $222,000 she is currently supposed to pay, said Randy M. Friedberg, a partner with Olshan Grundman Frome Rosenzweig & Wolosky.

Thomas knowingly posted 24 songs on the file-sharing network, the jury determined, and was ordered to pay $9,250 per song. "The standard that the judge is now applying in the case means that the RIAA has to show how many people downloaded those songs," Friedberg said.

Practically speaking, the number of downloads could be very difficult to prove at this point, he noted.

The judge's admission could well neutralize a potent weapon the RIAA had been yielding, said attorney Panzer of Caesar, Rivise et al.

"There's no doubt that the RIAA is hoping to accumulate more large monetary judgments for their deterrent effect," he commented. "Having the $222,000 Thomas judgment thrown out in favor of a new trial would put that strategy back to square one for the RIAA."

Even worse, returning to court for a new trial will allow Thomas to raise the issue of the constitutionality of such a huge award, noted Panzer.

"According to Thomas' lawyers, the actual damages suffered by the record labels may be 70 cents per song file. If the court were to find the damage award unconstitutional -- or to limit the award to 10 times actual damages, as some courts have done in other areas of the law, that would prove absolutely devastating to the RIAA," he said.

"Imagine...a user could be found liable for infringing the copyright in 1,000 songs. At 70 cents per song, with a limit on damages of ten times actual damages, you're looking at a maximum award of $7,000. It doesn't take a finance degree to understand that although it's still a lot of money for the average person, the deterrent effect of $7,000 is nowhere near that of $222,000," Panzer concluded.