Theft is a problem every industry confronts in some form. Businesses that rely on copyrights to protect their products and services - such as publishers and film producers, among others - are no different. It is no secret that online piracy of entertainment content such as films and photographs is one of the more prevalent forms of theft today. While most people believe it is wrong to steal a magazine or book from a store, many Internet users have something of an "anything goes" mentality toward online content, expecting free access and paying no heed to copyrights.
Here, I will share some lessons learned through representing news and information publishers, software and record companies, and others in the fight against copyright infringement, in individual cases and broader anti-piracy campaigns of the Software & Information Industry Association and the Recording Industry Association of America. Whether the goal is to change Internet users' expectations and habits or simply address instances of copyright infringement as they arise, it is a challenging but winnable battle.
For many copyright owners, criminal enforcement is the preferred method of pursuing infringers. While a number of federal law-enforcement branches have made copyright enforcement a priority - and have prosecuted and obtained jail sentences in several recent cases - the reality is that most garden-variety piracy cases cannot be pursued by law-enforcement agencies with many priorities to balance.
Fortunately, for content creators, U.S. copyright statute includes one of the most potent civil-damages schemes of any area of law. Congress repeatedly has recognized and cited the copyright industries' significance to the U.S. economy and the need for strong deterrence of infringement. Accordingly, the copyright statute has been improved frequently, most recently in 1999 to increase penalties for infringement and, in particular, Internet piracy.
Copyright "statutory damages" are relatively unique and can yield huge awards without the typical and sometimes arduous requirement that the plaintiff prove the amount of economic harm. For each work that is infringed, the copyright owner may recover between $750 (or lower in rare cases of "innocent" infringement) and $150,000. The judge or jury determines each statutory amount based on the totality of circumstances, looking at a potentially wide range of factors, such as the extent of the defendant's willfulness or knowledge, the amount needed to deter similar conduct in the future, the defendant's ability to pay damages, and the relative harm done to the plaintiff and value of the copyrighted works, when it can be determined.
Statutory damages are a potent remedy for two reasons. For cases in which multiple works are infringed - which is typical in online-piracy cases - the multiple statutory awards aggregate. And the wide range and discretion given to the courts force defendants to take seriously the prospect of crippling awards, therefore sometimes facilitating a fair settlement at minimal cost to the plaintiffs - and eventually deterring future infringement.
The threat of statutory damages makes the need for a copyright trial relatively rare, especially when the infringement is clear and the only real question is related to damages. When defendants choose to take their chances in court, headline-grabbing penalties often are the result.
In 2003, I was involved in litigating the case of Lowry's Reports Inc. v. Legg Mason Inc. (District of Maryland, 2003). Lowry's, a small, family-owned newsletter publisher, was awarded more than $18 million in statutory damages for Legg Mason's internal copying and distribution of 240 financial newsletters. The case was reported widely in the national media, and Legg Mason effectively became a poster child for copyright compliance in the financial-services industry. In copyright-compliance courses I have conducted around the country, virtually every corporate librarian who attends already is well versed in the Lowry's case.
Statutory damages are effective against more than just Fortune 500 companies. Recently, a group of record companies sued a single mother in Duluth, Minn., who - unlike thousands of other infringers receiving notices from the Recording Industry Association of America - decided to fight the charge of illegal file sharing, despite computer evidence of the infringement. Following a short jury trial, Jammie Thomas was ordered to pay statutory damages topping $220,000 for a sample set of 24 songs. Regardless of whether the full amount is collected - Thomas since has publicly discussed filing for bankruptcy - copyright industries have hailed the case's result as a strong deterrent to file sharing and validation of enforcement efforts.
As an alternative to statutory damages, a copyright owner can opt to recover "actual damages," or profit received by the defendant. In some cases, this may be a preferable remedy - for example, when the defendant makes and distributes a large number of copies of one or a few works. Last year, a federal jury in Pennsylvania assessed a $19 million profit award against USI MidAtlantic Inc. and one of its employees for illegally copying and using copyrighted insurance forms owned by the Graham Co.
In addition, the Copyright Act permits a plaintiff to recover costs, including attorney fees, from the defendant. The trial judge has discretion in this regard; when determining whether further penalty is merited, judges typically seem to weigh the amount of the damages award and extent of willfulness.
In order to have the option to pursue statutory damages, the copyright owner must register the work with the U.S. Copyright Office prior to the infringement or within three months of the work's first publication. Registration is easy and inexpensive, on the order of $45 per registration. Instructions can be found at Copyright.gov. Additionally, enforcement efforts are helped by ensuring any agreements with distributors, Internet providers or other intermediaries provide clear rules and obligations regarding use and distribution of the content, and placing clear copyright notices and warnings on the works.
When a business learns of online piracy of its content, at least two initial decisions must be made. The first is whether to issue some warning, demand for payment and/or takedown request by letter, versus immediately filing a lawsuit. Different circumstances may call for different approaches. At the Software & Information Industry Association, for example, we typically do not send warning letters before filing lawsuits in cases of eBay-auction piracy. One reason is that the infringing seller's real identity sometimes cannot be found until after we file suit and take initial discovery. Also, in our experience, warning letters may merely cause the offending eBay user to drop that screen name and continue using others. On the other hand, when we learn of alleged piracy by a corporation, we usually send the offending corporation a letter before filing suit. The letter invites the corporation to perform a self-audit and report the results to SIIA, thereby facilitating possible settlement of claims without the need for expensive lawsuits. This approach often results in a fair, sometimes confidential, settlement.
The second initial question is whether to direct action to the party that is directly responsible for the infringement or to a third-party business, such as the Internet service provider. Courts have interpreted the copyright statute to impose "indirect" liability upon a party that "induces infringement" by others, or knowingly "causes or materially contributes to" infringement by another. In addition, a party that has the right and ability to supervise the infringing conduct and has a direct financial interest in the exploitation of infringement may be held "vicariously" liable. In a nutshell, these terms mean that in some cases, Internet service providers such as website hosts or aggregators may be liable for infringement committed by their users, who sometimes may be more difficult or expensive to identify and pursue. The Digital Millennium Copyright Act imposes some limitations on Internet service providers' liability in certain circumstances.
The rules for indirect liability are somewhat complex and can involve exceptions within exceptions. The adult entertainment industry has played a large role in shaping this area of copyright law. In one case, for example, photograph publisher ALS Scan Inc. demanded ReMarq Communities remove user-posted newsgroups that contained copyrighted photographs of ALS Scan models. ReMarq refused, claiming technical deficiencies in ALS Scan's request. A federal appellate court eventually ruled ReMarq's refusal removed its DMCA shield and subjected it to potential liability for infringement by its users. Similarly, Playboy Enterprises Inc. has battled service providers in a variety of precedent-setting copyright cases for more than a decade, and Perfect 10 recently has taken on such service-industry giants as Google, Amazon and Visa.
As a practical matter, some service providers will voluntarily comply with copyright owners' requests to assist in the removal and prevention of infringement and/or to assist in the identification of users. Others may attempt to avoid action unless they believe they are legally compelled to do so. Sometimes, the only way to find out which is which is to ask.
In 1987, the SIIA's predecessor organization (the Software Publishers Association) recognized the common enforcement interests of many of its members and established the first coordinated industry enforcement and litigation program. The purpose was to protect copyrighted digital content and help educate consumers about compliance. Initially focused on internal corporate misuse of software, the SIIA programs have grown to include other content, such as news and information publications, in a wide variety of contexts. Similarly, other industry organizations, as well as many individual content producers, now have departments dedicated to enforcement or anti-piracy.
Most aspects of the programs described here are "content-neutral" and could be implemented within any industry or by individual companies.
SIIA's corporate enforcement programs, typically involving internal distribution of content or use of unlicensed software, are source-driven. That is, employees, ex-employees, consultants, contractors or others "on the inside" may anonymously report infringement to SIIA, and we will investigate. After years of publicity, the programs are well known to professionals in the software industry and others, and we receive dozens of confidential reports monthly - sometimes weekly - via our hotline and website.
The corporate programs include well-publicized rewards, which we believe improve the cooperation and quality of information we receive from sources. If a source chooses to disclose his or her identity and agrees to our terms and conditions, SIIA will award up to $1 million and preserve the source's confidentiality (to prevent retaliation). An award schedule guides the amount, which depends on various factors, including the terms of the eventual settlement.
Corporations accused of infringement typically are given the opportunity to self-audit and privately negotiate a settlement with SIIA; the settlement includes purchasing the required licenses from copyright owners. In some cases, the settlements are made public for deterrence purposes. Recently, SIIA announced a widely reported $300,000 settlement with the midsize consulting firm Knowledge Networks Inc. on behalf of several publishers. The terms included non-monetary components such as attending SIIA-sponsored copyright-compliance courses.
In addition to litigation, corporate programs typically include educational and public-relations initiatives. Through a partnership with LicenseLogic LLC, SIIA provides one-day "certified software manager" and "certified content-rights manager" courses around the country. The courses, which offer certification exams, provide professionals the copyright and licensing knowledge they need to maintain compliance in their organizations. Additionally, public-relations campaigns such as "Don't copy that floppy" and "It's not a copy. It's a crime" have mixed humor with a serious message of copyright compliance.
Enforcement against individual Internet users and websites involve other considerations. Due to the high volume of illegal software sold on eBay - some estimate the rate of infringement to be well above 90 percent - SIIA recently established its Auction Litigation Program. SIIA staff members - and third-party agents, in some cases - monitor eBay for infringing content, conduct test buys to confirm infringement and build cases against illegal sellers. Because it is so easy for users to change identification and continue their illegal activities, SIIA typically files suits without sending cease-and-desist letters. Close to a dozen ALP cases have been brought, resulting in settlements ranging from a few thousand dollars to more than $200,000 each, and regular suits will continue on behalf of software- and publishing-company members.
In some instances, egregious online infringers may be reported to federal law enforcement, such as the FBI and the Department of Justice Computer Crime and Intellectual Property section. While criminal proceedings are more complicated and take longer to develop, several high-profile convictions have been obtained in recent years. In 2006, in two separate cases referred to law enforcement by SIIA, Danny Ferrar and Nathan Peterson were sentenced to six years and seven years in federal prison, respectively, for operating software-piracy websites that had generated millions of dollars in profit. In other criminal investigations, the government has found piracy accompanied by other crimes involving elements such as drugs and guns. (In some countries, it is common for organized-crime rings to be behind piracy).
A variety of companies offer technological tools and consulting services to assist online monitoring and copyright enforcement. Two such companies, Bay TSP and MediaSentry, have done significant work in the entertainment industries, particularly in addressing file-sharing infringement. In addition, fingerprinting, watermarking and related technologies are increasingly implemented across a variety of industries to limit or track illegal proliferation of copies.
Enforcement against individual users online poses some challenges that are more difficult than those related to corporate enforcement. The sheer volume of potential cases can be overwhelming. The RIAA, for example, has brought more than 20,000 cases against users of peer-to-peer file-sharing services such as Limewire and Grokster. But while it is difficult to measure the extent of success achieved, there is little doubt - anecdotally and statistically - that the suits and accompanying publicity (along with the growth of legal services such as iTunes) have helped change many consumers' perceptions and behaviors.
Piracy can pose a significant economic threat to any business based on the sale or distribution of content. Copyright law, however, in combination with sound business and public-relations strategies, can be an effective sword in redressing and helping deter infringement.
-Scott E. Bain
Scott Bain is the litigation counsel for the Software & Information Industry Association, a Washington, D.C.-based trade association representing digital publishers and software companies. Previously, he was vice president of legal affairs for the Recording Industry Association of America. He specializes in copyright litigation and policy.
This article originally appeared in the March 2008 edition of AVN Online magazine. To subscribe to AVN Online, visit AVNMediaNetwork.com/subscriptions/ .
