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Intellectual Property Update: It's Not Just Big Record Labels That Stand To Gain From Newly Introduced Anti-Piracy Legislation and a $105 Million Settlement By LimeWire
By Owen J. Sloane and Rachel M. Stilwell
Copyright owners of all kinds may benefit from two seemingly unrelated recent developments:
1. A $105 million settlement to be paid by LimeWire, the now defunct file-sharing service, to the Recording Industry Association of American (RIAA); and
2. Newly-proposed legislation that, if passed, would provide new tools for combating criminal online copyright infringement.
File sharing software company LimeWire recently agreed, in an out of court settlement with the Recording Industry Association of America (RIAA), to pay $105 million in compensation for damages suffered by the major record labels as a result of LimeWire's web service that was alleged to have been “devoted essentially” to piracy of recorded music.
While this settlement is far less than the $1.4 billion initially sought by the RIAA, it is among the largest amount ever paid by a peer-to-peer service. During trial and just prior to the settlement, RIAA’s attorneys noted that Mark Gorton, who had served for the last ten years as LimeWire’s sole board member, CEO, and Chairman, had an IRA account containing $100 million and a home worth $4 million.
In March of this year, LimeWire also settled a lawsuit with the National Music Publishers Association for an undisclosed sum.
Those of us in the music business who do not have $105 million in the bank were surprised at how quickly some commentators determined that the settlement would have little effect deterring high-tech companies that make their money enabling consumer theft of copyrighted works. For example, Computerworld quoted Eric Johnson, Professor of Operations Management at Dartmouth College’s Tuck School of Business:
“’I don’t think [the settlements have] slowed piracy down an iota.’ Johnson continued, ‘With the closure of LimeWire and other major P2P networks, users have just moved in to different sources for illegal music downloads…. The RIAA has put their hands around the necks’ of every entity they could,’ Johnson said. ‘But many of the remaining ones are in the open source realm and are going to be harder to go after.’”
See Jaikumar Vijayan, "LimeWire Settlement Unlikely To Blunt Music Piracy," Computerworld, May 13, 2011.
We agree with Johnson that “the closure of LimeWire” alone may not have a demonstrable long-term deterrent effect on piracy. But there’s a difference between a web service being shut down, merely losing its sunk costs and revenue streams going forward, and that web service having to write a check for $105 million. We would hope that large payments required of companies dedicated to piracy would indeed have some deterrent effect.
After the announcement of the LimeWire settlement, the blogosphere seemed ablaze with renewed criticism of the RIAA, characterizing the organization and its members as being unnecessarily litigious rather than more accurately portraying those entities as protecting that property that rightfully belongs to them. We attribute this vilification of record labels to those who can’t differentiate the RIAA’s now-abandoned strategy of suing individual thieves, from the RIAA’s continued efforts to take down those businesses that make millions (and sometimes billions) of dollars by enabling and inducing theft.
While reasonable minds may differ as to the LimeWire settlement’s deterrent effect here in the United States, what about the vast numbers of foreign-based web services devoted to enabling online piracy of copyrighted content? These foreign-based web services that are dedicated to online piracy have proven particularly troublesome to owners of copyrighted musical compositions as well as to the record companies.
Enter new legislation.
Perhaps new law enforcement measures aimed at criminal copyright infringement and counterfeiting, both here and abroad, can help deter those who would otherwise build their businesses on enabling online piracy.
On May 26, 2011, the bipartisan Senate Judiciary Committee passed the PROTECT IP Act of 2011, in an effort to counter illegal online piracy and the illegal online sale of counterfeit goods. Introduced by Senators Patrick Leahy (D-Vt.), and Orrin Hatch (R-Utah) and Chuck Grassley (R-Iowa), the PROTECT IP Act aims to wipe out so-called “rogue websites” that are “dedicated to infringing activities” with “no significant use other than engaging in, facilitating or enabling” the sale or distribution of unauthorized works. The PROTECT IP Act is largely based on prior similar legislation that was unanimously approved by the Senate Judiciary Committee, but failed to gain further traction in last year’s lame-duck session.
Like its predecessor, the PROTECT IP Act would allow the Department of Justice to seize domains with infringing content and require ISPs to cut off connections with the offending sites. However, the newer bill also narrows the definition of what constitutes an infringing website so that the truly bad actors are targeted (rather than, for example, blogs that happen to post some infringing material).
The new bill also provides law enforcement with additional tools to stop websites dedicated to piracy and counterfeit sales. The PROTECT IP Act would allow copyright owners to seek court orders instructing advertising services and credit card companies from partnering with the infringing sites. The new bill makes search engines responsible for blocking access to these “rogue websites” if served with a court order. The bill also provides a private right of action to those whose copyrights have been infringed on such websites.
A key feature of the bill would address the vexing issue of foreign-based websites dedicated to piracy: under the PROTECT IP Act, the Department of Justice may file a civil action against the registrant or owner of a domain name that accesses either a foreign piracy-based website or the foreign-registered domain name of piracy-based website.
Some analysts have asked if this new bill is superfluous. Here’s why: the Department of Homeland Security’s ongoing “Operation In Our Sites,” which utilizes existing federal civil forfeiture laws and anti-piracy laws, has already seized dozens of domain names of piracy websites. Within the auspices of “Operation In Our Sites,” the Department of Justice asks federal courts for orders to seize the domain names of websites that are shown to be dedicated to willful copyright infringement. However, such tactics are available only against U.S.-based websites and cannot be used against domains registered outside of the U.S., since those foreign-based websites are beyond the reach of our courts and law enforcement officials. In order for a U.S. court order to have effect outside the U.S., it must be affirmed by a local court in the foreign country. Most foreign local courts have thus far declined to get involved with our country’s anti-piracy efforts. So the PROTECT IP Act would be an important tool in combating global piracy of U.S.-owned copyrighted works.
We hope that the PROTECT IP Act is made into law, and that the combined deterrent effects of this new legislation, along with civil suits by copyright holders against the worst offenders in commercial piracy, will help reduce the amount of online infringement of copyrighted works. The big record companies and movie studios are not the only owners of copyrighted content who are being robbed by the piracy-based websites. Remember that the owners of musical compositions, many of whom are themselves songwriters, are being victimized by these “rogue websites” as well as individual artists and small companies who own their master recordings.
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The publishers’ case against LimeWire is EMI April Music Inc et al v. Lime Wire LLC, U.S. District Court, Southern District of New York, No. 10-04695. The record companies' case is Arista Records LLC et al v Lime Group et al. in the same court, No. 06-05936.
The full text of the “Preventing Real Online Threats to Economic Activity and Theft of Intellectual Property Act of 2011,” otherwise known as the “PROTECT IP Act of 2011” can be found here: http://leahy.senate.gov/imo/media/doc/BillText-PROTECTIPAct.pdf.
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©2011 Gladstone Michel Weisberg Willner & Sloane, ALC. All Rights Reserved.