Music Industry Faces Dual Setbacks

Just as the reinvigorated Recording Industry Association of America (RIAA) filed its third wave of lawsuits to thwart the trading of copyrighted music online, the U.S. Court of Appeals for the District of Columbia, in a watershed ruling, struck a critical blow to the viability of those suits brought under the Digital Millennium Copyright Act (DMCA), 17 U.S.C. 512(h). On a separate but equally important front, the Supreme Court of the Netherlands has reaffirmed the legality of one type of peer-to-peer (P2P) filesharing software known as KaZaA.

The three-judge panel's ruling in Recording Industry Association of America v. Verizon Internet Services, Inc., No. 03-7015 (D.C. Cir. Dec. 19, 2003), poses a monumental setback for the industry's controversial anti-piracy campaign. The decision overturned U.S. District Judge John D. Bates' recent decision to enforce subpoenas filed against certain Internet service providers (ISPs) to divulge the identities of users who allegedly transferred copyrighted materials in violation of the Copyright Act.

The appeals court held that the DMCA simply does not apply to the popular P2P file-sharing networks currently used by tens of millions of Americans to download copyrighted songs.

The DMCA “betrays no awareness whatsoever that Internet users might be able directly to exchange files containing copyrighted works,” the court wrote.

While the appeals court noted that “stakes are large” as to the gravity of its decision, the court refrained from engaging in judicial legislation with respect to the copyright law “no matter how damaging [peer-to-peer file sharing] has been to the music industry or threatens being to the motion picture and software industries.”

The ruling throws into question at least 382 civil lawsuits filed by the RIAA since it started its legal campaign nearly 6 months ago, in addition to the 41 new lawsuits that were just filed targeting users who each uploaded at least 1000 copyrighted music files on P2P networks.

The U.S. District Court had approved use of the subpoenas, forcing Verizon to turn over the names and addresses of several Internet subscribers. Since then, Verizon has identified dozens of its other subscribers to RIAA's lawyers.

According to an organizational spokesperson, the RIAA had planned to warn another 90 users that they may be sued. Under copyright law, each defendant can be held liable for $750 to $150,000 in damages if the lawsuit is successful.

Prior to the appellate court decision, the RIAA claimed it had reached monetary settlements with 220 Internet users whom it had accused of illegally copying and distributing music online through P2P networks such as KaZaA and Morpheus.

In addition, the RIAA says that more than 1000 Internet users have voluntarily promised to stop copying music through P2P networks to avoid prosecution through its Clean Slate program.

The appeals court said one of the arguments advanced by the RIAA “borders upon the silly,” rejecting the trade group's claims that Verizon was responsible for downloaded music because such data files traverse its network.

The DMCA, passed years before downloading music over P2P networks became popular, compels Internet providers to turn over the names of suspected pirates upon subpoena from any U.S. District Court clerk's office. A judge's signature is not required. Critics contend judges ought to be more directly involved.

During oral argument and at trial, Verizon's lawyers maintained that Internet providers should be compelled to respond to such subpoenas only when pirated music is stored on computers that providers directly control, such as a Web site, rather than on a subscriber's personal computer.

In his ruling, the trial judge wrote that Verizon's interpretation “makes little sense from a policy standpoint,” and warned that it “would create a huge loophole in Congress' effort to prevent copyright infringement on the Internet.”

Cary Sherman, president of the RIAA, interprets the appeals court's decision narrowly and vows that it will not deter the organization's efforts to bring lawsuits against individual infringers.

“This is a disappointing procedural decision, but it only changes the process by which we will file lawsuits against online infringers. This decision in no way changes our right to sue, or the fact that those who upload or download copyrighted music without authorization are engaging in illegal activity. We can and will continue to file copyright infringement lawsuits against illegal file sharers,” she says.

Sherman further comments that “[t]his decision is inconsistent with both the views of Congress and the findings of the district court. It unfortunately means we can no longer notify illegal file sharers before we file lawsuits against them to offer the opportunity to settle outside of litigation. Verizon is solely responsible for a legal process that will now be less sensitive to the interests of its subscribers who engage in illegal activity.”

According to Wendy Seltzer, a staff attorney with the San Francisco-based Internet civil liberties group Electronic Frontier Foundation, the Appeals Court's decision “correctly interprets the law,” and stands as a great victory for all Internet users.

Seltzer acknowledges that the RIAA will continue to proceed with its infringement lawsuits, albeit through “John Doe” litigation, wherein the RIAA will name John Does associated with infringing IP addresses in an attempt to uncover and then prosecute named infringers via the DMCA's enforcement mechanisms. However, Seltzer points out that with the John Doe approach, subpoenas will be processed through a judge and not by the Clerk of the Copyright Office, thus allowing for direct identification challenges and other private defenses previously unavailable to alleged infringers whose identities could be revealed indirectly through their ISPs.

P2P on the International Front

In a related development, the Supreme Court of the Netherlands recently reaffirmed that the filesharing software known as KaZaA does not violate Dutch copyright law. This court is the first Supreme Court or other national high court ruling on the legality of P2P technologies such as KaZaA.

The outcome of the case, brought in a countersuit by music rights society Buma/Stemra, has been closely watched by the entertainment industry, technology businesses and consumer advocates. The Court's decision sends a strong message as to the propriety of P2P technology across the European Union and around the world.

The decision of the Supreme Court confirms a March 2002 ruling of the Amsterdam Court of Appeal. The Court of Appeal determined that the offering of KaZaA neither results in direct copyright infringement nor is otherwise unlawful toward the plaintiff Buma/Stemra.

The KaZaA program enables Internet users to share multiple types of files. Once the program is downloaded from the Internet and installed on a PC, users can share files and download files from other users. This is done without any intervention of KaZaA or others. Among the types of files that the KaZaA users may exchange are copyrighted music files. Buma/Stemra objected to the KaZaA software because of the copyrighted music files offered by users. The Supreme Court ruled that Buma/Stemra had no right to object to the software providers. However, the Supreme Court did not rule on the issue of whether individual file-sharers violate the copyrights of the music industry.

Just as the reinvigorated Recording Industry Association of America (RIAA) filed its third wave of lawsuits to thwart the trading of copyrighted music online, the U.S. Court of Appeals for the District of Columbia, in a watershed ruling, struck a critical blow to the viability of those suits brought under the Digital Millennium Copyright Act (DMCA), 17 U.S.C. 512(h). On a separate but equally important front, the Supreme Court of the Netherlands has reaffirmed the legality of one type of peer-to-peer (P2P) filesharing software known as KaZaA.

The three-judge panel's ruling in Recording Industry Association of America v. Verizon Internet Services, Inc., No. 03-7015 (D.C. Cir. Dec. 19, 2003), poses a monumental setback for the industry's controversial anti-piracy campaign. The decision overturned U.S. District Judge John D. Bates' recent decision to enforce subpoenas filed against certain Internet service providers (ISPs) to divulge the identities of users who allegedly transferred copyrighted materials in violation of the Copyright Act.

The appeals court held that the DMCA simply does not apply to the popular P2P file-sharing networks currently used by tens of millions of Americans to download copyrighted songs.

The DMCA “betrays no awareness whatsoever that Internet users might be able directly to exchange files containing copyrighted works,” the court wrote.

While the appeals court noted that “stakes are large” as to the gravity of its decision, the court refrained from engaging in judicial legislation with respect to the copyright law “no matter how damaging [peer-to-peer file sharing] has been to the music industry or threatens being to the motion picture and software industries.”

The ruling throws into question at least 382 civil lawsuits filed by the RIAA since it started its legal campaign nearly 6 months ago, in addition to the 41 new lawsuits that were just filed targeting users who each uploaded at least 1000 copyrighted music files on P2P networks.

The U.S. District Court had approved use of the subpoenas, forcing Verizon to turn over the names and addresses of several Internet subscribers. Since then, Verizon has identified dozens of its other subscribers to RIAA's lawyers.

According to an organizational spokesperson, the RIAA had planned to warn another 90 users that they may be sued. Under copyright law, each defendant can be held liable for $750 to $150,000 in damages if the lawsuit is successful.

Prior to the appellate court decision, the RIAA claimed it had reached monetary settlements with 220 Internet users whom it had accused of illegally copying and distributing music online through P2P networks such as KaZaA and Morpheus.

In addition, the RIAA says that more than 1000 Internet users have voluntarily promised to stop copying music through P2P networks to avoid prosecution through its Clean Slate program.

The appeals court said one of the arguments advanced by the RIAA “borders upon the silly,” rejecting the trade group's claims that Verizon was responsible for downloaded music because such data files traverse its network.

The DMCA, passed years before downloading music over P2P networks became popular, compels Internet providers to turn over the names of suspected pirates upon subpoena from any U.S. District Court clerk's office. A judge's signature is not required. Critics contend judges ought to be more directly involved.

During oral argument and at trial, Verizon's lawyers maintained that Internet providers should be compelled to respond to such subpoenas only when pirated music is stored on computers that providers directly control, such as a Web site, rather than on a subscriber's personal computer.

In his ruling, the trial judge wrote that Verizon's interpretation “makes little sense from a policy standpoint,” and warned that it “would create a huge loophole in Congress' effort to prevent copyright infringement on the Internet.”

Cary Sherman, president of the RIAA, interprets the appeals court's decision narrowly and vows that it will not deter the organization's efforts to bring lawsuits against individual infringers.

“This is a disappointing procedural decision, but it only changes the process by which we will file lawsuits against online infringers. This decision in no way changes our right to sue, or the fact that those who upload or download copyrighted music without authorization are engaging in illegal activity. We can and will continue to file copyright infringement lawsuits against illegal file sharers,” she says.

Sherman further comments that “[t]his decision is inconsistent with both the views of Congress and the findings of the district court. It unfortunately means we can no longer notify illegal file sharers before we file lawsuits against them to offer the opportunity to settle outside of litigation. Verizon is solely responsible for a legal process that will now be less sensitive to the interests of its subscribers who engage in illegal activity.”

According to Wendy Seltzer, a staff attorney with the San Francisco-based Internet civil liberties group Electronic Frontier Foundation, the Appeals Court's decision “correctly interprets the law,” and stands as a great victory for all Internet users.

Seltzer acknowledges that the RIAA will continue to proceed with its infringement lawsuits, albeit through “John Doe” litigation, wherein the RIAA will name John Does associated with infringing IP addresses in an attempt to uncover and then prosecute named infringers via the DMCA's enforcement mechanisms. However, Seltzer points out that with the John Doe approach, subpoenas will be processed through a judge and not by the Clerk of the Copyright Office, thus allowing for direct identification challenges and other private defenses previously unavailable to alleged infringers whose identities could be revealed indirectly through their ISPs.

P2P on the International Front

In a related development, the Supreme Court of the Netherlands recently reaffirmed that the filesharing software known as KaZaA does not violate Dutch copyright law. This court is the first Supreme Court or other national high court ruling on the legality of P2P technologies such as KaZaA.

The outcome of the case, brought in a countersuit by music rights society Buma/Stemra, has been closely watched by the entertainment industry, technology businesses and consumer advocates. The Court's decision sends a strong message as to the propriety of P2P technology across the European Union and around the world.

The decision of the Supreme Court confirms a March 2002 ruling of the Amsterdam Court of Appeal. The Court of Appeal determined that the offering of KaZaA neither results in direct copyright infringement nor is otherwise unlawful toward the plaintiff Buma/Stemra.

The KaZaA program enables Internet users to share multiple types of files. Once the program is downloaded from the Internet and installed on a PC, users can share files and download files from other users. This is done without any intervention of KaZaA or others. Among the types of files that the KaZaA users may exchange are copyrighted music files. Buma/Stemra objected to the KaZaA software because of the copyrighted music files offered by users. The Supreme Court ruled that Buma/Stemra had no right to object to the software providers. However, the Supreme Court did not rule on the issue of whether individual file-sharers violate the copyrights of the music industry.