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Lawsuits Try to Stop Music Sharing Through the Pipes of the Internets

by TChris

Reasonable minds can differ about the degree to which illegal downloading of music harms artists or recording companies. Some argue that few artists ever see their royalties anyway, and that the free distribution of their music encourages more people to attend concerts where artists are more likely to profit. Others argue that recording companies can't stay in business if music is stolen rather than purchased.

However you come out on that debate, the recording industry's heavy-handed practice of suing parents, grandparents, and other unwitting computer owners for file sharing by kids or grandkids, often without their consent or knowledge, isn't creating sympathy for the industry. Papers are filed in court and the defendants are given an ultimatum: pay us a few thousand dollars or we seek a lot more in court, including attorney's fees. Everyone settles, and the settlement proceeds fund more suits. For some people, it's an expensive lesson: pay attention to what your kids are doing on the computer. For others, it's a nightmare.

Iola Scruse of Louisville, a 66-year-old grandmother on Social Security, said her three teenage grandchildren downloaded music using an Internet account in her name. Her case ended up as a default judgment because she did not respond to the lawsuit. So Scruse, who also is racking up medical bills for dialysis, must pay $6,000 for the 872 songs her grandchildren downloaded, in addition to court fees.

The lawsuits benefit the big law firms who work for the music industry, and the paralegals they hire to process the settlements, but it doesn't stop people from sharing music files.

A New York-based market research firm, The NPD Group, reported that 6.9 million households illegally downloaded at least one music file from a P2P service in April, up from 6.2 million in April 2005. ... [L]ast April there were 63 million legal downloads, according to Soundscan, versus 315 million illegal downloads, according to NPD.

Republicans who favor tort reform gripe about "frivolous" medical malpractice cases clogging the court system. What about the thousands of suits the music industry brings to extort settlements in a losing battle to stop file sharing? Don't federal courts have anything better to do than to open and close files for the music industry?

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    One could also question whether those kids who downloaded would have actually bought the music. Just saying.

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#2)
    by Gabriel Malor on Mon Jul 31, 2006 at 03:32:53 PM EST
    Republicans who favor tort reform gripe about "frivolous" medical malpractice cases clogging the court system.
    I'm confused about this line. So Republicans gripe about tort reform. Are you saying that Republicans should gripe about this instead? That Democrats should gripe about this? That Democrats should gripe about tort reform too? The line just doesn't have any relation to what came before or after it.

    How should the music industry combat illegal downloading? I tend to agree they are fighting a losing battle. But I don't see why they can really be faulted for going down fighting.

    One could also question whether those kids who downloaded would have actually bought the music. Just saying. Libby, The RIAA's approach to this is insane, but that's a stupid argument. If those same kids had stolen an iPod would you defend them by saying they wouldn't have bought it in the first place?

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#5)
    by roger on Mon Jul 31, 2006 at 06:45:51 PM EST
    RIAA are idiots. Just demand discovery. They can never comply. All bluster.

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#6)
    by cpinva on Mon Jul 31, 2006 at 07:09:18 PM EST
    tend to agree they are fighting a losing battle. But I don't see why they can really be faulted for going down fighting.
    the key word in this statement is "losing", which is exactly what the big recording/distribution companies are doing, to themselves. sure, legally, they have every right to sue, early and often, for illegal downloading. that said, ultimately, they're slitting their own throats by doing so. the combination of rotten PR and the ease of loading/selling recordings on the net is slowly making them dinasaurs of the business. they are merely accelerating their own extinction. i submit that in 20 years (or less) the major labels will be seen in museums, as relics of a bygone era in the music business. artists will no longer need them, they'll sell direct to their fans, and make more money by doing so. historically, the music distributors did all they could to screw the artists out of their royalties. though technically they are within their rights, i'm having just wee bit of problem generating much sympathy for them, as are many, many others.

    Full disclosure: From 1985 to 2005 I worked in licensing for ASCAP. While ASCAP only licenses the non-dramatic public performance of their songwriter and publisher members works and doesn't have a dog directly in this fight, I can tell you that the same excuses that permeate the discussion about illegal downloading and file copying (it's not sharing, it's copying) were the ones I faced at ASCAP. I can't tell you how many times I heard broadcasters make remarks such as "Bruce Springsteen already makes enough money" or "You wouldn't sell records if it wasn't for airplay on the radio (ignoring the fact that people wouldn't tune in to radio if they were reading the telephone book). Everyone wants to go to heaven, but no one wants to die. Everyone wants to get the music and if they have an option to get it by copying from the CD to the computer, many, but not everyone will do just that all too often. Some argue that few artists ever see their royalties anyway That argument is such a canard. They certainly won't see the royalties if no one pays for the recordings because they can get it for free. Also, it shows an ignorance of the industry. There are many songwriters who don't record, but they receive royalties from mechanical rights (recordings) and performance rights (ASCAP and BMI). If people want to direct their energy to an area that would benefit artists they should consider supporting a measure for a performance royalty for recording artists. The US is one ofthe few nations that doesn't have one and that is the fault of the powerful broadcasting lobby.

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#8)
    by jimakaPPJ on Mon Jul 31, 2006 at 07:24:34 PM EST
    This is a toughie. Technology is over taking established ways of doing business. My view is that you should be able to download single songs for a modest fee. Of course some of the kids don't have access to a credit card. However, it should be easy for record stores to download them for the kids. Cut inventory, etc. But that means that the business model of selling $20 CD's with two songs people want to hear, and the rest junk, would now be obsolete. The industry should remember it got rich when technology produced cheap 45's. The industry should

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#9)
    by cpinva on Mon Jul 31, 2006 at 07:25:33 PM EST
    full disclosure randy paul: i am in the business of auditing said companies. you are full of it. the amounts paid out in royalties, to the actual artists, is but a mere fraction of the total revenues received. it barely registers as "material" on the income statements. tell you what, pull the 10k's of the pubicly held recording/distribution companies, and see what % of total annual operating expenses royalty payments constitute. by comparison to t&e (travel & entertainment), it's damn small. you also neglected to mention that, in many cases, the artists themselves bear a share of the production/promotion/distribution expenditures, taken out of their royalties up-front. this is hardly the company bearing the entire risk of an artist's success, as they would have you believe. for the record, i am both a cpa and a federal agent, so i have some clue of what i speak. also for the record: how much bruce springsteen does or doesn't make is irrelevant to the issue at hand: the efficacy of RIAA's blundering, heavy handed tactics. tactics which may serve to insure a substantial reduction in mr. springsteen's future earnings. nothing quite as painful, and avoidable, as cutting off your nose, to spite your face. actually, as i think about it, mr. springsteen is perfectly positioned to jettison his recording company, as soon as his current contract expires, he doesn't even need them anymore.

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#10)
    by Aaron on Mon Jul 31, 2006 at 07:30:44 PM EST
    Randy, that's a fair summary of the industry perspective, but I'm still inclined to ask.... If I choose not to stand tight-lipped when everybody else is singing "Happy Birthday" at my daughter's upcoming second birthday party, how big of a check should I cut to ASCAP? ;-)
    I'm confused about this line. So Republicans gripe about tort reform. Are you saying that Republicans should gripe about this instead?
    I think it was an observation of the irony in an industry that is very well represented by lobbyists, has Congress repeatedly extending copyrights, and has an enormous litigation budget targeting... well, deep pockets. Not the actual downloaders, because it doesn't really care who they are, but their parents, grandparents, or whomever else happens to be paying the ISP's bill. Not only do they not care if they bring a frivolous case against an innocent party, they are happy to use such suits to shake down those parties for settlement cash. Isn't that what Congress tells us is so bad about lawsuits by individuals against corporate giants? Why isn't it a two-way street?

    I know what I'm talking about CPINVA. As for ignoring things you're also ignoring a large number of independent record labels. They also suffer from theft via downloading. As for being full of it, if you had read carefully what I wrote, you would also note that much of what I discussed concerned songwriters who are also artists in their own right. Their royalties for mechanical rights are set by the Copyright Office and are currently in the neighborhood of 7.5 cents per unit manufactured, to be divided with the publisher and whatever cowriters there may be. The labels have no control over this rate and the royalties are paid to the Harry Fox Agency who distributes them to their members. If one is a prolific songwriter and is wise enough to be their own publisher, this can be lucrative, but it is also impacted by illegal downloading. Performance royalties can be even more lucrative for songwriters that get significant airplay. My last year at ASCAP income from terrestrial radio alone topped $180,000,000 and 86 cents on the dollar went back to the members. you also neglected to mention that, in many cases, the artists themselves bear a share of the production/promotion/distribution expenditures, taken out of their royalties up-front. this is hardly the company bearing the entire risk of an artist's success, as they would have you believe. I didn't mention it because it wasn't really relevant to my larger point. Lots of musicians have formed their own labels. Ani DiFranco comes to mind right away. Downloading her stuff illegally hurts her. Moreover, the mentality of illegally downloading copyrighted material affects artists in the developing world. many musicians in Brazil are protesting vigorously over piracy including illegal downloading. It is even worse in Paraguay, where there is credible evidence that money generated from pirated works is being used to fund terrorist activities. One would think a big tough federal agent like you would be concerned about that.

    Randy, that's a fair summary of the industry perspective, but I'm still inclined to ask.... If I choose not to stand tight-lipped when everybody else is singing "Happy Birthday" at my daughter's upcoming second birthday party, how big of a check should I cut to ASCAP? ;-) Here's where a little knowledge goes a long way. Section 101 of the US Copyright Law defines a public performance as follows:
    To perform or display a work "publicly" means-- (1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.
    Accordingly, as ASCAP has only the right to license public performances, then you would have nothing to worry about.

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#13)
    by Johnny on Mon Jul 31, 2006 at 08:58:49 PM EST
    What the RIAA is doing is idiotic... They are chasing the truly small fish in the piracy sea. I understand the complaints of the artists, and while I cannot vouch for everyone else indulging in "previewing" music via the internet or P2P, my own experiences lead to me purchasing many hudnreds of dollars worth of CD's I would never have bought otherwise... and lead to me NOT buying some truly sh!tty music. China is producing giant quantities of pirated music, hell, pawnshops move tens of millions of CD's a year through their doors. No royalties paid on that, either. XM Radio allows super easy copying of (admittedly crappy quality, even crappier than the 128 kbps offered by itunes)digital music. The RIAA (and the MPAA, and the BSA) all point and yell: "They cost us billions and billions!" Not true. While I do not condone compulsive file-sharing, most people would never have spent that money in the first place. It is a phantom dollar they are crying over. Even more true for the software companies. Some 17 year old kid downloads AutoCAD 2007, and Autodesk cries about 4000 dollars in "lost revenue". I am sure that kid was saving Burger King checks to buy that software. The music industry missed the boat on the digitala age, and it is chomping them in the a$$, big time. People will pay for the music they want, but most people simply do not, or will not, pay for music they do not want. How many songs has iTunes sold? A billion? How many full albums? 8? These clowns tried this crap when reel-to-reel became available, when VCR's came out, and now computers. Sony tried some serious virus-like stuff at preventing people exercising fair use. You cannot legally make a legal back-up copy of the DVD you own. Many CD's are copy-protected now. The record companies are pi$$ing people off, people that have "mad hacker skills", people that continue to circumvent protections. People that distribute those tools. People that break the law in order that others can make legal copies of their property. Defend the RIAA's right to sue all you want, that is their right, but they are only shooting themselves in the foot. Using low-level extortion techniques. "Your IP downloaded music, give me 4000 dollars."
    "Last month, the Supreme Court unanimously ruled that businesses that encourage the theft of music can be held accountable for their actions," said RIAA President Cary Sherman. "For businesses and individuals alike, the authority and credibility of the Court's decision could not be more clear: downloading without permission is 'garden variety theft.' We will continue to send a strong message to the users of these illicit networks that their actions are illegal, they can be identified and the consequences are real."
    Ha... Imagine a ruling like that directed at automakers or gun makers. RIAA: That burnign sensation is the multiple rounds of ammo tearing your foot apart.

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#14)
    by Al on Mon Jul 31, 2006 at 11:37:42 PM EST
    I am very far from an expert on this matter, but something seems wrong with a business model where you make money by bullying indigent women on dialysis. Randy Paul, from what I know about Paraguay, smuggling anything from cigarettes to stolen vehicle parts has been the main national industry for generations. I don't see the connection with downloading music, though. Are you suggesting these wily Paraguayans are downloading songs, burning them on CD's, selling them on the international market for dodgy CD's and funnelling the proceeds to Al Qaeda? Sounds a bit far-fetched to me. I would think cocaine is a lot more profitable. In any case, good luck to the RIAA with trying to persecute Paraguayan smugglers in the tropical jungle. They should probably stick to frightening little old ladies, it's a lot easier.

    Your headline is wrong. Everyone knows the internet is a bunch of tubes, not pipes.

    This has been discused many many times before, but I will add these two points: Others argue that recording companies can't stay in business if music is stolen rather than purchased. So what? Where in the Constitution does it say a particular business model is in anyway protected? Bring on Schumpeter and the destructive creation. Defense Attorneys should defend people, not corporations or business models! We already pay licensing fees for information in the forms of mandatory fees added to blank cassettes and fees added to blank CDs (some forms of CDs not all CDs). Considering how many of those CDs and cassettes are/were never used for music, I would say the consumder is being screwed. For 20 years, Bill Gates and others like him have complained that the average Chinese family is stealing his software. Compare the cost of Windows and Microsoft Office (roughly $200 + 400) to the average Chinese income, especially 20 years ago, and consider how many people were going to buy his malware. It would be curious then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property. If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it. Its peculiar character, too, is that no one possesses the less, because every other possesses the whole of it. He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me. That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation. Inventions then cannot, in nature, be a subject of property. Thomas Jefferson to the RIAA, MPAA, and Randy Paul: suck it!

    Thomas Jefferson to the RIAA, MPAA, and Randy Paul: suck it! There's a mature response. We already pay licensing fees for information in the forms of mandatory fees added to blank cassettes and fees added to blank CDs (some forms of CDs not all CDs). Not for regular tape cassettes, VHS tapes, DVD-R, DVD+R's etc. Indeed, the only ones included in that description are DAT tapes and recordable CD's for music only. These can be used in component stereo CD burners which is not where most people burn CD's. You're wrong on the facts. Al, The problem is that it encourages a culture in which people believe getting something for nothing is acceptable. All over Brazil, you can see people selling illegal copies of CD's with impunity. Most of them come from Paraguay. That's one of the areas in which they are copying music, but they are probably not doing it through illegal downloads. Nevertheless, it's a form of priacy and it is one of the methods that can bring in income with minimum risk, unlike cocaine.

    Let me also qualify that the statement concerning fees on blank cassettes, CD-R's, DVD-R's, etc. applies only to the US. The EU, Canada and many other nations do have license fees included in the price of this media.

    One last point: I'm not supporting the RIAA's tactics as I also find them heavy-handed, but they have every right to seek to prosecute infringers. My comment calling the issue of artist's royalties a canard I still stand by. Beyond that it's a cheap form of rationalization: if every recording artist recorded at their own expense, cut their own cd's did their own promotion and reaped 100% of the profits after expenses, are we to believe that illegal downloading would decrease?

    It's a little heavy handed, but not as bad as it could be. I'm not an IP lawyer, but I think the penalties for copyright infringement are statutorily defined and pretty steep. I have a vague memory of it being $1000 to $10,000 per violation (which is significant, because you don't have to prove damages). So if 900 people download a song from your computer, you could concievably be on the line for $900,000 to $9 million. Settling for 6K is letting people off pretty easy. It's a slap on the wrist meant to teach a lesson. For what it costs, I think it's pretty effective too. The dual fears of lawsuits and viruses have to be the main reasons millions of people are now paying to download when they could get the same songs for free. It's anecdotal, but it worked for me. One of my friends was sued over a bootleg version of "Elf." He settled for $3k. I've been using itunes ever since. As for the greedy record companies, they have a duty to their stockholders to try and make money. I have no problem with them trying to do that.

    JPF
    Others argue that recording companies can't stay in business if music is stolen rather than purchased. So what? Where in the Constitution does it say a particular business model is in anyway protected? Bring on Schumpeter and the destructive creation.
    How is a record company going out of business any different than Enron going out of business? Employees lose their jobs, benefits get cut, stockholders have their savings wiped out (think pension funds, employees, individual 401K accounts, universities, individuals saving for a house or their kid's college) ect. I know this is somehow better because there are millions of middle and upper class kids stealing (poor folks don't have computers and broadband connections), but I think the record companies have a duty to try and do something to stop the bleeding and figure out how to survive.

    How is a record company going out of business any different than Enron going out of business? Employees lose their jobs, benefits get cut, stockholders have their savings wiped out (think pension funds, employees, individual 401K accounts, universities, individuals saving for a house or their kid's college) ect. I know this is somehow better because there are millions of middle and upper class kids stealing (poor folks don't have computers and broadband connections), but I think the record companies have a duty to try and do something to stop the bleeding and figure out how to survive. Apples, and Oranges. Enron went bankrupt due to the criminal actions of their executives. They perpetrated a crime against their employees and their stockholders. If Capitol Records goes belly up because no one buys their records, that's called the free market. Yes, Cap Records has a duty to their shareholders to run their business the best way they can, but that doesn't extend to using the legal process and lobbyists and congress to enact through law the Cap Records Business Model Protection Act. Ask Santa Fe Railroads what it means when people switch to airplanes. Should the Congress be mandating the Santa Fe Railroad Protection Act? Charging duties on Airline tickets in order to keep the railroads in business? There's a free market, let them compete. Keep the market free. When the doctors came in and bloodletting was no longer needed, the barbers had to find new ways to make money. (Just ask Theodoric of York). Artists no longer need $2,000,000 of audio gear to make a recording. If Bruce, Weird Al, and Eminem can record their own music in their garages on their Macintosh computers, why do we need "recording companies?" They are just excess in the value chain and add to costs and reduce sales. Allan A Dale was a minstrel -- he made his money through performances. Now we again have the rich stealing from the poor. Let the modern A Dales earn their money through performances and direct sales of high quality music that is competitively priced. We don't need to guarantee recording companies. Randy Paul: get a sense of humor.

    Flathead, Grow up. Hues of Blue: The statutory range for willful copyright infringement is $750 to $150,000 per count.

    JPF
    Enron went bankrupt due to the criminal actions of their executives. They perpetrated a crime against their employees and their stockholders. If Capitol Records goes belly up because no one buys their records, that's called the free market.
    If no one is buying records because companies and individuals are stealing the music and distributing it at a dramatic discount, that's widespread crime not the free market. I think almost all proponents of free market capitalism would agree on the vital importance of strong intellectual property protection and enforcement.
    Yes, Cap Records has a duty to their shareholders to run their business the best way they can, but that doesn't extend to using the legal process and lobbyists and congress to enact through law the Cap Records Business Model Protection Act.
    If a company is sustaining massive losses due to copyright infringement, I think it should use the legal process (i.e. lawsuits) to try and stop those infringements. That's exactly what the copyright laws are there for! And if the current laws aren't effective or aren't being enforced, I don't see anything wrong with a company lobbying Congress for increased protection. This is exactly what they should be doing. If a company sells widgets and 1 out of every 3 truckloads of widgets gets hijacked and sold on the black market, what's wrong with the widget company suing the hijackers and petitioning the government for tougher laws? Sure, the company should probably look at alternative ways to move its widgets, and it will. But in the meantime I can't fault it for trying to stop the bleeding.
    Artists no longer need $2,000,000 of audio gear to make a recording. If Bruce, Weird Al, and Eminem can record their own music in their garages on their Macintosh computers, why do we need "recording companies?" They are just excess in the value chain and add to costs and reduce sales.
    I have no problem with that, but that's not what's threatening record companies. Without massive amounts of capital, its an extremely rare band that can establish itself nationally without the backing of a major record label or promoter.

    Re: Lawsuits Try to Stop Music Sharing Through the (none / 0) (#25)
    by Sailor on Wed Aug 02, 2006 at 07:20:39 AM EST
    Without massive amounts of capital, its an extremely rare band that can establish itself nationally without the backing of a major record label or promoter.
    that's the old model, welcome to the internets.