A TRILLION dollars!

The internet has been awash recently with the story of the thirteen record companies who sued Limewire for $75 trillion (which is likely more money than even exists in the world today).  But is it true?  And is the widespread public disapproval of the record companies justified?
 
In May 2010 the District Court (Southern District of New York) found in favour of the record companies on liability, holding that Limewire “had induced multiple users of the LimeWire online file-sharing program…to infringe [the record companies’] copyrights“.  Having so found, the only question which remained was to determine the appropriate award of damages.
 
The record companies have identified approximately 11,000 recordings which they allege were infringed.  About 9,500 of these recordings were post-1972, which allowed that the record companies to seek “statutory damages” under section 504 of the Copyright Act (US).
 
When a party claims “statutory damages”, it means the party does not have to prove its actual loss; rather, it is claiming an amount which has been pre-determined by the legislature.  The statutory damages for copyright infringement are set by the Court in each case, but must be between US$750 and US$30,000.  However, where the infringing conduct is “wilful“, the Court can set the amount at up to US$150,000.
 
In a judgment delivered a little over two weeks, the Court decided on the question of whether the record companies’ entitlement was limited to one award per infringing song, or whether they were entitled to an award for every download of an infringing song.  The difference is significant. 
 
As Judge Wood said “if one multiplies the maximum statutory damage award ($150,000) by approximately 10,000 post-1972 works, Defendants face a potential award of over a billion dollars in statutory damages alone.  If [the record companies] were able to pursue a statutory damage theory predicated on the number of direct infringers per work, Defendants’ damages could reach into the trillions… As Defendants note, [the record companies] are suggesting an award that is ‘more money than the entire music recording industry has made since Edison’s invention of the phonograph in 1877′”.
 
So where has the much hyped figure of $75 trillion come from?  That’s not entirely clear.  In fact, Judge Wood observed that the record companies “have never explained to the Court how they would even go about determining how many direct infringers there were per work” and therefore, the upper limits of their statutory damages claim.
 
Ultimately, the Court found in favour of Limewire, putting the maximum amount of statutory damages at about $1.5 billion.  However, the Court considered that “there is a considerable lack of guidance on this precise issue” and “this precise task of statutory interpretation presents in especially close question.”

The prospect of such a large award highlights the tension between open source Internet enthusiasts, and traditional IP owners seeking to rely on their rights.  The public policy debate is presently finely poised.  On the one hand, record companies have been criticised for using litigation to assert their rights, rather than (so it is argued anyway) sufficiently directing their resources to online products designed to appeal to erstwhile peer-to-peer users.
 
On the other hand, if the law exists, it can equally be argued that individuals should do their best not to break it.  Many peer to peer users have a sophisticated and savvy understanding of copyright laws, yet choose to ignore them.  Why then, should record companies answerable to shareholders and the like not assert their legitimate legal entitlement?  Indeed, if they did not do so, a sensible argument could be put that the officers of these companies would not be doing their best to maximise shareholder value.

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