Keeping pirates at bay

Sep 3rd 2009 From The Economist print edition

Policing the internet: The music industry has concluded that lawsuits alone are not the way to
discourage online piracy

THREE big court cases this year—one in Europe and two in America—have pitted music-industry lawyers
against people accused of online piracy. The industry prevailed in each case. But the three trials
may mark the end of its efforts to use the courts to stop piracy, for they highlighted the limits
of this approach.

The European case concerned the Pirate Bay, one of the world’s largest and most notorious
file-sharing hubs. The website does not actually store music, video and other files, but acts as a
central directory that helps users locate particular files on BitTorrent, a popular file-sharing
network. Swedish police began investigating the Pirate Bay in 2003, and charges were filed against
four men involved in running it in 2008. When the trial began in February 2009, they claimed the
site was merely a search engine, like Google, which also returns links to illegal material in some
cases. One defendant, Peter Sunde, said a guilty verdict would “be a huge mistake for the future of
the internet…it’s quite obvious which side is the good side.”

The court agreed that it was obvious and found the four men guilty, fining them a combined SKr30m
($3.6m) and sentencing them each to a year in jail. Despite tough talk from the defendants, they
appear to have tired of legal entanglements: in June another firm said it would buy the Pirate
Bay’s internet address for SKr60m and open a legal music site.

The Pirate Bay is the latest in a long list of file-sharing services, from Napster to Grokster to
KaZaA, to have come under assault from the media giants. If it closes, some other site will emerge
to take its place; the music industry’s victories, in short, are never final. Cases like this also
provoke a backlash against the music industry, though in Sweden it took an unusual form. In the
European elections in June, the Pirate Party won 7.1% of the Swedish vote, making it the
fifth-largest party in the country and earning it a seat in the European Parliament. “All
non-commercial copying and use should be completely free,” says its manifesto.

So much for that plan

The Recording Industry Association of America (RIAA) has pursued another legal avenue against
online piracy, which is to pursue individual users of file-sharing hubs. Over the years it has
accused 18,000 American internet users of engaging in illegal file-sharing and demanding
settlements of $4,000 on average. Facing the scary prospect of a federal copyright-infringement
lawsuit, nearly everyone settled; but two cases have proceeded to trial. The first involved Jammie
Thomas-Rasset, a single mother from Minnesota who was accused of sharing 24 songs using KaZaA in
2005. After a trial in 2007, a jury ruled against her and awarded the record companies almost
$10,000 per song in statutory damages.

Critics of the RIAA’s campaign pointed out that if Ms Thomas-Rasset had stolen a handful of CDs
from Wal-Mart, she would not have faced such severe penalties. The judge threw out the verdict,
saying that he had erred by agreeing to a particular “jury instruction” (guidance to the jury on
how they should decide a case) that had been backed by the RIAA. He then went further, calling the
damages “wholly disproportionate” and asking Congress to change the law, on the basis that Ms
Thomas-Rasset was an individual who had not sought to profit from piracy.

But at a second trial, which concluded in June 2009, Ms Thomas-Rasset was found guilty again. To
gasps from the defendant and from other observers, the jury awarded even higher damages of $80,000
per song, or $1.92m in total. One record label’s lawyer admitted that even he was shocked. In July,
in a separate case brought against Joel Tenenbaum, a student at Boston University, a jury ordered
him to pay damages of $675,000 for sharing 30 songs.

According to Steven Marks, general counsel for the RIAA, the main point of pursuing these sorts of
cases is to make other internet users aware that file-sharing of copyrighted material is illegal.
Mr Marks admits that the legal campaign has not done much to reduce file-sharing, but how much
worse might things be, he wonders, if the industry had done nothing? This year’s cases, and other
examples (such as the RIAA’s attempt in 2005 to sue a grandmother, who had just died, for
file-sharing), certainly generate headlines—but those headlines can also make the industry look
bad, even to people who agree that piracy is wrong.

That helps explain why, in late 2008, the RIAA abandoned the idea of suing individuals for
file-sharing. Instead it is now backing another approach that seems to be gaining traction around
the world, called “graduated response”. This is an effort to get internet service-providers to play
a greater role in the fight against piracy. As its name indicates, it involves ratcheting up the
pressure on users of file-sharing software by sending them warnings by e-mail and letter and then
restricting their internet access. In its strictest form, proposed in France, those accused three
times of piracy would have their internet access cut off and their names placed on a national
blacklist to prevent them signing up with another service provider. Other versions of the scheme
propose throttling broadband-connection speeds.

All this would be much quicker and cheaper than going to court and does not involve absurd awards
of damages and their attendant bad publicity. A British study found that most file-sharers will
stop after receiving a warning—but only if it is backed up by the threat of sanctions.

It sounds promising, from the industry’s perspective, but graduated response has drawbacks of its
own. In New Zealand the government scrapped the idea before implementation, and in Britain the idea
of cutting off access has been ruled out. In France the first draft of the law was savaged by the
Constitutional Council over concerns that internet users would be presumed guilty rather than
innocent. Internet service-providers are opposed to being forced to act as copyright police. Even
the European Parliament has weighed in, criticising any sanctions imposed without judicial
oversight. But the industry is optimistic that the scheme will be implemented in some form. It does
not need to make piracy impossible—just less convenient than the legal alternatives.

But many existing sources of legal music have not offered what file-sharers want. “In my view,
growing internet piracy is a vote of no confidence in existing business models,” said Viviane
Reding, the European commissioner for the information society, in July.

The industry is desperately searching for better business models, and is offering its catalogue at
low rates to upstarts that could never have acquired such rights a decade ago. Services such as
Pandora, Spotify and we7 that stream free music, supported by advertising, are becoming popular.
Most innovative are the plans to offer unlimited downloads for a flat fee. British internet
providers are keen to offer such a service, the cost of which would be rolled into the monthly
bill. Similarly, Nokia’s “Comes With Music” scheme includes a year’s downloads in the price of a
mobile phone. The music industry will not abandon legal measures against piracy altogether. But
solving the problem will require carrots as well as sticks.