Statutory Damages In Copyright Law Make It More Appealing To Sue Than To Innovate

from the problem-in-a-nutshell dept

There are all sorts of problems with copyright law today, but one of the biggest is the farce that is statutory damages. This is what allows everyone who sues someone for a single instance of copyright infringement to threaten them with the possibility of a $150,000 fine. Of course, even in situations where the $150,000 isn’t available, we still end up with rulings that seem totally disconnected from any actual “harm.” Defenders of the statutory damages provisions in copyright law come up with all sorts of twisted rationalizations for why ridiculously high statutory damages rates make sense, usually along the lines of saying that there’s simply no reasonable way to calculate actual damages. This is, of course, silly. Even if you can’t calculate exact damages, you can come up with something that at least approaches a reasonable level.

However, the completely unrealistic statutory damages have created other problems as well — and defenders of the statutory damage rates may want to pay attention here, since it actually makes life a lot worse for the content creators copyright law is supposedly supposed to “protect.” It’s highlighted in some comments from Pandora’s CEO Joe Kennedy, noting that it’s tough to build a legitimate online music service these days because it’s a better business model for copyright holders to sue:

“The statutory damages clause (of copyright law) creates a moral hazard… It’s too attractive to sue. It’s a better business model than saying, ‘I’ll partner with you and build a business.’ The lawyers in the music industry spent too much time suing and fighting, in lieu of developing better business partners.”

While he goes on to say they’re better about it today than in the past, it’s still very much true today as well. As we’ve highlighted, the recording industry has a long history of suing first and negotiating later. In fact, there was a time when pretty much any halfway respectable music startup was being sued by a record label. The labels recognized that hanging that liability over the startups’ heads was a way to force them into a negotiating corner. That’s no way to build innovative music services. And, of course, even when the labels did end up negotiating, they would use those huge statutory damage threats to wring ridiculous rates out of the startups — rates that made it impossible to build a real business.

So isn’t it about time that we dumped these statutory damage rates? Or drastically lowered them? Unfortunately, you hear no movement in that direction.

The rest of Kennedy’s interview is interesting as well. He notes how it’s difficult-to-impossible to build a global internet music company due to different copyright laws around the world, and the ridiculous royalty rates demanded by holders in each country. And, he notes that copyright law, itself, needs a massive rethink in the age of computers:

“There is a really fundamental problem that’s going to keep coming up over and over again. Computers, in the digital world, work by making copies. I think that we’re going to continue to trip over this very fundamental issue. This is the frustration of a computer-science guy in a roomful of lawyers. Until there’s some conception of what a copy is in a digital world… there are going to be a whole bunch of cases that are going to be kind of a crap-shoot.”

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Companies: pandora

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Comments on “Statutory Damages In Copyright Law Make It More Appealing To Sue Than To Innovate”

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Jay (profile) says:

This right here

This is the FUNDAMENTAL frustration that I have with copyright law. You look at the people arrested for Criminal copyright infringement, Gilberto Sanchez and Bryan McCarthy and look at the damages that they have to pay for their actions.

What damage did Gilberto do when Wolverine went on to make $1billion dollars in revenue? “If he didn’t leak it, they could have made MORE money” is a false argument. And Gilberto already admitted that he got the DVD from someone else!

Then you have Bryan McCarthy who did nothing more than put up links and is arrested for it. I’ve actually heard it said that he’s a “criminal” enterprise…

One guy… With links costing a company that made 450 million in 2010 revenue.

And no one sees the dissonance.

It’s more of the reason why I shake my head in astonishment when no one can bring viable arguments to the table.

vivaelamor (profile) says:

Re: Re: Re: Ah.

“That’s a very dark satire. When I say very dark, we’re talking Frankie Boyle meets Glenn Beck dark.”

I can’t stand Frankie Boyle. His sort of satire is incredibly lazy. One of his most controversial jokes was pretty much ‘She looks weird. I guess she’s really dirty in bed because she has a good looking boyfriend’. It’s basically taking a completely non-ironic joke and calling it satire. The joke isn’t satire, the character is satire. Frankie Boyle pokes fun at people being offended by being intentionally offensive. Here’s the thing, while some people find that funny (I don’t, especially when the comedian makes fun of the mother of a child with Down’s syndrome for being upset by his joke about Down’s syndrome), it doesn’t work if you’re not in character. The only difference between an offensive joke and a satire of an offensive joke by Frankie Boyle is that Frankie Boyle is the one saying it.

Sarah Silverman is a much better contemporary dark satirist because her actual jokes are satirical as well as her character. Frankie Boyle is more like Charlie Sheen, an asshole who plays an asshole.

Anyway, I didn’t find the joke funny more because it’s a lazy pun than offensive in any way. ‘So that’s what sex with a minor means’ wouldn’t even make sense let alone be funny.

Hephaestus (profile) says:

“So isn’t it about time that we dumped these statutory damage rates? Or drastically lowered them? Unfortunately, you hear no movement in that direction.”

Arguments can be made for both lowering statutory damage rates and keeping them at the same levels. I am not a big fan of RIAA, MPAA, the record labels, or the TV and movie studios. It would be good to see them all receive a business darwin award. With them using negotiation via lawsuit it keeps most venture capitalists from investing in innovative distribution systems. This tactic removes channels that could profit them speeding their demise.

So I say keep them at current levels, allow COICA, ACTA, and the ICE seizures. All of which are horrible from a business perspective and drive artists and consumers away.

Give them as much rope as they want, everyone around them will innovate and side step them.

Josh in CharlotteNC (profile) says:

Re: Re: Re: Re:

ACTA, COICA, and lawsuits are the life support that allows them to remain leeching off real innovation. Every dollar they get by refusing to change is more dollars used to lobby (a.k.a. legalized bribery) politicians around the world.

Cut them off cold turkey. Copyright cut down to 5 years, max. Anything older automatically in the public domain. No exceptions.

Force them to adapt or die. Allowing them to continue trampling my rights and holding back culture and innovation is morally bankrupt.

Hephaestus (profile) says:

Re: Re: Re:2 Re:

“ACTA, COICA, and lawsuits are the life support that allows them to remain leeching off real innovation.”

ACTA and COICA are the threat of punishment for misbehaving children. Historically the lawsuits have been a real loser monetarily. The $150,000 per infringement is much like the death penalty line thrown out by a music industry lobbyist. It follows the logic of, if we can only threaten them with something worse then they will stop doing “X”. That has never worked.

“Force them to adapt or die.”

They have momentum on their side. Its fading slowly as more competition enters the entertainment sector. Letting them have their really big sticks, and allowing them to believe that “Piracy” is responsible for all their problems, is magic. (def : MAGIC – the art of misdirection) And its is so funny that they are the ones performing the magic trick. 🙂

“Allowing them to continue trampling my rights and holding back culture and innovation is morally bankrupt.”

Agreed. But we really do need to get rid of these middlemen that were created in 1709. I don’t think 5-10 years of trampling, to rid the world of laws that should never have been implemented 300 years ago, is to much to ask.

Brett says:

Unfortunately, we’re basically stuck waiting for the recording business (of both music and videos) to die, and for one or more of the streaming services to get powerful enough to get their own stakes in music and video production to turn it towards their advantage.

It is happening (the CD business has more or less shrunk to hold-outs plus people on the older side of the generation gap), but it’s happening slowly. Which is just what most of the media business companies want, since they know that they can’t stop it altogether – they want to slow things down enough so that they can try and set-up a new model similar to the old one, where they can make the money they’re used to.

Anonymous Coward says:

Re: Re: Re:

Let me end the “suspense”. There is no such provision in the 1790 Act.

Something along the line of what you said was incorporated into the 1909 Act via an amendment in 1947 (See: Section 101 of the Act), but there the word that was used was “penalty”, and not “punitive”.

If I am mistaken on the details, please feel free to correct me as no offense will be taken.

RadialSkid (profile) says:

This is basically the reason that I stopped p2ping label music about two years ago…I believe in the long run, it’s helping the copyright cartels, by providing them with a new source of revenue (“pre-settlement” shakedowns).

Since then, I’ve been in a full-on boycott. Don’t buy, don’t download, don’t listen. Use free, legal alternatives. Basically, I’m for whatever kills record labels fastest…and nothing would do it faster than complete irrelevance.

d1ckiem0e (profile) says:

A little too much "governing" by lawyers, no?

I wonder how many “law makers” are lawyers by trade? Or how much money law firms spend in keeping law makers in posh comfort? Perhaps there’s a benefit to be had in making laws, rules, regulations that favor no one except the business of courts. Perhaps the US Constitution is a “living document”, and the words “Congress shall make no law…” can mean whatever you want it to mean, and perhaps there are plenty of lawyers to argue the case that it means such and such.

Anonymous Coward says:

Re: A little too much "governing" by lawyers, no?

I am a lawyer and have long held the belief that far too many in political office are lawyers. Some distinguish themselves quite well, but far too many, so it seems to me, can be described by one of the very first lessons I learned in law school:

“Those of you who excel in your study of law will go on to practice law, and those of you who do not will go into politics.”

I have seen countless times that what my professor stated was spot on.

anymouse (profile) says:

How much money/time/resources wasted on lawsuits

It would be interesting to see America’s GDP broken down by industry over the years, including lawsuits and associated fines/penalties assessed as their own industry. I’m guessing that lawsuits (including the assessed fines, not what may have been paid) would probably be the largest section of America’s GDP… Of course it’s a little dishonest to consider this to be a ‘product’ that America produces, but it’s money that could be going to produce things, but it’s not because it’s being removed from the economy via lawsuit and re-distributed to those who aren’t actually producing anything (except the laws and lawsuits).

Factor on the amount of money removed from the productive economy via ‘lobbying’ (if it was possible to get accurate figures on all the hidden/backroom/behind the back/guest at my resort in the Caman island type deals), and I’m guessing that these 2 ‘industries’ would dwarf any legitimate industries in the United States.

When the shills and trolls come on to talk about how their industry is dying or being wiped out by piracy, this is the true industry they are talking about. The industry of taking money from productive members of society via lawsuit, which has become one of the most profitable industries in the US.

Sure I could provide statistics to back up all this, but 68% of statistics are made up on the spot, so just pick some random numbers out of the air and you’ll be about as close as the ‘industry’ statistics that we are expected to believe support their outrageous claims.

Francisco Pina says:

To change the business model of most music companies based on the copyright laws and the supposedly statutory damages that these companies will be able to collect in cases of copyright infringement doesn’t make any sense. Companies have to start asking customers what they really want and the same companies have to start pricing their articles realistically. I read a really great article that talks about this in detail and how to take care of a flawed business model:

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