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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Filed Under: copyright, innovation, statutory damages
Companies: pandora


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  1. icon
    anymouse (profile), 11 Apr 2011 @ 10:19am

    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.

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