ANONYMITY LOST: TARGETING INDIVIDUAL INFRINGERS IN THE WAR AGAINST FILE-SHARING by Frank L. Bernstein1 and Alexander S. Janofsky2 I. Introduction Since the advent of the Internet as a pop culture phenomenon, copyright holders have struggled to find reliable litigation strategies to stem the resulting flood of infringing activity. Until recently, the sheer number of individuals and copyrights involved has deterred copyright holders, often motion picture or recording companies, many of whom were members of the Recording Industry Association of America (“RIAA”), from focusing litigious resources on direct, individual infringers. Economics dictated that pursuing potential secondary infringers, such as Internet Service Providers (ISPs) or fileswapping services, optimized copyright protection. While the high profile Napster3 decision seemed to indicate the viability of this strategy, the recent Grokster4 decision proved that targeting secondary infringers would ultimately fail. Accordingly, copyright holders have increasingly focused their legal efforts on direct individual infringers, even to the point of filing a lawsuit against a 12-year old girl. Even during the earliest stages of the Internet’s rapid growth, copyright holders recognized the threat posed to their intellectual property rights by a system that easily facilitated the copy and transfer of textual, audio, visual, and software files. Religious Technology Center v. Netcom On-Line Communication Services, Inc.5 was the most significant early legal effort to curb on-line copyright infringement. In that case, Netcom On-Line Communication Services, Inc. (“Netcom”) provided Internet access to a bulletin board service where an individual posted textual works to which Religious Technology Center owned the rights.6 The Northern District of California found Netcom (1) not liable for direct infringement because, as a mere connection to the internet, it did not actively engage in infringement; (2) liable for contributory infringement because it received specific notice of the infringing activity and maintained enough control over its network to halt the activity; and (3) not liable for vicarious infringement because Netcom derived no direct financial benefit from infringement.7 In the wake of this decision and the proliferation of similar disputes, Congress enacted the Digital Millennium Copyright Act of 1998 (“DMCA”).8 The DMCA’s second title, the Online Copyright Infringement Liability Limitation Act, codified, universalized, and clarified the standards established in Netcom by providing a series of safe harbors for ISPs that protected qualified entities from paying monetary damages for secondary infringement.9 The DMCA significantly narrowed the viability of secondary liability suits involving on-line copyright infringement by effectively immunizing ISPs against copyright litigation. The RIAA, now dealing with Napster’s popularization of illegal music trading, pursued legal action against the file-sharing services directly facilitating the infringement. Besides Napster, the RIAA challenged other first-generation swapping systems such as Aimster and Scour. The Ninth Circuit decision in A&M Records v. Napster Inc.,10 the most significant decision in this line of disputes, validated the strategy. In this case, the Ninth Circuit upheld the District Court’s determination that Napster should be enjoined due to likely liability for both contributory infringement and vicarious infringement.11 The strategy succeeded because the early file-swapping services maintained direct control over user access, directed queries through central servers, and knew which files users traded. These centralized features made Napster and other firstgeneration services vulnerable to secondary infringement liability. The focus on secondary liability in protecting copyrights on-line has waned recently, because next-generation file swapping services have been designed to avoid liability for copyright infringement. Rather than operate centrally, networks such as Kazaa and Gnutella arise spontaneously among user machines. The software allowing users to connect is centrally distributed, but there is no central authority or system involved in the running of the networks. This decentralization allows the new peer-topeer networks to escape liability for contributory and secondary infringement because they have no means of monitoring activity, controlling access, or even shutting down. The recent MGM v. Grokster12 decision confirmed that secondary infringement litigation could not adequately control piracy over decentralized file-sharing networks. II. The New Strategy: Target Individual Infringers Faced with the reality that centralized litigation strategies through secondary infringement cannot halt on-line file trading, copyright holders, particularly the music industry, are now beginning to aggressively pursue individual, direct infringers. This appears to be the only viable legal option left for defending copyrights on-line in the face of massive infringement. A. The Verizon Case This past spring, two decisions handed down by the District Court for the District of Columbia in In re Verizon Internet Services, Inc.13 paved the way for the record industry to engage individual infringers. Verizon disputed the constitutionality of a DMCA provision allowing copyright holders to subpoena ISPs for the identities of infringers.14 However, the District Court upheld the constitutionality of the DMCA.15 In upholding the RIAA’s interpretation of the statute, the Court opened the floodgates to infringement litigation against anyone who ventures into Internet world to download music. The major legal hurdle to this emerging new strategy for halting illegal music distribution had been cleared. B. The Record Industry’s Announcement On the heels of Verizon and Grokster, the RIAA announced this July that it would pursue legal action against thousands of suspected infringers, particularly those offering “substantial amounts” of music files over peer to peer networks.16 The announcement appeared aimed at both preventing piracy by directly reducing the number of files available and by deterring users from sharing for fear of steep monetary penalties. Regardless, users who share large volumes of files account for a disproportionate amount of the traffic on networks such as Kazaa and Gnutella. Successfully halting a mere handful of significant traders could substantially reduce piracy. The RIAA created a potential public relations nightmare when it filed 261 lawsuits against individuals, one of them a 12-year-old girl. The RIAA settled for $2,000, but people around the country were not terribly impressed with that kind of strong-arm tactic against a child. On the other hand, some of the RIAA targets were apparently rather major offenders, and the RIAA was able to obtain quick settlements. C. Proposed Legislation In a bid to enhance their legal arsenal, the record industry is supporting a bill in the United States Congress that would substantially stiffen the penalties for illegally uploading copyrighted music onto peer-to-peer networks.17 Sponsored by Representative Howard Berman (D-CA), the legislation would classify the upload of even a single copyrighted work over a publicly accessible network as a felony offense.18 Offenders would be eligible to face jail time and hefty fines.19 The harsh punishment would help counteract the main problem confronting the RIAA in its attempt to halt illicit file sharing: the sheer volume of infringers. Ideally, the proposed law would combat the perception among file-traders that their actions are somehow less serious than theft. Clearly delineated consequences could help to highlight the social and economic gravity of the offense. While the intense media coverage of this controversial proposal has cast doubt on its chances of passage, the proposal itself seems to point out a significant shift occurring in anti-piracy policy. As the new approach directly targets common individuals, its biggest challenge is neither feasibility nor legal merit, but public acceptance. D. Will the New Strategy Work? Even if the shift to direct infringement prosecution remains the only feasible legal option for countering on-line piracy, will it succeed in curbing such activity? Initial returns suggested a 15% drop in users on the major peer-to-peer networks in the week following the RIAA’s announcement to aggressively prosecute individual fileswappers.20 However, the file-sharing networks questioned the conclusion, claiming that despite fluctuations in the number of users logged-on, the amount of trading occurring remained relatively constant. Further, the file-swapping services are exploring means of protecting their users’ anonymity.21 If successful, this technological counterattack would severely undermine the RIAA’s latest legal strategy by preventing the identification of suspected pirates. Another roadblock to the strategy is the immunity of international file-swappers. The record industry has no means of stopping pirates outside the United States. Even countries with rigorous intellectual property regimes lack the types of measures enacted by the DMCA necessary for widespread pursuit of individual infringers. Thus, infringement would continue abroad, thereby potentially undercutting the effectiveness of domestic enforcement. Additionally, attacking the very customers whose loyalty they are trying to regain may be the best available legal option for the RIAA, but the value of such a business strategy is doubtful. The recording industry needs to change consumer attitudes to ensure long-term viability. Rather than encouraging file-traders to purchase music, the new strategy may alienate would-be customers and further damage sales. Already, filesharers are organizing boycotts of companies represented by the RIAA and are encouraging their foreign counterparts to increase infringing activities. Furthermore, a consumer backlash could precipitate a large-scale public backlash. Policies aimed at bolstering copyrights on-line could face energized opposition from citizens who are angry that big corporations are targeting individuals. Consumer rights and privacy advocates are aligning themselves with lobbies recently established by the major file-trading services. These elements are garnering support in Congress to defeat the bill discussed above and protect file trading. There are even questions in Congress as to whether the RIAA’s use of the DMCA is unfair to Americans. The Senate has opened an investigation into the current barrage of subpoenas to determine whether the DMCA gives copyright holders too much power.22 III. Conclusion By belligerently attacking its own market, the RIAA risks losing its reputation on top of the already lost sales. The RIAA’s emerging legal strategy needs to dovetail with a business strategy that recognizes the consumer needs expressed by the file-sharing phenomenon. Consumers want to conveniently download music on-line from as large a selection as possible. The recent success of Apple’s I-Tunes service proves that consumers are willing to pay reasonable fees ($0.99 per song) for such a service. The record companies should respond to the expressed demand by licensing more songs to legitimate download services. Perhaps creating competition among such services will reduce the price set by I-Tunes and entice illegal file-swappers to acquire their music legally. This also might precipitate a long-awaited and long-promised drop in compact disc prices. Long-term success requires that the RIAA offer an alternative to file swapping because as long as there is a demand, individuals will find ways to trade copyrighted files. The RIAA’s litigation onslaught and the Grokster decision seem to point to a need for demand legislative intervention. The current attacks on individuals and privacy rights would not appear to be in the public’s best interest, but current legislation is insufficient to enable the record companies to go after anyone but individuals. Private solutions alone, such as I-Tunes, cannot resolve the situation, and Grokster and Verizon prove that current statutes tie the judiciary’s hands. Perhaps Congress should heed Judge Wilson’s call in Grokster for legislative action to prevent peer-to-peer services from undermining copyrights. Such action would satisfy the RIAA without exposing individuals to privacy invasions and costly lawsuits. The recent escalation of the war over on-line file trading finally provides an opportunity for policymakers to resolve a dispute that has plagued the Internet for the past half-decade. ____________________________________________________________________________________________________________________________ 1 Mr. Frank L. Bernstein, Esq. is a partner in Sughrue Mion PLLC’s Menlo Park, CA office. Mr. Alexander S. Janofsky was as a research assistant in Sughrue Mion PLLC’s Menlo Park, CA office during the summer of 2003. 2 3 See A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896 (N.D. Cal. 2000) (granting injunction), affirmed in part and reversed in part by, stay granted by and remanded by 239 F.3d. 1004 (9th Cir. 2001), injunction granted by 2001 U.S. Dist. LEXIS 2186 (N.D. Cal. March 5, 2001), stay granted in part by In re Napster, Inc. Copyright Litig., 191 F. Supp. 2d 1087, affirmed by A&M Records, Inc. v. Napster, Inc., 284 F.3d 1091 (9th Cir. 2002). 4 See MGM Studios, Inc. v. Grokster, Ltd., 259 F. Supp. 2d 1029 (C.D. Cal. 2003). An appeal of this decision is pending in the Ninth U.S. Circuit Court of Appeals. See “Grokster Defiant as Music Industry Appeals” August 20, 2003, Newswire (VNU). 5 Religious Tech. Ctr. v. Netcom On-Line Communication Servs., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995). 6 Id. at 1365-66. 7 Id. at 1372-77. 8 Digital Millennium Copyright Act, Pub. L. No. 105-304, 112 Stat. 2860 (Oct. 28, 1998). See also 3-12B Nimmer on Copyright § 12B.01. 9 Digital Millennium Copyright Act § 202. 10 A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (9th Cir. 2001). 11 Id. at 1022-24. 12 MGM Studios, Inc. v. Grokster, Ltd., 259 F. Supp. 2d 1029 (C.D. Cal. 2003). 13 In re Verizon Internet Servs., Inc. 240 F. Supp. 2d 24 (D.D.C. 2003); In re Verizon Internet Servs., Inc., 257 F. Supp. 2d 244 (D.D.C. 2003). 14 In re Verizon Internet Servs., Inc., 257 F. Supp. 2d at 246-47. 15 Id. at 256-268. 16 See <http://news.com.com/2100-1027-1020876.html?tag=nl>. 17 See Author, Consumer, and Computer Owner Protection and Security Act of 2003, H.R. 2752, 108th Cong. (2003). 18 Id. See also <http://www.wired.com/news/digiwood/0,1412,59654,00.html>. 19 Id. 20 See <http://www.siliconvalley.com/mld/siliconvalley/6303554.htm>. 21 See <http://news.com.com/2100-1027_3-1025684.html?tag=fd_top>. 22 See <http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=3200913>.