Information Technology and the Law

The example given in class of Bank Software working perfectly 99% of the time, but allowing illegal money transfers during the other 1%. Since the dammages incurred during the 1% of infringing uses are so high, in the bank software case, 99% non-infringing is not enough. Similarly, if a network were set up that could compute cleansing drugs to aid chemotherapy and “cure” cancer, most would deem that 1% to be enough to qualify as substantial non-infringing use. it is pretty clear that the percentage of use is not enough to determine an appropriate amount of non-infringing use.

Some weighted average of importance of use times numberr of uses is necessary. This is partially solved by the law/economics model. If one looks at the law as a firm producing legislation, it is clear that there are many variables. First, one must consider the amount of infringing and non-infringing use. Then, one must determine the amount of gain/harm each use has, which is tremendously difficult. Without hindsight, it is almost impossible to determine the actual monetary impact each transaction (or even a sequence of transactions) has on the overall system. For example, every time “Pulp Fiction” is illegally copied, hoe much money is being pulled out of whose pockets. It is unclear who is actually losing the money, and also unclear the monetary amount of dammages are actually being incurred.

For this reason, courts are going to be very reluctant to write any opinion on the matter. It is up to each additional case to determine whether or not, in that specific instance, there is too much imbalance between infringing and non-infringing use. Finally, there is the looming 60% in Betamax, and 10% in Grokster. As Professor Felten said in class, 0% non-infringing use is too little, but apparently 60% is enough. However, there may be a case where 60% is too little non-infringing use given the dammage of the other 40%. Basically, I believe that any concrete opinions will be left out of court decisions for a long time.

As for my personal beliefs, i think it should really be a case by case basis weighing potential harms and gains.

In reply to Eric Tonkyn’s The RIAA’s options to limit illegal file sharing:

Let me briefly defend my $5 estimate for the utility gained by the average filesharer. It is conservatively low, but I think it’s the right order of magnitude. In class, Professor Felten today said that 60,000,000 Americans have used a filesharing service. In the absense of any more details about how this number came about, it is impossible to really justify any estimate. (Professor Felten, do we have a citation on that 60,000,000 figure?) Nevertheless, here is how I came to that number.

I would argue that most of these people have only minimally used filesharing networks. Not only is our sample skewed because we live in college dorms with young adults and fast Internet connections, but I think the nature of these things is that a large majority of people have just tried them briefly because they’re free. My $5 estimate is a balance between the large number of people that probably gained less than $1 of utility and the few people that have probably gained over $50 of utility.

Keep in mind that if you argue that the average filesharer gains $50 of utility, that means that overall, filesharing contributes $3 billion of utility! ($50 * 60,000,000). It seems difficult to reconcile that with a belief that filesharing is unlikely to hurt music sales. Also, only last July did America have 60,000,000 broadband users.

Anyway, Eric makes a good point about risk aversion. Risk adverse people will be more likely to heed the RIAA’s threat. The sensationalism of the news media is also likely to help the RIAA’s cause. Publicity may be exchangeable for lawsuits.

I am, perhaps, more optimistic about the RIAA’s odds of success. By spreading fear about peer-to-peer networks, suing their owners, and contaminating them with corrupt files, they may succeed in rendering them less attractive than their own legal digital music download services.

The RIAA has attempted several different strategies in their fight against illegal file sharing and several other strategies have been proposed in discussions both in class and on this site. I’m hoping to follow the model of Unsuspecting Innocent and really analyze some of the options that the recording industry has and how effective they may be.

First, I want to make a few comments on Unsuspecting Innocent’s analysis of lawsuits against individual users. I would argue that even if the expected value of file sharing remains positive, as the lawsuits are too few and not for enough money to provide a real monetary disincentive, that many people are very risk adverse in this area, and will be scared away from file sharing even when the penalty is so small. However, I think the utility to the file sharer is much larger than he estimates, closer to $50 instead of $5. This means that if the recording industry wanted to make it a negative EV to download music, they would need to sue approximately one million individual users, which is not reasonable. Overall individual lawsuits could stop certain risk adverse users from using the system, but a large fraction will be relatively unaffected in their usage.

Another approach that the recording industry has used is to sue and attempt to shut down the distributors of the file sharing service. With early P2P technology such as Napster and Aimster, once the courts ruled for the recording industry, it was fairly straightforward to disable the networks completely. But even then, other services took their place immediately and even in those early cases it’s not clear that this strategy reduced sharing of copyrighted music. Now, even if cases were to be decided in favor of the recording industry, which is not at all a certainty, the company has no power to shut down the existing network. Would a ruling against Grokster do anything at all to stop illegal sharing of copyrighted works? Certainly it would be far less effective than the shut down of Napster, which had little to no effect.

Those are the two main strategies employed by the recording industry, and it seems as though both will necessarily fail. Another strategy which is used somewhat but doesn’t appear to be the focus is to compete with the P2P networks through products like iTunes. While they can’t win on price, the recording industry needs to make sure that the pay to download sites offer both greater convenience and better quality than P2P networks. Based on comments I received on my writing last week, I take it that currently the P2P networks may succeed on both of these points as well, but that certainly doesn’t need to be the case. Still, this strategy may not have much effect on the amount of illegal sharing that occurs.

I think the best option for the recording industry is to turn these P2P networks into part of their distribution system. Don makes this sort of suggestion in his post this week, proposing that some sort of compromise is reached between the P2P networks and the recording industry. I would go further and say that the recording industry needs to take the initiative and create something which equates to the compulsory license under which songs are played on the radio. There needs to be a license to distribute songs on a P2P network which is openly available to anyone that wants to acquire that license, instead of requiring each vendor to negotiate a separate license with the recording industry. This would give P2P networks the option of making their software and networks completely legal so long as they found a sufficient way of getting revenue from their software.

The EFF has a page with all of the Grokster briefs. They’ll add the new briefs that are filed tomorrow.

Lawrence Solum, a law professor at the University of San Diego, publishes a Legal Theory Lexicon page/blog that explains terms and concepts from legal theory, such as Causation, Intention, and Consent.

(1) Should the Court adopt the law/economics professors’ view?

(2) If the Court does adopt the law/economics professors view, how should it resolve the case? (Presumably the Court would remand the case back to the lower court, with some instructions about what procedure to use, such as which questions of fact to resolve, and how the case should be resolved based on those factual findings. But what, specifically, should the Court say?)

(3) Do you agree with the IEEE brief’s criticism of the 9th Circuit’s Grokster opinion?

(4) Do you agree with the IEEE brief’s criticism of the 7th Circuit’s Aimster opinion?

(5) What do you think of the IEEE brief’s “active inducement” standard? What would be the consequences of adopting it, for this case? For other technology vendors?

Two brief points:

• We shouldn’t expect the few lawsuits that the RIAA has filed so far against individual filesharers to make much of an impact. Consider an economic analysis of whether I (your average rational American) should fileshare or not. If fear of a lawsuit is going to deter me from filesharing, the expected value of the penalty has to be at least the same order of magnitude as the utility I gain from filesharing. If the recording industry has sued 7,000 out of 60,000,000 filesharers, the odds of me getting sued are 1 in 10,000. The average settlement is about $3,000, so my expected penalty is 30 cents. This is clearly insufficient to have any substantial impact.

  If we conservatively assume that the average filesharer gets $5 of utility from filesharing, then the recording industry has to either increase the average settlement to $50,000, sue 20 times more people, or some mix of the two. As a practical matter, I doubt that they can increase the average settlement much past $5,000 before filesharers become reluctant to settle, so they probably need to sue about 10 times as many users for about $5,000 each for these lawsuits to be an effective deterrent.

  Is this practical? Most of these lawsuits never see a day in court, so, perhaps. Increasing the number of lawsuits may also be more effective than the straightforward utility argument implies, because I bet it really hits home if an acquaintance gets nailed with a $3,000 settlement. With 1 in 10,000 filesharers getting sued, the odds are about even that nobody at Princeton has been sued yet.

• Judge Posner actually has a blog, the Becker-Posner Blog, that he writes with Nobel prize-winning economist Gary Becker. (Yes, our favorite Judge Posner from the Aimster decision.) It’s a good read. You can see his law and economics stance take on things.

Upon reading the brief set forth by the plaintiffs in MGM v Grokster, one notices the charged language used by the writers. It seems like every other sentence uses unnecessarily descriptive phrases such as “copyright infringement is the lifeblood of these businesses” or “resulting in an exponentially multiplying (or ‘viral’) creation and redistribution of perfect digital copies.” Obviously, the brief is written this way in order to paint a vivid picture of the illegality of Grokster. But does it? I contend that all this language is directed at the users of Grokster, and not the service itself. This is the subtlety that most people, unfamiliar with the details of contributory and vicarious copyright infringement, miss. In order to examine this case, however, one must differentiate between the responsibility of the Grokster software, and its users.

Every person who shares and downloads illegal music on Grokster is in clear violation of copyright law. This is why the RIAA undoubtedly had airtight cases against Kazaa users. However, this does not mean that Grokster is responsible for the activity of those infringers, based on the three-prong tests for vicarious and contributory infringement set forth by court precedent. The writers of the MGM brief seem to have forgotten this fact (or more likely, they are playing it down in favor of over-the-top descriptions of end-user law violation). The court should recognize that since MGM attacks the users and not the service, its argument does not apply to the case.

The copyright infringement tests were set forth by other courts, and developed over time. They can now be considered a sort of precedent, as a result of the decisions of other cases. So, MGM is effectively ignoring precedent, and asking the Supreme Court to do the same.

The easiest way to refute the assertions of the MGM brief is to cite not only the appellate and district court decisions in this case, but also the Aimster decision written by Posner. Beginning on page 15 of the Posner decision, he lists 5 potential non-infringing uses of file-sharing software, which he says Aimster could have done to “demonstrate that its service has substantial non-infringing uses,” therefore showing its legality, as set forth by the precedent of the Sony-Betamax case. The 9th circuit decision in this case used this precedent to decide that Grokster had in fact demonstrated its substantial non-infringing uses, and was therefore legal. These citations are all based on court precedent. If the Supreme Court overturns the appellate court decisions, they would be ignoring the clear-cut precedent used in so many other decisions regarding contributory and vicarious copyright infringement. This is why I cannot conceive of any decision other than upholding the decisions of the lower courts.

Also, Muoyo says in the previous post “What’s the difference,” that normatively, nothing fundamentally changed between Napster and Grokster. I argue that something has – you cannot shut down the Gnutella network. As described in the post by mdaly, Grokster is a gateway product, piggybacking on the Gnutella network. When the courts decided against Napster, they had the power to simply “turn off” the service, thus ending any and all infringement by its users. However, this is not possible with Grokster. Shutting down Grokster essentially does nothing. It is like taking cough syrup for a cold – it alleviates the symptoms temporarily, but really doesn’t do anything to cure the problem. Again, the recording industry should be concentrating on the users of these networks, not the software providers, since they cannot do anything to change the behavior on the network. The appellate court decision in Grokster makes this clear.