Napster, Kazaa, and the Cost of Litigation

Napster launched in 1999. In 2000, just one year later, Senators Orrin Hatch and Patrick Leahy, in hearings before the Senate Judiciary Committee, demonstrated downloading music, remarked about the popularity of file sharing on college campuses, described receiving favorite songs obtained in this manner from their children, and publicly praised Shawn Fanning, one of the founders of Napster. By 2001, Napster had 60,000,000 users sharing music online.

The recording industry responded in court. It began by suing companies that distributed music online, like MP3.com, or developed and distributed file-sharing software and encouraged users to share music peer to peer, like Napster, Grokster, and Kazaa. While these lawsuits succeeded in shutting down particular targets, they did little to limit the growth of file sharing in general. A dialogue from The Social Network between Facebook cofounder Eduardo Saverin and Napster cofounder Sean Parker makes the point:

EDUARDO: You didn’t bring down the record companies. They won.
SEAN: In court.
EDUARDO: Yes.
SEAN: You want to buy a Tower Records, Eduardo?

In 2003, the recording industry began suing individual file sharers. Between 2003 and 2008, record companies sued 12,500 people and sent demand letters to 5,000 more. Here is where the Copyright Act comes in. Under the Copyright Act, a plaintiff can recover so-called statutory damages of between $750 and $150,000 per copyrighted work that is willfully infringed. So someone who downloaded 100 songs could be liable for anywhere from $75,000 at the low end to $15,000,000 at the high end. And this is so even though the only injury that that person caused was the recording industry’s losing a $100 sale ($1 per song) on iTunes. Faced with the threat of statutory damages like these, and, realistically, a six-figure cost of defense in federal court, almost everyone settled and paid an average of $3,500.

Two defendants refused out of principle: Jammie Thomas-Rasset of Duluth, Minnesota, and Joel Tenenbaum of Boston, Massachusetts. Thomas-Rasset took her case to trial, where the first jury returned a verdict of $222,000; the second jury, $1,920,000; and the third jury, $1,500,000. Thomas-Rasset argued that awards like these — entirely unpredictable and wholly divorced from any injury that she caused — were unconstitutional. The United States District Court for the District of Minnesota agreed with her. But the recording companies appealed, and the United States Court of Appeals for the Eighth Circuit agreed. Today, Thomas-Rasset asked the Supreme Court of the United States to review her case.

Thomas-Rasset’s petition for certiorari, prepared by me and my colleague Charles Nesson(who is also a law professor at Harvard and a founder of the Berkman Center) at Camara & Sibley, argues that the Supreme Court should take Thomas-Rasset’s case for three reasons: (1) the courts of appeals are divided on whether statutory damages should be reviewed under the Supreme Court’s recent punitive-damages decisions, with the First, Second, Third, Seventh, and Tenth Circuits agreeing with us and the Sixth and Eighth Circuits agreeing with the recording industry; (2) the RIAA’s litigation campaign is extortion, not law; and (3) clarity in this area is important not only to the recording industry, but also in the growing number of industries governed by copyright, including publishing and software.

A litigation campaign like the RIAA’s is effective for two reasons: it scares people, as RIAA president Cary Sherman put it, “searing in the minds of the public that maybe getting all of this stuff for free isn’t legal after all”; and it is very hard for individuals to resist because the risk and cost of fighting is too high. Thus, out of 12,500 cases, the Supreme Court will have the opportunity to consider only two.

I hope the Court decides to hear this case. Download the petition for certiorari and press release here.