The has been some interesting developments in the RIAA vs. Tenenbaum case that may have some far reaching consequences. How far reaching wasn’t clear until some paperwork surfaced with just how much the RIAA is losing in these file-sharing cases. We weigh the possibilities to figure out how likely the RIAA is going to appeal the judgment that the original fine was unconstitutional.
To recap, Joel Tenenbaum was sued by the RIAA and fined $675,000 for sharing 30 works without authorization. Ever since, questions surfaced about the constitutionality of the fine. A judge finally looked at the fine, agreed that the amount was unconstitutional and knocked off a zero to make the fine $67,500 for 30 works. Not surprisingly, even at that point, the RIAA was upset at this and vowed to contest it, but didn’t give details as to how they would contest it at that point.
While there was some debate about how this new fine was still way too high, something interesting surfaced in the midst of all of this. An IRS form from the RIAA was discovered which said that the RIAA is spending over $17 million and only pulling in $391,000. It’s a trend that has been going for three years which, as Ray Beckerman suggests, shows that the RIAA spent a total of $64 Million and only $1,361,000 between 2006 and 2008.
It really shows a root cause for the RIAA being upset that a fine such as Tenenbaum was knocked down due to constitutional concerns. Not much is currently coming out of the RIAA at this point. The only thing that has recently come out of the organization was an anonymous comment from a high ranking official of the RIAA saying that an appeal is likely.
So, how likely is an appeal? The RIAA is currently losing tens of millions of dollars in its litigation campaign and not much is coming back. If the RIAA wins the original fine of $675,000, that’s a precedent that could ultimately see the money coming back to the RIAA gradually for future cases. So, it’s an investment to set some nasty precedents. If the new fine of $67,500 sticks, that’s a precedent that would be very worrying for the RIAA because the RIAA would completely log-jam the court system before they even get a chance to come close to recouping all of the legal costs over the years.
A business can talk about morals until they are blue in the face, but if it becomes nonviable thanks to locked in precedents to legally pursue file-sharers, there really is only two options the organization would eventually face – 1. Stop pursuing file-sharers or 2. Go bankrupt trying.
Looking at the options, the case is sort of a perfect storm for the RIAA too. They could back down and hope for a different case to have a better outcome, but how much better of a case could they hope for? They have a case where the defendant admitted guilt and the RIAA is getting a fine. Going back to square one is also risky because the questions of faulty evidence to name one example would, once again, haunt the RIAA throughout the case. So it’s all risk, no real award to back down and try again.
Another option the RIAA could take is to try to offer a settlement again, but it would not solve the core problem of the $2,250 per work fine precedent. It’ll simply defer the problem to a later time and mean they can’t get a precedent they want anywhere near as quickly – which, in and of itself is expensive.
Then there’s appealing the decision in the hopes of getting a much larger fine. There’s a possibility of it going up or down because the nature of file-sharing fines, at this point, is purely arbitrary. It’ll get really messy quick where to set the fine rate per work because the arguments could easily be reduced to, “Well, my imaginary losses are different from your imaginary losses!”, but at least the battle can shift either way.
Worst case scenario for the RIAA if they appeal is they lose every one. Should that happen, I’d argue that it threatens to derail the entire litigation campaign because the return of investment would be pretty bad. Either way, there’s a lot riding on getting a high fine including the ability to say to future alleged infringers, “You could be on the hook for millions! Pay up or else.”
Having said all of this, I’d argue that it would be a big surprise if the RIAA doesn’t appeal. So my prediction is that there’s a 95% chance the RIAA would appeal, a 4% chance that the RIAA would offer a settlement and a 1% chance the RIAA would drop the case. At least, that’s my prediction in all of this.
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@Justin
No one is forgetting about Statutory Damages. The big deal about these cases is that Judges have been ruling that the award amounts are excessive. If this case makes it to the supreme cout then the statutory amount may be deemed an excessive fine and in violation of the 8th Amendment of the US Constitution.
That would effectively KILL the industry’s litigation campaign.
@Gamer
True, judges are saying the amounts awarded are excessive, but in both the Thomas-Rasset and Tennenbaum cases the judges set the award at $2,250 per copyright – 3 times the minimum statutory amount. if it does go to the SCOTUS, I really doubt they are going to find the statutory amounts excessive, they will simply say it’s up to Congress to set the amounts and they will likely defer to the lower judges discretion on damages if it is within that range.
I don’t disagree that the actual damages of the RIAA are questionable, to say the least. And their litigation campaign is unsustainable anyway – $16 mill in legal fees and only $391,000 in returns last year.
Are y’all are forgetting about statutory damages of at least $750 up to $30,000 per copyright? Actual losses are no the only thing the appeals court would consider in terms of reasonableness. Both the original award and the judge’s reduction are within this range, so it really comes down to whether a higher court is going to overrule the lower judge’s discretion. I personally don’t think it will, given the judge’s ruling is over 3 times the minimum amount.
That latest Harvard study pegs losses at about 20%, so damages will be $1.20 each.
Since punitive damages is limited to 9 times, that maxes it out at 12 bucks.
Thirty of those brings the bill up to $360, not counting tips.
Am I leaving anything out? Cab fare? Lunch money? :p
If RIAA appeals and gets to the Supreme Court it may end up getting the fine reduced to “reasonable” levels. Since the established market value of each song is $0.99, and the RIAA can’t prove how many times it was downloaded, or even give a good approximation, and since the defendant didn’t make money from the songs the compensatory cost is probably around $30.
Knock that up some for a few “most likely” downloaded, and throw in some punitive damages and you’ll probably get something around $500-$1,000. Well within “painful, but payable” range . However well outside the cost of time for the RIAA legal council.