The RIAA (Recording Industry Association of America) on Tuesday won its legal case against Usenet.com for copyright infringement when the judge hearing the case ruled that Usenet was not entitled to use the 1984 Betamax defense. The parties are next headed to federal court for the damages assessment and award, which could amount to many, many millions that Usenet.com must pay the RIAA.
Usenet.com enables users to access the Usenet network, which was in its beginning a way that users could share binary files, as well as participate in electronic discussion forums. The RIAA claimed that Usenet.com was permitting unauthorized copyright infringement by charging users $19.00 to access "millions of MP3 files and also enables you to post your own files the same way and share them with the whole world." Unfortunately, this was Usenet’s own advertising pitch, which did not help its legal defense.
Judge Baer ruled for the RIAA and found that Usenet.com is liable for direct, contributory, and vicarious infringement and accordingly for damages for all of these. The damages awarded could range from $750.00 per infringing work up to $30,000.00 per infringement, with the award totaling hundreds of millions in damages. However, Usenet’s attorney, Charles Baker stated that, "The court needs to balance the fact that you can't simply shut us down, because the technology itself has substantial non-infringing uses. On that everyone agrees."
Baker was referring to the Betamax defense, which companies have used to diminish their liability from infringement when there are other uses for the technology that are significant and not infringing. The Betamax case refers to the U.S. Supreme Court decision in Sony Corp. of America vs. Universal City Studios, which held that video recorder manufacturers could not be held liable for copyright infringement since the devices were "capable of significant non-infringing uses." This case has been a bulwark for defense lawyers to shield their technology clients against copyright complaints.
Judge Baer claimed he disallowed the Betamax defense on the grounds that the main difference between Usenet.com and Sony in the Betamax case was that Sony cut all of its ties with customers once those customers bought a VCR. In doing so Sony had no part at all in whatever illegal acts were committed later by customers. The Judge then found that Usenet.com, on the other hand, still maintains a relationship with its customers, and thus acts as the “gatekeeper” to the Usenet network.
Usenet’s attorney said, "You do see a whittling down of the (Betamax) policy unfortunately. I think because the court found that we were more actively involved in our users than they were in the Sony case itself. Yes, we maintained a relationship with our clients but we tried to point out Sony also maintained a relationship by keeping up with customers through warranties, and providing 800 numbers and by contacting their customers. In this situation, the court may have gone too far in finding that Sony Betamax was not available to us as a defense." Baker went on to say that Judge Baer also may have gone too far by ruling that distributing material within a closed network was a violation.
Baker went on to say, "This is something new the judge bought off on their argument. The way Usenet works is there is copying going on in the servers, there's multiple copies being made. When a user uploads a file it goes into a server and subsequently those binary files move from server to server as they go through the Usenet network. The court has held that was a violation of the right of distribution and no court has gone there before."
Naturally, the RIAA's chief litigation attorney disagreed that the Judge had made any rulings that represented new law. "You only need to look at the decisions that we [the RIAA] have prevailed in thus far against peer-to-peer services. In all of those cases, the court must have determined that Betamax didn't apply because you know for sure that every defendant always tries to say, 'We're immune from liability because of Sony Betamax.'" It is simply untrue that this case is unprecedented…. It's true that this particular technology has not been observed before, but you can think of that as analogous to the transferring from one file to another on a peer-to-peer network, which the Supreme Court in Grokster said was infringement. The fact that it goes from a peer to another peer doesn't mean it's not copyright infringement. What [Judge] Baer said is that the transfer of the file from this defendant's server to a Usenet.com paid subscriber is unauthorized distribution."
Usenet.com now needs to think about appealing, and about what steps they must offer the court as the way they will prevent future copyright violations while still operating their business model. Also, Judge Baer will be assessing what the damages should be. You can bet that the number will be a large one. Fasten your seat belts, as this one is going to be a long ride.