Usenet.com ruling, a 'whittling down' of Betamax defense

Usenet.com lawyers lost their copyright infringement case to the music industry on Tuesday and are now preparing for a federal court to assess damages. The judgment could be hundreds of millions of dollars.

Charles Baker, attorney for Usenet.com

(Credit: Fulbright & Jaworski law firm)

In the long list of copyright cases brought by the Recording Industry Association of America, this one stands out for all the drama it provided, and depending on which side you talk to, the amount of precedent-setting decisions involved. Usenet.com lawyers argue the presiding judge diluted the power of the landmark 1984 Betamax case. RIAA attorneys sigh, and say their opponents are just trying to inflame the public.

In what became a provocative sideshow during the proceedings, the RIAA alleged that Usenet.com destroyed evidence and prevented employees from being questioned by RIAA lawyers, going so far as shipping some of them off on extended trips to Europe. Presiding U.S. District Judge Harold Baer, of the Southern District of New York, was unamused and sanctioned Usenet.com.

Usenet.com is a company that enables users to access the Usenet network, an early electronic discussion forum and formerly popular way to share binary files. In October 2007, the RIAA filed suit against Usenet.com, which charges up to $19 for access "to millions of MP3 files and also enables you to post your own files the same way and share them with the whole world."

That was how Usenet.com advertised itself and while the pitch may have lured customers, it certainly didn't help in the defense against a copyright suit. Baer ruled in favor of the RIAA on Tuesday and found Usenet.com liable for direct, contributory, and vicarious infringement. Sometime in the next three weeks, the judge will hear from both sides as to what they think damages should be and what steps Usenet.com must take to prevent copyright violations.

Both sides agree that there is a vast amount of infringing material that Usenet.com helps make available. Baer could assess damages anywhere from $750 per infringing work to $30,000. The total award to the RIAA theoretically could be in the hundreds of millions of dollars. Already, one of the three defendants in the case has filed bankruptcy. There are serious questions about whether Usenet.com can survive a significant damage award.

"The court needs to balance the fact that you can't simply shut us down," said Baker, "because the technology itself has substantial non-infringing uses. On that everyone agrees."

Erosion of Betamax
For other media services accused of copyright violations, such as YouTube and music start-up Project Playlist, nothing in the case is more important than the judge's decision to prevent Usenet.com from arguing a Betamax defense, Baker said. The Betamax case refers to the Supreme Court decision in Sony Corp. of America vs. Universal City Studios, which decided that makers of video recorders could not be held liable for copyright infringement.

That ruling has been interpreted to mean that companies can't be held liable if the devices they create are "capable of significant non-infringing uses." It is a decision that tech companies have long relied on to shield them against copyright complaints. But the RIAA now has Betamax in its crosshairs, according to Baker.

Judge Baer said, in his 38-page decision, that the chief difference between Usenet.com and Sony in the Betamax case is the latter company cut ties with customers once they purchased a VCR. After that, Sony had no part whatsoever in illegal acts committed by customers. Usenet.com, on the other hand, maintains a relationship with customers. For Usenet.com subscribers, the company is the gatekeeper to the Usenet network.

"You do see a whittling down of the (Betamax) policy unfortunately," said Baker, with the law firm of Fulbright and Jaworski. "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."

Another precedent set by Baer, according to Baker, is that distributing material within a closed network was a violation.

"This is something new the judge bought off on their argument," Baker said. "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."

Jennifer Pariser, the RIAA's chief of litigation.

(Credit: RIAA)

Nothing new here, move along
The RIAA's chief of litigation denied in an interview that that there is much new, if anything, in Baer's decision. "Baker is inflaming your readers by suggesting that Baer went further than he did," said Jennifer Pariser, the RIAA's senior vice president of litigation.

"You only need to look at the decisions that we have prevailed in thus far against peer-to-peer services," Pariser said. "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.'"

She noted that decisions in such cases from Aimster to Napster have all said that just because a service is capable of non-infringing uses, doesn't automatically protect it from liability. In Napster, for example, the company asserted the Betamax case in its defense but U.S. District Judge Marilyn Patel ruled against the music-sharing service because the defendant had knowledge of copyright theft on the site.

"It is simply untrue that this case is unprecedented," Pariser said.

As for the way the files are distributed on Usenet, she also disagreed that Baer's findings were anything new. "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 Baer said," Pariser continued, "is that the transfer of the file from this defendant's server to a Usenet.com paid subscriber is unauthorized distribution."

How about the shenanigans Usenet.com was accused of committing with respect to evidence and discovery?

Baker said the RIAA's favorite tactic in these sort of cases is to "bombard defendants with discovery requests" and that his clients aren't very sophisticated. They were doing their best to comply. He added that the RIAA is trying to use this case to scare other Usenet services.

Pariser said that in all the similar cases the RIAA has pressed, when it came to Usenet.com "the discovery misconduct was unprecedented."

As for what the RIAA is going to ask for in damages, Pariser said the RIAA hasn't come to a dollar figure yet but "certainly there's no question that Usenet.com caused multimillion dollars worth of damage."