Update 2/3/2010 – Some have contacted me that the following post is over simplistic, and they raise some very good points.  It isn’t the RIAA that is seeking the million dollar fines; they’re usually asking for ~$3500 settlement fees; it is the juries that are issuing these multi-million dollar fines if the case goes to court.  Someone else criticized my blog posting that:

“This is way way way oversimplistic.  The penalties were, of course, originally set in a world where a copyright violation might be a movie, or a record, or a book – and the penalties are not at all unreasonable.  Then electronic networks set in and some folks are copying a few songs for their ipod, while others are operating cyblerlockers and linking sites that affect millions in revenue.  That’s why the law allows a lot of flexibility in setting actual penalties – and doesn’t allow a $2500 penalty (a lot for the ipod downloader) to become a $2500 license fee for someone taking a prerelease copy of Star Wars and releasing it to the internet (which could be worth hundreds of millions).”

All of these are great points, but the current system seems to be a legal quagmire.  I understand that content pirates aren’t just downloading the content; they’re also distributing it to other users in the process which causes even more damage.  The million dollar fines may be justifiable if we look at the damage caused by the dissemination of valuable content, but it doesn’t seem practical to go after every infringer with an army of lawyers.  The point of the original blog is that if we can make the punishment less controversial and easier to apply to a larger number of pirates, then it will be a more effective deterrent.  I could be wrong, but I think that people fear a likely $2500 fine much more than they fear a rare million dollar fine.

Now I want to be clear that I am not talking about pirates that are making mass illegal duplications and selling them.  Those people need to be severely fined and jailed.  But the scope of this conversation was always strictly about residential broadband customers.

Original post below:

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Nate Anderson of Arstechnica posted a great story “Towards a kinder, gentler three-strikes for file sharers” about a sensible middle ground for combating digital piracy.

“IFPI publicly supports the right for users to challenge their accusations before any penalty is imposed, but it rejects the idea that simply using toothless notices will have much effect. Some “bad thing” is needed at the end of the process. It certainly seems as though some compromise could be worked out if the industry were willing to drop its insistence on disconnection and would work for a Congressional change to copyright penalties. If a graduated response process ended with the option of a real judicial hearing and a maximum $2,500 total fine (but no disconnection), how many people would still object?

Years of support for maximal copyright penalties have in some ways boxed the copyright industries in, and we’ve seen little apparent willingness to craft smaller, more realistic penalties that don’t send federal judge and Internet users into a rage. Such lesser punishments, while they seem to weaken copyright, might in fact strengthen it immeasurably”

There are extremes on both sides that are completely unworkable.  One extreme is the position that copyright should simply be abolished and that “sharing” (a euphemism for piracy) without profit should simply be legal.  That effectively means almost no one will ever pay for content again which translates to almost no professional artists and writers.  The other extreme is the million dollar fine that no one is ever going to pay even if they wanted to pay it or if someone tried to beat it out of them.  Cutting Internet users off unfairly penalizes the rest of the family that may not have had anything to do with the piracy, and it deprives a broadband provider a paying customer which is the reason ISPs aren’t enthusiastic about cutting off pirates.

The sensible solution seems to be a $2500 cap on the fine for individual pirates that can realistically be paid without any kind of drawn out legal challenges and bad press, but still be a very powerful deterrent.  Realistically speaking, the RIAA usually settles for a few thousand dollars anyways so why not just make it official and get rid of all the controversy?  Most people will modify their behavior as soon as they see their first warning for piracy if they know that there is a real possibility of a $2500 fine if they keep it up.  To lighten the load on the legal system, give people the option of pleading guilty and paying a half fine.  The current strategy of fining violators millions of dollars is simply not going anywhere and it’s a legal quagmire.

The reality is that the RIAA is probably perfectly happy to slap on a few thousand dollar fine and they usually settle for that much money anyways.  The problem is that if they ask for $2500, their opponents will say why not $10 since the content was barely worth that much in the first place.  So to counter the unworkable extreme of $10, the RIAA asks for some other unworkable extreme of a million dollars.  This is where a mediator needs to step in and come up with a number that is a realistic deterrent.

This would effectively turn piracy into a very severe traffic violation on the digital highway.  I used to drive too fast on the freeway but a few $300 fines plus driver’s ed classes were enough to change my behavior.  If a police officer pulled me over and told me that my next violation was going to cost me $1250, I would be setting my cruise control to 65 on the freeway for the rest of my life and I suspect most people would be the same way.  So by turning piracy into a simple infraction that doesn’t need to go beyond a local court house hearing (if it even gets that far), it becomes practical to enforce copyrights at a consumer level.