I spent this morning on the phone with Ray Beckerman of the Recording Industry v The People blog, who laid out why the decision is pretty much the touch of death for the RIAA's litigation strategy.
Here's the scenario: The entire litigation model is based on the statutory damages under the Copyright Act. Those start at $750 per song and go as high as $150,000 per song. These were the damages that a jury nailed on Jammie Thomas -- $9,250 per song for a total of $222,000.
In the Thomas case, the judge went along with the "making available" theory of copyright infringement and allowed the mere presence of P2P-accessible files to be the basis for those damages. If the Howell decision is followed – and it will be, Beckerman said, by appellate courts as well as district courts – the industry will have to prove actual distribution. That will prove to be very difficult to do -- "I believe they won't be able to prove actual dissemination," he said – and thus they will not prevail on the distribution part of copyright infringement. There is another part, however – the reproduction right. Basically, the right to reproduce (think Chinese copies of DVDs) is distinct from the right to distribute. The actual damage from illegal reproduction is only about 40 cents per song, Beckerman said, counting the royalty and other costs. If the RIAA can only prove illegal reproduction, not distribution, they have a problem.
Statutory damages of $750 on a 40 cent lost profit claim is a multiplier in the thousands, which will be held unconstitutional, Beckerman predicted. In restaurant cases where the operator didn't pay performance royalties when music was played in the restaurant, the reasonable ration was found to be between three and four times. With the payoff cut down from a minimum of $750 to a couple bucks, it will no longer make sense to sue users.
In other words, he said, "making available is dying but it may take a long time before it finally dies."