Unintended consequences of the proposed Inducement of Copyright Infringement Act have been criticized as likely to give birth to a generation of twenty-first century high-technology ambulance chasers. Inducement is well-known to facilitate a number of nasty and sometimes unfair litigation tactics to increase costs of litigation and sometimes to force companies to settle cases they would not have settled otherwise. Content organizations sneered at such criticisms of the IICA as unlikely or at best theoretical.
In an ironic twist, past and present RIAA officers Hilary Rosen, Cary Sherman and Mitch Bainwol now individually face the business end of their own proposal. They have now been sued --as individuals-- for inducing infringement made by the organizations they manage.
An often repeated criticism of S. 2560, the Inducement of Infringement of Copyrights Act, is that it will chill innovation even if the content plaintiffs are unable to win a single case on the merits. Because the proposed standard is so subjective, a defendant who is likely to win will nevertheless be unable to prevail on a motion to dismiss or for summary judgment, and must therefore go to trial.
A trial means that regardless of merits, a defendant must face the uncertainty of a jury that may not understand or accept the technical niceties of the "safeguards" built into IICA, and may face ruinous liabliity that could be measured in the hundreds of millions or billions. And depending upon how the trial is conducted, such jury findings might be unreversable on appeal. In other words, even in clear cases of non-inducement, a defendant will not know whether they had bet and lost their company, or were permitted to sell a new technology, until the judge and jury tells them so.
What company would introduce a new technology under such circumstances? Who would invest in such a company? IICA, as drafted, will no doubt chill technology unless the new bill can erase uncertainties provided a company selling a lawful product having both infringing and noninfringing uses controls its conduct. No proposal by the Senate staff or the Copyright Office to date has provided such assurances.
This is no theoretical issue. The exploitation of claims of inducement by plaintiff's lawyers is a well-known and extremely common litigation tactic. Most commonly, inducement in patent cases (under a far more rational standard) is exploited to extend a claim against a company for patent infringement into an action against the officers and directors of that company. Such apparently overreaching litigation tactics are often used by patent plaintiffs, designed to give the individuals an incentive to pressure their companies to settle and resolve the lawsuit, forcing them to obtain counsel and perhaps to generate wedges between them as their personal assets and documents are placed at risk.
Although RIAA and staffers scoffed at the possibility that their new bill might lead to exploitation and overreaching legal tactics, dismissing the criticisms of ICAA as unlikely and implausible, perhaps their mindset will soon change. As you know, RIAA has recently been sued for patent infringement in the Central District of California by Altnet and others for patent infringement arising from use by others of a document spoofing technology to disrupt P2P networks.
While it is questionable whether RIAA itself engaged in actionable conduct, the plaintiffs in that case sued not only the known infringers, and not only the RIAA, but also Messrs. Bainwol, Sherman and Rosen in their individual capacity, as Counts two and four of the complaint set forth claims for inducement of patent infringement.
Perhaps these individual officers are clearly innocent of bad-acting in the form of patent inducement. Even so, they may not prevail on summary judgment due to plausible litigable fact questions, and ultimately, may be exposing their personal fortunes to the caprice of jurors who like P2P software. Perhaps a bad result can be appealed. Perhaps not.
The good news for them is that, the patent inducement standards will be more helpful to them, than the standards they would impose upon technology companies with their new bill. This is why the IEEE-USA proposed as an alternative to IICA, essentially, an adaptation of those more rational and well-tested patent standards. Even so, these individuals must now face personal risk and litigation expense because of allegations for individual bad acting in a cause for inducement.
Some "theoretical" problem.
Posted by Werdna at September 14, 2004 01:36 PM