Eliminate Statutory Damages

NB: This is a complete rewrite of this blog entry for the sake of readability.

The lurking question for anybody who opposes compulsory licensing is what alternative they have to offer. I vacillate about whether I'm for or against compulsories, so I'm going to put my alternative to the test by articulating it here.

The most common form of the idea of compulsory licensing is that rights holders are compelled to make their content available, listeners are taxed, and the revenues are distributed according to the results of some kind of census. I advocate a different kind of compulsory: rights holders should
be forced to get off the fence -- they must sell their music online --
but how they do it is up to them. There would be no global pool of
revenues. Rights holders would choose their way of selling and
listeners would choose their way of buying.

This can be done by eliminating statutory damages for file sharing.
What are statutory damages? From href="http://www.gigalaw.com/articles/2000-all/landau-2000-10-all.html">GigaLaw:

They may be awarded to the plaintiff even though the
actual market harm may be quite small, or difficult to calculate with
certainty. Although technically not "punitive damages," in the
traditional tort sense in which damages can be designed to punish
someone, they are meant to send a strong message, "DO NOT
INFRINGE!"

If you get hauled in to court by the RIAA, they're not going to sue you for money they actually lost (monetary damages). They're going to sue you for $150,000 per song, regardless of how much they made or lost (statutory damages).

The deadlock

Online music sales haven't taken off because downloaders can't buy major hit songs at any price. There are other reasons, like overcharging and underdelivering, but those can work themselves out; if DRM makes a
download unusable people can choose not to buy it, for example. This problem isn't working itself out because of a deadlock where
rights holders are waiting to see what happens, while buyers are
waiting for hits to become available.

Eliminating statutory damages breaks the deadlock by forcing rights holders to put their songs up for sale. That would create a virtuous circle where buyers can find what they want, which brings them into for-pay systems, which generates revenues for sellers, which gives sellers a revenue base on which to sue for monetary damages.

A practical design

This solution is minimally burdensome to rights holders because it
relies on the free market. Sellers can opt for DRM or not. They can
sign with streaming services. They can sell via their own web site.
They can do whatever they want to as long as they do something.

Unlike designs where there is a pool of revenues which are paid out according to a census, this system would have very little administration. There would be no census bureau and no rights collectives. There would also be less corruption, since there would be no monitoring system to game.

Unlike designs based on tipping, this system doesn't require
revolutionary change. Rights holders would do more of what they've always done -- finding and negotiating with distribution and marketing
partners.

Lastly, eliminating statutory damages is politically feasible, since
it can be enacted in a pinpoint bit of legislation. One line in a
rider and the thing is done.

Fairness and freedom

Sticking strictly to monetary damages helps to balance the quid pro quo of copyright. Exclusive rights are a bargain between the public and the rights holders. We gave them the right to sue 12 year old girls into oblivion in exchange for making their music available, they have to live up to the bargain.

Eliminating statutory damages would also fix the problem of gross
unfairness towards people being sued. It makes no sense for Brianna
LaHara's mom to be on the hook for $150,000 per song times 1,000 songs
-- $150,000,000! Exclusive rights are intended to be a stick, not
a murder weapon.

In terms of freedom, eliminating statutory damages is the least
restrictive solution on the table. The only behavioral restriction is
that musicians who want to sue have to put their music up for sale,
which is a reasonable requirement regardless. There is no new
regulatory body. It's fully decentralized, except that courts will be
involved in deciding monetary damages.

Advocates of freedom will take
a harder line, saying that intellectual property is evil. Fair
enough, except that freedom is comprised of our actual state, not just
the one we see through the filter of the law. Eliminating statutory
damages leads to an actual state that's more free because it's more sensible. Somebody getting sued by the RIAA won't walk into court with 99% of the outcome already decided.

Wrapping up

Getting rid of statutory damages doesn't mean getting rid of monetary
damages. It means saying that somebody can't sue for money they
haven't lost. If they can't sue for money they haven't lost, they
have to be in business, and if they're in business -- if they are
really making their music available to the public over the internet
for a plausible price -- then the market will be able to work its
blundering magic.