On the Logic of Suing One's Customers and the Dilemma of Infringement-Based Business Models

Abstract

Before mid-2003, the recording industry's legal attack against peer-to-peer (P2P) systems was limited to the purveyors of P2P. End users were left untouched, the conventional wisdom being that it's not good business to sue one's own customers. Seven thousand lawsuits against P2P users later, that conventional wisdom appears wrong.

This essay looks at the conflicting evidence and concludes that the most reasonable interpretation of the data is that suing end users has meaningfully dampened file sharing among people who can afford to buy music; that suing these end-users may be a financially self-sustaining activity; and that, if left unchecked, unauthorized P2P file sharing would increasingly substitute for legitimate sales. The de facto price discrimination produced by filing sharing has triggered official price discrimination through a combination of spoofing, lawsuits, differently priced download services, and discounts for university students. But this new balance is precarious and the problem of infringement-based business models remains. The most reasonable way to address that problem while preserving P2P technology is to fully restore knowledge and intent as components of third party liability in copyright. This requires revision of the Sony test, revision already started by the lower courts in Napster and Aimster.

Keywords: Internet, Intellectual Property, Copyright