The day the music industry sued someone for $72 trillion – National | Globalnews.ca

In 1999, the recorded music industry was swimming, drowning in money. CDs had been on an upward trajectory for more than 15 years, reaching sales of 2.4 billion globally and one billion units in the U.S. alone in 2000.

Despite the massive scale of the CD industry and plants running flat out around the world, the promised decline in prices never came. In fact, the industry was caught in a price-fixing scheme that inflated the cost of CDs between 1995 and 2000 with a marketing plan called “minimum advertised pricing.” It’s estimated customers were overcharged US$500 million and up to US$5 per album. (The case was settled with a fine and a promise to give US$75 million to public and non-profit groups.)

At the same time, labels moved to eliminate the more affordable CD single. “Want just that one song? Too bad! Buy the whole album for 20 bucks!” And given the perceived rise in one-hit wonders by the end of the ’90s, music fans were in a surly mood.

The dam began to burst on June 1, 1999, when v1.0 of Napster was released into the wild. Within 18 months, the service had more than 80 million users sharing MP3s they didn’t pay for. Other illegal file-sharing programs popped up. Audio-Galaxy, Kazaa, BearShare, Grokster and dozens more. Other music fans turned to legal-but-often-used-illegally software like BitTorrent and uTorrent, programs that powered networks like The Pirate Bay.

As the ’00s continued, CD sales were in freefall, costing the industry and artists untold billions. People were laid off and artists were dropped from rosters. Unable to get a handle on new digital realities, the industry was in full panic mode. The only real tool it had at its disposal was filing lawsuits, with the Recording Industry Association of America (RIAA) leading the way.

The RIAA had been successful in shutting down Napster. The organization came after the country hard, forcing it to cease operations in 2001. By June 2002, Napster had filed for bankruptcy. The Grokster and Morpheus case lasted four years before the U.S. Supreme Court ruled that file-sharing services could be held liable for copyright infringement. A suit against BearShare was settled out of court for US$30 million in 2006. Kazaa was also done by 2006, settling for US$100 million.

But this was small change compared with what the RIAA demanded from LimeWire.

A free version of the program was launched by Mark Gorton in 2000, followed later by a pro version that cost US$35 a year. It was so popular that by 2007, it was estimated to be installed on one-third of all personal computers on the planet, despite some versions being very buggy and opening anyone’s computer to malware and theft of non-music documents.

Gorton and LimeWire began to get nervous about their business and legal prospects after Grokster’s loss in court, but decided to push ahead. And yes, the lawyers soon came after LimeWire. The losses in court began to pile up; the most significant was a lawsuit filed by Arista Records in May 2010.

A judge in the Southern District of New York ruled that LimeWire and Gorton were on the hook for copyright infringement, unfair competition and inducing other people/companies to commit copyright infringement. This dragged on for months until Oct. 26, 2010, when LimeWire was ordered to disable all features that allowed people to illegally share music. Gorton and LimeWire were defiant, saying they would continue operating but stop distributing the offending software.

That, however, wasn’t good enough for the RIAA. In early 2011, it followed up on the October ruling by claiming statutory damages. Judge Kimbra Wood, who was in charge of the case, wrote this in a 14-page ruling: “Plaintiffs are suggesting an award that is more money than the entire music recording industry has made since Edison’s invention of the phonograph in 1877…. If Plaintiffs were able to pursue a statutory damage theory based on the number of direct infringers per work, Defendants’ damages could reach into the trillions.”

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She was correct. The RIAA wanted Gorton and LimeWire to pay a mere US$72 trillion. To put that into perspective, that was more than three times the GDP of the entire planet at the time and the combined economic output of all seven billion people. The total wealth of Earth was probably no more than US$60 trillion at the time.

How did anyone come up with that figure? Someone made a back-of-the-envelope calculation that looked at 11,000 songs, estimating the number of times each one of them had been downloaded illegally and then equating each download with the loss of a full-priced sale. Given that American law allowed for US$150,000 per infringement, the numbers got big very, very quickly.

The RIAA says it never specifically asked for US$72 trillion, but the figure did come up as part of the case.

Expecting LimeWire to pay that amount was insane, of course, so Wood gave the RIAA a way forward. She ruled that the RIAA was entitled to a “single statutory damage award from Defendants per work infringed.” If we consider the original 11,000 songs at US$150,000 each, that added up to US$1.65 billion. That was later amended to 5,000 songs and infringement damages of US$750 million. In the end, LimeWire was able to reduce the penalty to a mere US$105 million.

So what of LimeWire today? The company is gone, but its software lives on. Version 5.5.10 and all previous versions still work and can’t be disabled in any way unless the user attempts an upgrade. Meanwhile, the LimeWire name lives as a platform for people into non-fungible tokens (NFTs). It’s also in the artificial intelligence space and can be used to share AI-generated images and videos. It’s out of music entirely.

If you’re having a bad day, just remember that in 2011, a software programmer was told he was on the hook for US$72,000,000,000,000. That would cast a pall over your morning, wouldn’t it?

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