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October 20, 2003
Copyright Liability Insurance: A Response to Dan Fingerman
Dan Fingerman has some interesting responses to my claim that copyright liability insurance is a bad idea (Copyright Liability Insurance: A Response). The "insurance" he proposes only covers "settlements" but not "judgments." Thus, he argues, this "insurance" escapes the requirements of insurance discovery under Federal Rules of Civil Procedure (FRCP) Rule 26. It is an interesting argument and a truly bizarre form of insurance. I'm not so sure how many people would be interested in something that only protected them so long as they didn't go to judgment in court. Whatever the potential popularity of such a policy, unfortunately, Dan's distinction doesn't hold up. The problem is that a "settlement" is a type of judgment. It is, in fact, an "Offer of Judgment" under FRCP Rule 68.
His second claim is that I am incorrect in my argument that purchasing insurance would lead to a higher probability of being found to have willfully infringed. He makes two counter-claims: 1) that this sort of insurance should raise no more suspicions than other forms of insurance, such as malpractice; and, 2) Federal Rules of Evidence (FRE) 411 prohibits the admission of evidence of liability insurance for this purpose. Counter-claim 1 contradicts counter-claim 2. The whole purpose of FRE 411 is to keep evidence of liability insurance from the jury because of its presumed prejudicial effect. Claim 2, however, is much stronger. Nevertheless, Dan does acknowledge that evidence of liability insurance can be admissible to show other elements of a case, such as ownership, control, or knowledge. This is precisely my point ... evidence of liability insurance bears directly on the question of knowledge: did the defendant know that use of P2P can lead to copyright infringement? If you have knowledge, then it is much easier to show willfulness. Now, there may be cases where such evidence would be insufficient to show willfulness, but that does not mean the evidence is inadmissible or doesn't bear on the question.
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