1. Ernest Miller on October 21, 2003 05:52 AM writes...

Dan further responds here:
http://dan.yale2000.org/dtm/archives/000013.html

My response:

Fingerman responds:

"Ernest points out that the insurance policy I suggested would be unusual: it would cover settlements but not judgments in copyright infringement suits. This may seem bizarre, but it is necessary for two reasons. First, it is an attempt to dodge the required disclosures under Rule 26 of the Federal Rules of Civil Procedure (FRCP). If the policy does not cover judgments, it does not fall within the literal language of the rule. If push comes to shove, a court might see it for what it is (an attempt to dodge the rule) and assess sanctions for failure to disclose. I would not recommend this litigation strategy for most people, but someone interested in setting precedent (EFF? ACLU?) might be interested."

I remain skeptical that one can dodge the required elements of Rule 26 with this ruse. However, even if one does dodge the required disclosure under Rule 26, that does not mean they don't have to disclose. It just means that disclosure isn't automatic. To the extent that the public policy behind Rule 26 mandates automatic disclosure of insurance policies, I would expect that Rule 26 would encourage disclosure of insurance-like policies that cover "settlements" in response to a specific discovery request. You could fight the discover request, I suppose, but I'm not sure that would win you many points with a judge or the plaintiffs.

And who exactly would litigate the issue anyway and on who's behalf? Which raises the issue of whether it is proper for representatives of this "insurance" company to represent the interests of those it insures. Normally, an insurance company's lawyers are allowed to represent the insured in court because it is assumed that the insurance company and the insured have interests that are quite similar - the lawyers for the insurance company will fight as hard as if they were directly employed by the insured. Why is that at all the case here? If anything, the lawyers for the "insurance company" in this case have every incentive to press for a judgment of any sort, thus eliminating any requirement for the "insurance company" to pay out. I wouldn't want a lawyer with such a mismatch of incentives to represent me ... heck, I'm not even sure it is ethical.

Dan next agrees with me that insurance for judgments would cost too much. He notes that the RIAA would prefer to settle claims rather than litigate them. However, the point for the RIAA is not to litigate or settle, but to discourage people from file sharing - the current settlements are part of that strategy. To the extent that permitting this insurance business to operate would undermine this strategy, the RIAA will push forward to litigation where necessary. In such a case, if you are buying insurance because you are worried about the consequence of a lawsuit, the fact that the RIAA can push forward with litigation to "judgment" (at their discretion) leaves you as unprotected as if you didn't have any insurance whatsoever. So, why would people pay for this protection that is no protection whatsoever?

Dan then notes that there are a variety of settlements and not all of them will be considered "judgments." This is true, and I should have been more clear. The point is that the RIAA can basically insist that the defendant make a Rule 68 offer or no settlement, and a Rule 68 offer is a "judgment." What is a defendant going to do? The RIAA says, "make us a Rule 68 offer of $3,000 and this case goes away, otherwise we take you to trial where you will be liable for a minimum of $750,000." If the defendant is so concerned about such an outcome that they are taking out insurance in the first place are they going to say "no"? What would be the point? And why wouldn't the RIAA insist on a Rule 68 offer? Because otherwise the defendant will insist on going to trial?

Knowledge and Willfullness

Dan argues that evidence of liability insurance can't be brought in as evidence of willfullness under FRE 411. True, but it can be brought in for a number of other purposes (such as knowledge), including those that would more likely result in a finding of willfullness. Dan insists that the knowledge provision applies only to knowledge of what is being done with a person's property. I disagree, I believe that it can be used to show knowledge that file sharing programs can infringe copyright. Furthermore, even if that isn't permitted, it certainly would be permitted to rebut the credibility of a defendant who denied knowledge that file sharing programs can infringe copyright. Basically, buying insurance will significantly reduce your ability to claim "innocent infringement" and make it much more likely that willfullness will be found.

One of the first questions the RIAA's lawyers will ask defendants who don't settle is whether or not they knew that P2P could be used to illegally file share. If they say, "yes", you are well on your way to a finding of willfullness. If they say, "no", then the evidence of insurance can be instroduced to rebut or cast doubt on their veracity.

Dan postulates a defendant who sometimes names files "NOT [songname].mp3" in order to trick the RIAA into an attack. Bad, bad idea, if you are actually file sharing files that are copyrighted by the RIAA. According to the RIAA, they are actually downloading songs from the individuals they target in order to verify that a representative number of songs are actually copyright violations. If this is this case, and you are also sharing files simply to taunt the RIAA, you are definitely looking at a finding of willfullness, whether you buy insurance or not.

If the RIAA sues someone by mistake, and they can prove it, then the insurance evidence may not be relevant. But, really, are people so afraid of being mistakenly sued by the RIAA that they are going to buy insurance that only covers settlements?