Wednesday, October 20, 2010

No Piracy, No Money: California Appellate Court Denies RIAA's Request For Restitution

In March, 1997, the American rapper The Notorious B.I.G. was shot and killed in a drive-by shooting on Wilshire Boulevard in Los Angeles. Two weeks later his CD Life After Death was posthumously released. It became one of the best-selling hip-hop albums of all time.

Nine years later, in March 2006, Micah Areem Kelly sold a handful of pirated CDs to an undercover police officer posing as a customer in San Bernardino County, in California. Among them was a copy of Life after Death.

Kelly worked in a barbershop with Robert Trongale. Trongale admitted he stored nearly two thousand compact discs and the barbershop and Kelly sold the CDS as a favor to him. Kelly admitted to having sold a total of 11 CDs, five of them to the undercover officer for $20.

At the time, Calif. Penal Code section 1204.4 permitted a direct victim crime to receive restitution from a convicted defendant with respect to any economic loss suffered a result of the commission of the crime. Following the convictions of the two men, the music industry trade association the Recording Industry Association of America (RIAA) sought restitution.

In June 2009, at Kelly's restitution hearing, the RIAA submitted a letter identifying itself as a nonprofit trade association that represents the United States recording industry, and explained that its primary function is to investigate the illegal production and distribution of sound recordings. The RIAA calculated a wholesale value of $7.58 for each of the 1,927 compact discs found in the barber shop. Based on RIAA's letter, the court ordered Kelly to pay a restitution fine of $14,606.66 to RIAA. In September 2009, the court then modified Trongale's earlier victim restitution order, which originally awarded RIAA $2,213. As modified, the new order required Trongale and Kelly, jointly and severally, to pay the higher $14,606.66 amount, notwithstanding the evidence that Kelly had only sold eleven CDs.

The California Court of Appeal reversed, holding that under the statute, RIAA was not a "direct victim" because it was not the object of the defendants' crimes – and that RIAA, as a nonprofit organization, had not suffered any loss. "Only those persons or entities whose product was pirated by defendants have suffered losses," the court held.

The decision may have limited impact, however, as the applicable law has since been amended to permit trade associations to obtain restitution on behalf of the owner or lawful producer of the compact disks there at issue. The court noted the amendment in its opinion. However, the crimes at issue were committed in 2006, before the amendment became effective on January 1, 2009. Moreover, on the record before the court, there was insufficient proof that RIAA was acting on behalf of the owner or lawful producer of the subject recordings.

Life after Death was originally released by Bad Boy Entertainment, the record label founded by Sean Combs in 1993. (The label now operates as a subsidiary of Warner Music Group.) It remains a mystery just how much RIAA spent pursuing fourteen thousand dollars in restitution from two men who work in a barbershop. Surely the events of the last few years have put a strain on Kelly and Trongale's friendship. As for their $20 sale in the back of the barbershop, they needed only listen to the advice The Notorious B.I.G. offered in a song on his Life After Death CD:

It's like the more money we come across,
The more problems we see.

– "Mo Money, Mo Problems" (1997) by Christopher George Latore Wallace, a.k.a. Biggie Smalls, a.k.a. Big Poppa, a.k.a. Frank White, a.k.a. The Notorious B.I.G (May 21, 1972 – March 9, 1997).

Whether one subscribes to the theory that suing "ordinary people" is an effective strategy to protect copyrights, or just a good business model for increasing work for lawyers, RIAA appears intent on continuing to pursue all infringers in a world where pirates reap ever-increasing profits. Presumably in the trade association's next restitution case, it will include proof that it was acting on behalf of the individual or company whose copyright it is representing.

The case, People v. Kelly, California Court of Appeal Case no. E048797, is available here.