How Pirating For Personal Use Became Illegal: The LaMacchia Loophole & The NET Act

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The LaMacchia Loophole is why illegal downloading is now, well, illegal.

Believe it or not, not so long ago, illegal downloading was legal.  But that all changed when MIT student, David LaMacchia, successfully argued the dismissal of his case by reasoning that pirating activities weren’t personally profitable, and therefore not sanctionable under the Copyright Act. Shortly after the decision, officials got to work closing the “LaMacchia Loophole” and ultimately passed the No Electronic Theft Act (NET Act).

LaMacchia’s File Sharing Set-Up (What Got Him In Trouble)

David LaMacchia, a then 21-year-old student at the Massachusetts Institute of Technology, was a fan of file sharing. To satiate his pirating penchant, LaMacchia set up a network where people could upload their files to an anonymous encrypted server called Cynosure. Once there, LaMacchia would upload the Cynosure files to another encrypted server, Cynosure II, from which people could download files. LaMacchia asked that users keep his network on the down-low, but it wasn’t too long before the traffic volume was too much for the university to ignore.

A Massachusetts federal grand jury indicted LaMacchia in April 1994 for “conspiring with persons unknown” in violation of the wire fraud statute (18 U.S.C. Sec. 1343). Prosecutors alleged that since LaMacchia didn’t pay proper licensing or royalty fees, he caused more than $1 million in losses.

On September 30, 1994, LaMacchia filed a motion to dismiss the case. LaMacchia argued that “copyright prosecutions for alleged copyright infringement must be brought, if at all, under the Copyright Act, and could not be brought under statutes enacted by Congress to prohibit interstate theft and fraud” – a legal precedence established in Downling v. United States (1985). Moreover, prosecuting using federal felony wire-fraud statutes would have made criminal “the myriad of home computer users who succumb to the temptation to copy even a single software program for private use.” The ruling judge, Justice Richard Stearns, had no other choice but to dismiss the case.

Along Comes the NET Act

Nobody likes to lose – especially government officials. So after the “LaMacchia Loophole” was exposed, politicians got to work drafting and passing the No Electronic Theft Act (NET Act). Essentially, the bill criminalized illegal downloading by changing Titles 17 and 18 of the United States Code to include the “receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works.” Prior to the amendment, the law only called for sanctions against those who enjoyed “commercial advantage or private financial gain” as a result of violating copyright statutes.

In addition, the NET Act made clear that criminal prosecutions could not go forward unless “1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $ 1,000” over a given “180-day period.”

Online copyright infringement is a complicated area of law. The key to successful Internet intellectual property litigation is a lawyer who understands the nuances of copyright, trademark and trade dress violations in the context of the Web. With a dedicated Internet law practice, Kelly / Warner are those attorneys. Who knows, we may be able to find the next “LaMacchia Loophole” on your behalf. Contact us today to begin the conversation.