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Bankruptcy could protect Jammie Thomas

Appeals decision could require the music industry, which she owes $1.92 million, to prove malicious intent in bankruptcy court. That would be tough, say attorneys.

Prior to last year, bankruptcy court would not have sheltered Jammie Thomas-Rasset from the $1.92 million debt she owes the music industry. But a decision by the Ninth Circuit Court of Appeals in San Francisco could enable her to walk away from the debt, several legal experts said on Friday.

In a stunning jury decision on Thursday, Thomas-Rasset was found liable for willful copyright infringement and ordered to pay damages of $80,000 for each of the 24 songs she was accused of illegally file sharing. The 32-year-old is the first person accused of online music piracy by the Recording Industry Association of America who has taken his or her case to court.

Greg Sandoval/CNET Networks

This is the second time that a jury has ruled in the case against the Brainerd, Minn., resident. In October 2007, she was ordered to pay $222,000, but the decision was thrown out after the judge in the case acknowledged he erred in giving jury instructions. Thomas-Rasset has become the Joan of Arc of the file-sharing community. She has vowed to keep fighting. She's told reporters she hasn't the means to pay the RIAA, and wouldn't if she could.

Here's why bankruptcy court may be an option for Thomas-Rasset, according to Ira Rothken, the lawyer who has represented BitTorrent tracking sites such as TorrentSpy and Isohunt, and has a long record of defending clients against the entertainment industry:

He says that in the past, when someone was found liable of willful copyright infringement, the law prevented the defendant from discharging, or wiping out the debt in bankruptcy court. Last year, however, the Ninth Circuit Court of Appeals found in the case of Barboza vs. New Form, that "willful" meant one thing in civil court and something else in bankruptcy court.

"Now her conversation must be 'Hey, if we can't settle, I'm going to go forward and file for bankruptcy,' and they'll say 'Well, you'll have to have another trial.'"
--Ira Rothken, attorney

In trademark or copyright cases, "willful" means that a defendant knew what they were doing. According to the Ninth Circuit, bankruptcy laws mandate that for a debt to be non-dischargeable, a plaintiff must prove a defendant was "willful and malicious," meaning the person's intent was to cause harm.

Even entertainment lawyers agree that the Ninth Circuit's decision in Barboza makes it tougher for copyright owners to collect damages. Kathryn Bartow, an attorney with Manatt, Phelps & Phillips, a Los Angeles-based law firm that does extensive work for the major movie studios, wrote in a February issue of her firm's newsletter:

(Barboza) serves as a warning to trademark and copyright owners as well as the counsel who represent them in willful infringement cases. When presenting evidence and crafting jury instructions, beware. In willful infringement cases, to prevent an individual defendant from having its debt discharged in bankruptcy, the plaintiff should consider introducing sufficient evidence and including additional jury instructions to satisfy the Bankruptcy Code's definitions of 'willful and malicious.'

If the jury had only found Thomas-Rasset guilty of copyright infringement instead of willful infringement, it would have been easier for her to get rid of the debt.

"If she could have won on that point," Rothken said, "it would be absolutely dischargable without even having to have another hearing in bankruptcy court. She'd be going into a settlement discussion (with the RIAA) saying 'Look, if we can't settle it, I'm just going to go bankrupt and you're not going to get anything.' Now her conversation must be 'Hey, if we can't settle, I'm going to go forward and file for bankruptcy,' and they'll say 'Well, you'll have to have another trial.'"

Fred von Lohmann, an attorney for the Electronic Frontier Foundation, an Internet-user advocacy group, said that proving malice in bankruptcy court might be extremely hard for the RIAA.

"No. 1, I'm not at all sure that they'd be interested in trying this case again," von Lohmann said. "And No.2, I'm not sure they'd win. Just because you think she did it doesn't mean necessarily that she knew and intended to harm the industry. We know that lots of people are running Kazaa without understanding that they're sharing (the music files) at the same time."

Jammie Thomas-Rasset now owes the RIAA $1.92 million. Jammie Thomas-Rasset

Much of what happens next depends upon how settlement talks go between the RIAA and attorneys for Thomas-Rassert.

Since the second the jury's decision was read, the RIAA has said it wants to settle. The trade group for the four largest music companies repeated that sentiment on Friday.

"It was a jury of regular folks who rendered this decision," said Jonathan Lamy, a spokesperson for the RIAA. "We do not seek any specific damage awards. For the few existing cases, this verdict is a reminder of the clarity of the law. With any case, including that of Ms. Thomas-Rasset, we seek to settle these out of court. We stand ready and willing to talk settlement with Ms. Thomas-Rasset or anyone. We think that's most beneficial for everyone involved."

What Thomas-Rasset must consider before going forward is that she has lost twice in court. The legal costs for her may rise. As it stands, the RIAA can legally garnish her wages. According to Bloomberg, she works as a natural-resources coordinator for a Native American Indian tribe.

For the RIAA, the size of the damages stamps it with the bully label and backfires when it comes to public relations. That's the opinion of Ben Sheffner, a former entertainment lawyer and copyright proponent. He says the jury award also potentially hurts the RIAA if someone decides to challenge the damages on constitutional grounds.

"On the plus side, the decision sent a strong message," Sheffner said. Twenty-four "average Minnesotans with no ties to the entertainment industry have now said what she did was wrong and she deserves a strong punishment. On the other side, the size of the monetary damages could be used as serious ammo against the music industry."