NET Act
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The United States No Electronic Theft Act (NET Act), a federal law passed in 1997, provides for criminal prosecution of individuals who engage in copyright infringement, even when there is no monetary profit or commercial benefit from the infringement. Maximum penalties can be five years in prison and up to $250,000 in fines. The NET Act also raised statutory damages by 50%.
Prior to the enactment of the NET Act in 1997, copyright infringement for a noncommercial purpose was apparently not punishable by criminal prosecution, although noncommercial infringers could be sued in a civil action by the copyright holder to recover damages. At that time, criminal prosecutions under the copyright act were possible only when the infringer derived a commercial benefit from his or her actions. This state of affairs was underscored by the unsuccessful 1994 prosecution of David LaMacchia, then a student at the Massachusetts Institute of Technology, for allegedly facilitating massive copyright infringement as a hobby, without any commercial motive. The court's decision in United States v. LaMacchia suggested that then-existing criminal law simply did not apply to noncommercial infringements (a state of affairs which became known as the "LaMacchia Loophole"). The court suggested that Congress could act to make some noncommercial infringements a crime, and Congress acted on that suggestion in the NET Act.
The NET Act amends the definition of "commercial advantage or private financial gain" to include the exchange of copies of copyrighted works even if no money changes hands and specifies penalties of up to five years in prison and up to $250,000 in fines. It also creates a threshold for criminal liability even where the infringer neither obtained nor expected to obtain anything of value for the infringement.
The NET Act raised the levels of statutory damages to $750 -- $30,000 per work (or actual damages or infringer's profits, whichever is greater). In cases of willful infringement, the act allows individuals to be held civilly liable for statutory damages of up to $150,000 per work infringed).
The NET Act could be applied to the unauthorized trading of infringing MP3 files, although music file-sharing was not yet widely practiced by 1997. The infringements of greatest interest to industry at that time were primarily infringing copies of software.
