There is the potential for being sued over the infringement of the copyrighted material if you do not pay the settlement amount demanded, at which time you could be held liable for damages of between $750 to $30,000 for each work infringed, if the copyrighted material has been registered (or up to $150,000 per infringed work if the infringement is found to be willful).
Individuals are, in fact, sued and taken to court over the infringement of copyrighted material, and damages awarded by a court to the copyright holder have been high. That said, most lawsuits (of all kinds) will settle prior to any trial.
What your best course of action is, when receiving a notice that your ISP has been subpoenaed for your identifying information, or when receiving direct notice of copyright infringement by the copyright holder or a firm representing the copyright holder, will vary by circumstances and facts (who owns the works, who is making the demands, if you in fact illegally downloaded the material or otherwise infringed on the rights of the copyright holder...).
Generally when receiving a notice of copyright infringement, you have the following options:
1. If you are not already identified and your ISP has been subpoenaed for release of your identifying information, you can move to quash the subpoena in an effort to protect your anonymity (which, if your motion to quash is not denied, can allow you to remain anonymous but will not prevent any suit from going forward against you), or you can let the ISP release your identifying information and the copyright holder can direct a settlement letter to or file suit against an identified-you in your state.
2. If you have received a settlement notice and you DID infringe on the work, you can pay the settlement amount demanded (or try to negotiate for a lower amount) and the matter should end there. Settlements generally remain confidential - your identifying information will not become part of a public record.
3. If you have received a settlement notice and you DID infringe on the work, you can ignore the notice, not pay, and hope you are not taken into court, where the damages awarded can be significantly higher than the original amount demanded and where all information becomes a public record. Ignoring the notice and hoping that the copyright holder will forget all about you and your infringement can be a costly risk.
4. If you have received a settlement notice and you did NOT infringe on the work, you can notify the copyright holder of this fact, demand proof that you infringed (which they won't have if you didn't infringe), hope they don't take you to court anyway.
5. If you have received a settlement notice and you DID infringe on the work, you can demand proof from the copyright holder that you were the one who infringed, hope they don't have that proof and hope they don't take you to court with that proof.
6. You can ignore the settlement letter and wait to be sued and then either file a motion to dismiss, or defend against the infringement suit in court - where you will either win the suit or lose the suit based on a preponderance of the evidence. Going to court, regardless of the outcome, will be a costly option (far more costly than paying the original asked-for settlement amount), but if you didn't infringe it may be a reasonable option.
I recommend that all of you consult with an attorney in your area to review all of the facts specific to each of your particular situations so that you can get advice tailored specifically for you on what the wisest course of action may be.
As additional information, some of the major Internet Service Providers have been working with the Recording Industry and the Motion Picture Industry on the increasing problem of piracy and the illegal downloading of copyrighted material. It may soon be that an infringer will receive a warning notice from their ISP when the ISP receives notice from a copyright holder of the subscriber's infringement on rights-protected material. The ISP may send one notice, or several, before either cutting bandwidth speed of the subscriber or limiting internet access. The ISP can also decide to terminate the service of those subscribers who continue to infringe. This "plan" (that is still in the working-out stage) is being worked on and supported by the National Cable and Telecommunications Association (of which Time Warner, Charter, Comcast and Quest are members), the Recording Industry Association of America (RIAA) and the Motion Picture Association of America (MPAA).
A few more notes:
There are several recent threads that you should review for more detailed information on copyright infringement suits. All of the threads should have some information that will be useful to you. Use the "Search" feature at the top of the page and type in the keyword box "West Coast Productions," enter the verification code, press enter.
Start by reading the thread titled "Illegal Downloading." Although the thread is about a West Coast Productions infringement suit filed in a District of Columbia District Court against 5000+ John Does, there are resources provided in that thread that can be helpful to you with your own infringement suits.
It is important to note that the DC Court decisions are unlike the decisions being made by other courts in other states throughout the country who are handling copyright infringement suits involving a large number of defendants. None of you mentioned whether you were part of a mass "John Doe" defendant action or not - many of the copyright infringement lawsuits being filed right now are against several unnamed defendants.
It can also be important for you to determine if the person/entity suing you actually has standing to sue (owns the copyright or holds rights in the copyrighted work) and to determine if the copyrighted material has been registered with the U.S. Copyright Office (date of registration can determine if statutory damages can be sought). Do some investigation before sending off any money.
What you decide to do is ultimately up to you. If you did, in fact, illegally download the copyrighted material, settling with the copyright holder for the amount demanded (or trying to negotiate for a lower settlement amount) will often make the most financial sense.
Good luck to all of you and, in the future, I suggest you take justalayman's advice: "Don't illegally download copyrighted material."
