Some time back Noel posted about a Mark Lemley article in which he argued that encouraging copyright holders to deter and enforce direct copyright liability will help innovation. This can be done by raising sactions for copyright violators and decreasing costs for copyright holders to bring suit. It appears the recommendations of the DOJ in the case align with Lemley's first recommendation.

Back to the deterrence studies: Below a certain likelihood of getting caught, even severe penalties do not deter; above that threshold, even light penalties deter. It's unlikely that traditional "see you in court" enforcement is going to fit this bill, in the copyright area, or for many others--low-value online fraud. Some innovation on the enforcement end is called for.