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I think the only way to avoid those sort of ridiculous punishments is to do away with civil damages cases completely. Make things like that a legal matter and hand out punishments that are approriate for the seriousness of the crime when there is enough evidence to prove guilt. Listening to music without authorisation getting a harsher punishment than mugging an old lady is just plain silly.
But I don't think it will stifle innovation. All the innovation of recent years has come from the pirate community initially, then been legitimised later.
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