In his presentation to the “The Future of Audio” hearing yesterday, RIAA chief Cary Sherman spoke of the music industry more frequently steering towards voluntary agreements for dealing with online infringement, such as the "six strikes" deal struck with ISPs recently. But what can happen when agreements can't be reached? After Hollywood couldn't get an ISP to voluntarily play ball they sued - and lost - and now find themselves being chastised by the ISP in public.

In November 2008 and after three years of voluntary discussions that went nowhere, the Hollywood movie studios under the banner of the Australian Federation Against Copyright Theft (AFACT) decided to would be a good business decision to sue ISP iiNet.

Their aim was to hold the ISP responsible for the copyright infringements of its subscribers, an effort that ultimately failed in April this year.

For two and a half years, iiNet – who never engaged in any wrongdoing – were distracted by this massive legal action. Many of their key staff had to take huge amounts of time out from their normal roles in order to fend off the Hollywood attack dogs.

With the case now closed iiNet is getting back to its core business, but it’s apparent that the bad taste left behind after the earlier failed negotiations and subsequent legal action is going to take longer to go away. Reading through a blog post today by iiNet chief regulatory officer Steve Dalby, one has to wonder if the damage will ever be repaired.

Dalby’s article precedes a closed-door meeting today between Australia’s major ISPs, AFACT and other rightsholders, a consumer group, the Internet Society of Australia and the government. The topic is once again online infringement and from Dalby’s tone today and comments he made previously, it’s clear that iiNet have already lost faith in the process.

“I don’t need a crystal ball to tell you that the likely conclusion will be negligible change; as has been the situation since the 2005 Australia – US free trade agreement was signed,” Dalby writes.

“Little, if anything at all, is to be gained by engaging with rights holders for a commercial solution.”

The notion that rights holders cannot be negotiated with towards any mutually useful end is hugely problematic. As highlighted yesterday by RIAA chief Cary Sherman, negotiated agreements are now high on the recording industry’s agenda for moving forward, with ISPs and search engines for example.

But of course, the RIAA and its overseas counterparts haven’t yet sued an ISP in frustration after failing to get what they want, although publicly attacking Google is moving dangerously close to alienating a potentially useful partner. Hollywood has taken the nuclear option, however, and the results are visible on Dalby’s blog in black and white.

“AFACT and other rights holder bodies don’t care much for consumers. As you may have read, Neil Gane of AFACT thinks consumers are “unreasonable” to tell their suppliers of entertainment what they want.

“Actually, AFACT don’t have any customers in Australia, they are all in California, which unfortunately means that consumer pressure is unlikely to have much impact on their strategies. iiNet have suggested that they focus on what the market is demanding, but it’s a waste of breath. Their masters have set the agenda and rights holders will only do their bidding.

“A solution needs to be found but as far as AFACT goes, you might as well be talking to a brick wall,” Dalby continues.

It seems then that having failed in four years of negotiations and more than two and a half years of litigation, the people the studios need onside have already lost faith in reaching a voluntary agreement second time around.

That only leaves two options – having the law changed to favor Hollywood or giving those “unreasonable” consumers what they want. Place your bets gentlemen, please.