Game On! – Viacom, YouTube Briefs On File in 2nd Circuit

YouTube filed its brief Second Circuit brief today in Viacom v. YouTube, in which Viacom and others have sued YouTube for copyright infringement resulting from third parties’ uploading of videos to the YouTube service. See my earlier posts on the District Court opinion here and here; you can find the parties’ District Court briefs here. I haven’t had the opportunity to digest these filings yet, but I will post my thoughts when I get a chance.

Viacom’s Opening Brief
YouTube’s Brief
Amicus Brief American Federation of Musicians et al.
Amicus Brief Advance Publications et al.
Amicus Brief BMI et al.
Amicus Brief Stuart Brotman et al.
Amicus Brief Business Software Alliance
Amicus Brief CBS Corporation
Amicus Brief International Intellectual Property Institute
Amicus Brief Microsoft Corporation and Electronic Arts, Inc.
Amicus Brief Matthew Spitzer et al.
Amicus Brief Washington Legal Foundation
Amicus Brief Intellectual Property Law Professors

Statutory Damages Smackdown!
First Circuit Set to Hear Constitutional Challenge to Filesharing Award

On April 4, the First Circuit Court of Appeals will hear oral argument in Sony v. Tenenbaum, the first constitutional challenge to a statutory damages award to reach the appellate level. The case pits the recording industry against Joel Tenenbaum, who, as a college student, downloaded and made available for distribution thousands of songs using multiple filesharing services over a period of years. A group of recording companies sued Tenenbaum for infringing 30 of those songs. The trial court rejected Tenenbaum’s fair use defense and directed verdict against him. The plaintiffs elected statutory damages and the parties proceeded to a jury trial. The jury found that Tenenbaum had acted willfully and awarded the plaintiffs $22,500 per song, for a total verdict of $675,000.

Tenenbaum moved for a new trial, arguing that the statutory damages award was unconstitutionally excessive as applied. Alternatively, he sought remittitur, a common-law procedure allowing the judge to reduce an award that “shocks the conscience.” If a judge grants the request and reduces the award, the plaintiff may elect either to accept the remitted award or proceed to a new trial. The recording industry plaintiffs, however, indicated to the judge that they would not accept any remitted award. As a result, the Court felt constrained to address the constitutional issues, despite courts’ usual preference for avoiding ruling on constitutional questions if a dispute can be resolved on other grounds.

Before reaching the merits of the constitutional issue, the Court addressed two dueling standards for assessing the appropriateness of damages awards: St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67-68 (1919) and BMW v. Gore, 517 U.S. 559, 568 (1996). In Williams, the Supreme Court upheld a $75 statutory damages award against a railroad that had overcharged passengers by 66 cents per ticket, which amounted to 114 times the amount of the plaintiffs’ actual damages. The Supreme Court upheld the award because it was not “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” In reaching this conclusion, the Supreme Court took into account the following factors: the ratio of the award to the plaintiffs’ actual damages; the interests of the public; the “numberless opportunities” for the railroad to commit the offense; and the need for securing uniform adherence to established passenger rates.

Gore, in contrast to Williams, involved punitive, not statutory, damages. In Gore, the jury awarded $4,000 in compensatory and $4,000,000 in punitive damages for BMW’s failure to disclose that the plaintiff’s “new” car had been repainted before it was sold to him. The Supreme Court struck the award under the Due Process Clause, following three “guideposts”: the degreee of reprehensibility of the defendant’s conduct; the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and the difference betwen the jury’s punitive award and civil penalties authorized in comparable cases.

The Tenenbaum court found little distinction between the two approaches, reasoning that both cases seek to protect defendants from damages awards that are “grossly excessive in relation to the objectives that the awards are designed to achieve.” The court ultimately applied the three Gore guideposts to the jury’s award, while noting two factors that distinguish the award from typical punitive damages awards: the award fell within the statutory range authorized by Congress; and the statute clearly sets forth the maximum and minimum allowable amounts.

Degree of reprehensibility of defendant’s conduct

This is “perhaps the most important” indicator of the reasonableness of a punitive award. The court characterized filesharing as “relatively low on the totem pole of reprehensible conduct.” Tenenbaum caused economic, not physical, harm. He displayed no indifference or reckless disregard of the health or safety of others. The recording companies were not financially vulnerable. On the other hand, the court acknowledged that Tenenbaum’s conduct was willful, and that he had lied under oath and tried to shift blame. Thus, “among this group of comparatively venial offenders, Tenenbaum is one of the most blameworthy.”

Disparity between plaintiffs’ actual harm and the award

The court reasoned that the Copyright Act requires at least some relationship between the actual harm suffered and the statutory damages award. It focused solely on Tenenbaum’s individual conduct, refusing to take into account the activities of other filesharers because “the jury was not permitted to punish Tenenbaum for harm caused by other infringers.” Using the $0.70 wholesale iTunes price for music as a “rough proxy” for the plaintiffs’ profits, Tenenbaum’s unauthorized sharing of 30 songs cost the plaintiffs $21 in profits, resulting in a ratio of statuory to actual damages of 32,143:1. The court also noted that services like Rhapsody charge $15 per month for access to millions of songs. The court dismissed the plaintifsf’ contention that the harm was much greater by virtue of Tenenbaum’s having distributed the songs to countless filesharers, resulting in immeasurable lost sales. The court found it “hard to believe that Tenenbaum’s conduct, when viewed in isolation, had a significant impact on plaintiffs’ profits” because he would not have purchased the music if they were not available for free, and the filesharers who downloaded the songs that Tenenbaum made available would simply have gotten them from a free alterntaive source. This reasoning is fairly remarkable; it is comparable to saying that if Tenenbaum had walked out of Barnes and Noble with a backpack full of stolen CD’s and given those CD’s to his friends, Barnes and Noble would have suffered little harm because Tenenbaum and his friends would simply have stolen the CD’s elsewhere.

Difference between the award and comparable civil penalties

The court found this to be the most troublesome factor for Tenenbaum, as the award was well within the range authorized by Congress. But the court concluded that Congress likely did not foresee that such awards would be imposed on noncommercial infringers like filesharers. The court cited a number of facts in support of this theory. First, Congress’s most recent enactment affecting the amount of allowable statutory damages, which increased the maximum potential penalty for willful infringement from $100,000 to $150,000, occurred before peer-to-peer filesharing became prominent. Napster, however, had been in existence for at least six months at that time. Moreover, Congress passed this increase specifically in response to the illegal sharing of software over the Internet. More remarkably, the court cited statements and conduct of various members of Congress outside the context of statutory damages legislation in concluding that Congress did not intend statutory damages to be awarded against individual filesharers. For example, the court noted that during the course of a Senate Judiciary Committee hearing in July, 2000 on music downloading, committee members demonstrated how peer-to-peer filesharing works by downloading songs, and one Senator admitted that he had downloaded songs on his own laptop. Incredibly, the court also cited remarks made by Senator Hatch at a talk at Brigham Young University in which he praised Shawn Fanning, the founder of Napster. Such events hardly rise to the level of legislative history which can be relied upon to illuminate Congressional intent (Justice Scalia would likely spontaneously combust at the very idea).

Finally, the court compared the jury award with the results in other filesharing cases and concluded that it was “especially excessive.” The court noted that the court in the case involving Jammie Thomas-Rasset, the only other filesharer to go to trial, remitted a verdict of $80,000 per song (for a total award of $1.92 million) to $2,250 per song, which amounted to three times the minimum statutory damages award. The court concluded that Tenenbaum’s cuilpability was “roughly comparable” to Thomas Rasset’s, and ultimately concluded that the 3-times statutory damages figure was the “outer limit of what a jury could reasonably (and constitutionally) impose in this case.” Accordingly, the court reduced the award to $2,250 per song, for a toal award of $67,500.

The appeal

Both sides have appealed. The plaintiffs argue that Williams, not Gore, is the appropriate standard, and that the jury’s award is constitutional under either approach. They (properly) fault the judge’s questionable reliance on the post-hoc colloquy of a handful of memberes of Congress as “a textbook illustration of misuse of legislative history to avoid giving due deference to Congress’s determinations . . . manufactur[ing] ambiguity where none exists.” The United States submitted a brief arguing that the lower court should have exercised its power of remittitur before reaching the constitutional issues; it also argues that Congress intended the full range of statutory damages to apply to peer-to-peer filesharing. Tenenbaum argues in favor of the Gore standard, but complains that the court improperly instructed the jury on the entire range of statutory damages without “context,” and that statutory damages were never meant to apply to consumer copies. Links to the parties’ briefs appear below.

The court is scheduled to hear oral argument in just over two weeks, on April 4, 2011. I will post the link to the audio recording of the argument when and if it becomes available.

Ascending to the appellate level is a game-changer in more than one respect. Tenenbaum benefited at the trial level from an extraordinarily friendly judge. Indeed, as I described more fully in my post on the fair use ruling, Judge Gertner actively and overtly searched for reasons to rule in Tenenbaum’s favor. He may not find such a warm welcome at the First Circuit.

Sony’s Opening Brief
United States’ Opening Brief
Tenenbaum’s Opening Brief
Sony’s reply brief
United States’ reply brief

The Mildred Rule
Keeping Clients’ Email Out of the Spotlight When Litigation Hits the Fan

Naomi&Grandmother71 

When I sat down to read the parties’ moving briefs in Viacom v. YouTube  back in the spring, I was reminded powerfully of something I have come to think of as the Mildred Rule (in honor of my late grandmother, pictured above with me in 1971).  Though the Mildred Rule did not come into play in the summary  judgment opinion that just issued, the opinion seemed to present an opportune moment for a post on the subject.

Among other things, Viacom argued that YouTube (1) intended to create a haven for massive copyright infringement, (2) knew that rampant infringement was occurring on the site, and (3) deliberately exploited infringing content in order to increase user traffic to the site.  In support of these arguments, Viacom introduced rafts of internal YouTube emails which, in florid and sometimes sarcastic language, exposed YouTube’s struggle to address the issue of infringing videos on the site.  In the emails, YouTube employees referred to content owners as “copyright bastards” and “a-holes.”  They made flippant comments such as, “save your meal money for some lawsuits!”  and “steal it! . . . haha ya.”  And they suggested that “one of the co-founders is blatantly stealing content from other sites,” and “we’re just trying to cover our asses so we don’t get sued.”

Fortunately for YouTube, Judge Stanton ruled on a purely legal issue and did not need to reach the evidence of YouTube’s knowledge in the emails.  (And incidentally, I thought YouTube’s counsel did a stellar job in their opposition papers of countering this evidence.)  Judge Stanton could, however, have ruled differently; for example, he could have found that the conflicting evidence submitted by both parties created a genuine issue of material fact about the state of YouTube’s knowledge, requiring the case to go before a jury.  To a jury, this kind of raw, emotional, unexpurgated email evidence could have a devastating effect on YouTube’s defense.  Indeed, Judge Stanton noted, “a jury could find that the defendants not only were generally aware of, but welcomed, copyright-infringing material being placed on their website.”

Which brings me to the Mildred Rule.  In its initial formulation, the Mildred Rule exhorted, “If you don’t want your grandmother to see it on the front page of the New York Times, don’t put it in an email.”  But that was not long after I graduated from law school (back in, roughly, the Pleistocene era); today, the Mildred Rule might be amended to read, “If you don’t want your grandmother to see it on nytimes.com (or huffingtonpost.com, or widely-disseminated-.com-of-your-choice), don’t put it in an email.” 

I am continually amazed at the statements people commit to email.  When I was a new lawyer, email was just beginning to take hold in the business environment.  When I worked on my first litigation that involved reviewing email (back then, we printed them out – on paper! - to review and produce them), I remember thinking that in the future, as people caught on to the fact that email really is permanent and can be discovered to a party’s significant detriment in litigation, we wouldn’t get so many juicy tidbits in discovery anymore, because people would learn to exercise more restraint before hitting the “send” button.  The opposite has happened.  The proliferation, and now ubiquity, of different forms of electronic communication has resulted in a steadily increasing degree of comfort with the medium, culminating in a generation of “digital natives” for whom email comes as naturally as breathing.

From the standpoint of lawyers who advise clients, and litigate on their behalf, this evolution presents a significant challenge.  Our role as counselor is to guide clients’ decisionmaking processes without unduly hampering the conduct of their affairs.  Email (like its progeny, instant messaging and texting) is not going away; nor should it.  And possibly, in view of society’s increasing digital exhibitionism on the social networking frontier, the notion that one might be embarrassed to have one’s grandmother read anything, however scurrilous, is hopelessly antiquated.  But the email evidence submitted in Viacom v. YouTube demonstrates a continuing need to educate clients about the potential pitfalls of email as a communication tool in the business environment.  So when the opportunity next presents itself, remember Mildred and help your clients keep their emails out of the spotlight before litigation hits the fan. 

I realize that this post is not, strictly speaking, a copyright post.  The Mildred Rule, however, is an equal opportunity rule which does not discriminate based on practice area; copyright litigants run afoul of it as often as parties to any other kind of dispute, as demonstrated so aptly in Viacom v. YouTube.