Breaking: This morning, Judge Pauley of the Southern District of New York issued an opinion granting in part and denying in part (but mostly denying) the defendant’s motion for judgment as a matter of law in Capitol Records v MP3Tunes, in which the jury had found liability for copyright infringement and awarded over $48 million in damages. The opinion is lengthy and fascinating, especially in its characterization of the parties, and particularly the defendant. This post summarizes the rulings on each issue and sprinkles in some of the court’s more colorful commentary. Continue reading
POSTS TAGGED : statutory damages
Name That MP3Tune:
They Built This Lawsuit on Rock ‘n Roll – Thomas-Rasset oral arguments available
On June 8, the Eighth Circuit Court of Appeal heard oral argument in the Capitol Records v. Thomas-Rasset filesharing case. The oral argument addressed two issues: (1) whether the Copyright Act grants a copyright owner the exclusive right to “make available” works to the public; and (2) whether a statutory damages award that is within the range set by Congress can nonetheless be constitutionally excessive. The (third) jury in the case rendered a verdict of $80,000 per song infringed, for a total of $1.92 million, which the District Court remitted to $2,250 per song (three times the statutory minimum).
I will post the opinion when it is available. In the meantime, diehards can listen to the oral argument here.
Hearing is Believing
Audio of Oral Argument in Sony v Tenenbaum Available
The audio recording of this morning’s oral argument in Sony v. Tenenbaum is now available through the First Circuit’s RSS feed. Click on the link and scroll down to find the recording. Enjoy!
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.
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
One Award to Rule Them All – Second Circuit Addresses What Constitutes a “Work” For Statutory Damages Purposes
Section 504(c) of the Copyright Act allows a plaintiff to elect statutory damages instead of actual damages and profits “for all infringements involved in the action, with respect to any one work . . .” For purposes of that subsection, “all the parts of a compilation or derivative work constitute one work.” The Copyright Act does not define “work,” though it defines a “compilation” as a “work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship.” In litigation involving a work with multiple components, then, the question arises whether it is a single “work” or multiple “works” for purposes of assessing statutory damages.
A recent Second Circuit opinion illustrates the problem. Bryant v. Media Right Prodns., __ F.3d __ (2d Cir. 2010). In Bryant, two songwriters created and produced two albums – “Songs for Dogs” and “Songs for Cats” – and registered both the albums and, separately, at least some of the individual songs with the Copyright Office. They then authorized defendant Media Right to market the albums. Media Right in turn granted co-defendant Orchard Enterprises the right to distribute the albums “by any and all means and media,” including by digital download. Initially, Orchard only sold physical copies of the albums. In early 2004, however, Orchard began making the albums and the individual songs available for sale through Internet retailers like iTunes. Orchard recognized $578.91 from downloads of digital copies of the albums and the individual songs on the albums. The songwriters sued, alleging that their initial agreement with Media Right did not include the right to make copies of the albums, which Orchard did in order to enable digital sales.
The district court (ruling on competing summary judgments motions which the parties agreed to treat as a case stated, thus allowing the court rather than a jury to determine statutory damages) held that each album was a compilation and constituted a single work for purposes of computing statutory damages. The court found that Orchard’s infringement was innocent and imposed the minimum amount of statutory damages on Orchard, $200 per album for a total of $400. The court found that Media Right’s conduct was neither innocent nor willful, and imposed statutory damages on the company and its president, jointly and severally, for $1000 per album for a total of $2000. The plaintiffs’ entire award thus amounted to $2400. The court denied the plaintiffs’ request for attorney’s fees.
The Second Circuit affirmed, finding that the plain language of the Act established that the albums were compilations since each album is a “collection of preexisting materials – songs – that are selected and arranged by the author in a way that results in an original work of authorship – the album.” It concluded that the fact that certain songs had been registered separately was irrelevant, relying on the Conference Report that accompanied the final Copyright Act, which explains many of its provisions. The Report states that a “compilation” “results from a process of selecting, bringing together, organizing, and arranging previously existing material of all kinds, regardless of whether . . . the individual items in the material have been or ever could have been subject to copyright.”
Bryant represents the third occasion upon which the Second Circuit has construed Section 504’s one-award restriction. In Twin Peaks Prodns., Inc. v Publ’ns, Int’l Ltd., 996 F.2d 1366 (2d Cir. 1993), the court awarded the plaintiff one statutory damages award for each of 8 episodes of a television series. Rather than explaining why each episode constituted a single work, the court stated its conclusion in the converse: “The author of eight scripts for eight television episodes is not limited to one award of statutory damages just because he or she can continue the plot line from one episode to the next and hold the viewers’ interest without furnishing a resolution. . . . [O]urs is the easy case of infringement of eight separate works that warrants eight statutory awards, whether the registrations apply to the teleplays or the televised episodes.” Though the opinion did not explicitly say so, it appeared to turn on the fact that each television episode aired independently. In WB Music Corp. v. TRV Communication Group, Inc., 445 F.3d 538 (2d Cir. 2006), the court awarded thirteen statutory damages awards for thirteen infringed songs because the songs themselves had been released separately and not as part of an album. The Bryant court thus found its opinion in harmony with both Twin Peaks and WB Music because the plaintiffs’ songs were issued as part of CD compilations and not individually, like the Twin Peaks episodes but unlike the songs in WB Music.
The Second Circuit also rejected the “independent economic value” approach adopted by the First, Ninth, Eleventh and D.C. Circuits. This approach looks at whether each element of a work has “independent economic value” and can live its own copyright life. Following this approach, the First Circuit, for example, allowed multiple statutory damages awards for individual television episodes that were released collectively on videotape as part of a complete series. Gamma Audio & Video, Inc. v. Each-Chea, 11 F.3d 1106 (1st Cir. 1993).
Practice tip: statutory damages and the plaintiff’s choice of forum
Now that the Second Circuit has squarely rejected the “independent economic value” approach, plaintiffs have an additional consideration when deciding where to sue for infringement. If a plaintiff issued the components of a multi-part work as part of a collection and not singly, and is considering seeking statutory damages rather than actual damages and profits, it may be better off suing in a circuit that will look at whether those parts have independent economic value rather than in the Second Circuit.
Attorney’s fees and offers of judgment
An interesting side note to the case involves the court’s denial of the plaintiffs’ request for attorney’s fees. Copyright Act Section 505 allows a court, in its discretion, to award a “reasonable attorney’s fee to the prevailing party” in a copyright case. Though some commentators argue that such awards seem virtually guaranteed to prevailing parties, here the court exercised its discretion to deny the award to the prevailing plaintiffs.
The denial boiled down to the reasonableness of the parties’ conduct in the litigation. The Second Circuit found that the defendants’ arguments were objectively reasonable, and the defendants prevailed on several important issues. Moreover, the defendants “also were reasonable in trying to resolve the case short of trial: [Defendants] made an Offer of Judgment in the amount of $3000, which [Plainitffs] rejected, in favor of continuing to demand over $1 million in damages, notwithstanding the evidence that [Defendants] had received less than $600 in revenues from infringing sales.”
This portion of the opinion, tacked on to the end in just a few sentences, is interesting for a couple of reasons. First, it illustrates that the prevailing party’s conduct in the course of the litigation retains relevance in the attorney’s fees analysis. Second, it highlights a thorny question at the intersection of civil procedure and copyright that remains unresolved.
Federal Rule of Civil Procedure 68 governs offers of judgment, and provides that a party defending against a claim may offer to the opposing party to allow judgment on specified terms. If the opposing party fails to accept the offer within 14 days, and later obtains a judgment that is less favorable than the offer, then “the offeree must pay the [offeror’s] costs incurred after the offer was made.” But “costs,” at least in the sense of true, out-of-pocket costs, are dwarfed by attorney’s fees in typical litigation. Do Rule 68 “costs” include attorney’s fees? In Marek v. Chesney, 473 U.S. 1 (1985), the Supreme Court held that Rule 68 “costs” include attorney’s fees if the underlying statute so prescribes. Because attorney’s fees can amount to substantial sums, the offer of judgment can be a powerful tool in a defendant’s arsenal in settlement negotiations where such fees are included as costs.
If there is no settlement and the parties proceed to judgment in a copyright case, how do Rule 68 and Section 505 interact? Section 505 defines costs as including attorney’s fees, thus bringing Rule 68 into play. The rules differ from each other in important ways, however. While Section 505 allows an award of attorney’s fees to any prevailing party, whether plaintiff or defendant, Rule 68 only shifts costs to a party “defending against a claim” – usually the defendant, though the rule would seem to apply equally to a counterclaim defendant. Moreover, Section 505 gives the court discretion to award attorney’s fees, while Rule 68 is phrased in mandatory terms. Relying on Rule 68’s mandatory language, the Eleventh Circuit, in Jordan v. Time, Inc., 111 F.3d 102 (11th Cir. 1997), awarded costs (including attorney’s fees) to the defendant even though the plaintiff prevailed, because the plaintiff recovered less than the amount of the offer of judgment – a traditional application of Rule 68. In contrast, the Seventh Circuit, in Harbor Motor Co. v. Arnell, 265 F.3d 638 (7th Cir. 2001), held that in copyright cases, only prevailing parties can receive attorney’s fees under Rule 68 because the Supreme Court in Marek tied the award of Rule 68 fees to those costs that are “properly awardable under the substantive statute at issue,” and Section 505 only awards fees to prevailing parties. The Seventh Circuit thus reads Section 505 as a limitation on Rule 68.
The Bryant court makes no reference to a request for attorney’s fees by the defendants. Presumably, the defendants made no such request, and there is nothing in the opinion suggesting how the court might have ruled had they done so. I believe the Eleventh Circuit view is the better one. Marek v. Chesney instructs us to look to the underlying statute to determine whether it defines costs as including fees, not the circumstances under which fees are to be awarded: “where the underlying statute defines ‘costs’ to include attorney’s fees, we are satisfied such fees are to be included as costs for purposes of Rule 68.” Moreover, the Eleventh Circuit approach is consistent with the policy, emphasized by the Supreme Court in Marek, in favor of encouraging settlement of disputes. It will be interesting to see how case law develops in this area.
Berne, Baby Berne
Court upholds registration requirement as prerequisite for statutory damages and attorney’s fees
The United States became a member of the Berne Convention for the Protection of Literary and Artistic Works effective March 1, 1989. The Berne Convention is the foremost multilateral copyright treaty in effect today; most of the economically significant countries in the world adhere to it. The most significant accomplishment of the Berne Convention was to eliminate the requirement of any “formalities” as a prerequisite to copyright protection. I’ve always thought of this as the “black tie optional” rule for copyright; works are protected by copyright in Berne member countries even if they are published without a copyright notice and if they are never registered for copyright protection. Before the U.S. signed onto Berne, works published without a copyright notice risked injection into the public domain. Today, works are protected from the moment they are fixed in a tangible medium of expression, without need for notice or registration.
Registration remains essential, however, for the enforcement of copyright in domestic works and for the availability of certain remedies. Under Section 412 of the Copyright Act, in order to be eligible to recover statutory damages for infringement and attorney’s fees, a copyright owner must have registered the work before the infringement began (or within three months of first publication of the work). Statutory damages are critical in cases where it is difficult to prove actual damages, and provide copyright owners with significant leverage in settlement negotiations. Thus, Section 412 acts as a powerful incentive for authors and owners to register their works promptly.
In Elsevier B.V. v. UnitedHealth Group, Inc., 2010 U.S. Dist. LEXIS 3261 (S.D.N.Y. Jan. 14, 2010), the Southern District of New York addressed the question whether, by virtue of the Supremacy Clause, the Berne Convention supersedes Section 412 with respect to unregistered foreign works. In other words, may plaintiffs suing to enforce copyrights in unregistered foreign works recover statutory damages and attorney’s fees? The answer hinged on whether Berne was a “self-executing” treaty under U.S. law – that is, a treaty which becomes law upon ratification. By contrast, Congress must affirmatively enact treaties which are not self-executing in order for their provisions to take effect under domestic law.
The court concluded that the Berne Convention was not self-executing. In adopting the Berne Convention Implementation Act, Congress explicitly stated that the treaty was “not self-executing under the Constitution and the laws of the United States”; that U.S. obligations under Berne “may be performed only pursuant to appropriate domestic law”; and that U.S. copyright law, as amended by the Implementation Act, satisfied U.S. obligations under Berne. Moreover, Article 36 of Berne itself states that the treaty is not self-executing:
“(1) Any country party to this Convention undertakes to adopt, in accordance with its constitution, the measures necessary to ensure the application of this convention.
(2) It is understood that, at the time a country becomes bound by this Convention, it will be in a position under its domestic law to give effect to the provisions of this Convention.”
Congress passed the Implementation Act specifically to revise U.S. law to comply with the Berne Convention. Though the Implementation Act amended other sections of the Copyright Act, it deliberately left Section 412 unchanged. For instance, Congress eliminated the requirement in Section 411(a) that foreign works be registered as a prerequisite to maintain an infringement action, finding the requirement to constitute a prohibited formality. On the other hand, Congress concluded that the statutory incentives for registration in Section 412 “are not preconditions for the ‘enjoyment and exercise’ of copyright” because “they do not condition the availability of all meaningful relief on registration, and therefore are not inconsistent with Berne.”
Because the Berne Convention was not self-executing, the court concluded that it could not preempt Section 412 of the Copyright Act. Owners of foreign works who might seek to enforce their copyrights in the United States would thus be well advised to register their works in order to maximize the tools and remedies available to them in the event of infringement.
Tenenbaum Tries, Tries Again
Seeks New Trial or Reduction of Damages Award
Joel Tenenbaum rang in the New Year by seeking a new trial or, alternatively, a reduction of the $675,000 award of statutory damages imposed by a jury last summer for his illegal file-sharing activities. Attempting to capitalize on favorable language in the court’s opinion rejecting his fair use defense, Tenenbaum’s motion trumpeted the court for becoming “the first to recognize a fair use interregnum for copyright infringement following the debut of Napster.” Tenenbaum can’t be blamed for trying to turn lemons into lemonade, but the court recognized no such thing, though it plainly wished to rule otherwise. At most, the court speculated that a file sharer “might” be able to rely on a fair use defense under certain limited circumstances not applicable to Tenenbaum’s conduct, such as by swapping files during the time period “before digital media could be purchased legally, but  later shift[ing] to paid outlets.”
Tenenbaum devoted much of his brief to rehashing the same fair use arguments that the court already (properly) rejected. After praising the court for supposedly establishing the so-called “fair use interregnum,” Tenenbaum faulted the court for cutting it off before his file-sharing was detected in August 2004 due to the fact that “a commercial market for digital music had fully materialized” by then. According to Tenenbaum, early online sellers of digital music did nothing to alleviate the injustice of having to purchase entire CD’s rather than individual songs because they employed encryption technology which restricted purchasers’ ability to transfer songs between different media players. This “boxed music consumers like Tenenbaum into an unfair choice” until the music industry began offering unrestricted copies of songs for sale online in 2007. Tenenbaum also reasserted his “attractive nuisance” argument – that the music industry lured Tenenbaum and other consumers into wrongdoing with their marketing strategies – and bemoaned anew the conscription of parents and universities as “copyright police to regulate internet use” by children and students. None of these arguments is likely to persuade the court that it made a mistake in rejecting Tenenbaum’s fair use defense, which remains, as the court succinctly noted, “completely elastic, utterly standardless, and wholly without support.”
Statutory damages and due process
Tenenbaum buried his most interesting, and potentially most successful, argument at the end of the brief – that the $675,000 statutory damages award is so grossly excessive that it violates his Constitutional right to due process. The Supreme Court has held that statutory damages violate due process where they are “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67-68 (1919). In Williams, the Court upheld a $75 statutory damages award against a railroad that had overcharged passengers by 66 cents per ticket. Relying on the Williams standard, Tenenbaum contrasted the “bankrupting” size of the award with his conduct, which he characterized as “at most comparable to shoplifting music from a record store.” Assuming a purchase price of 99 cents per song, Tenenbaum calculated that the ratio between the award and the actual damage to the plaintiffs was 22,500 to 1 – far in excess of the 113 to 1 ratio which the Williams Court found acceptable.
The shoplifting analogy is a compelling one. The consequences for theft can be severe, but it is almost inconceivable that Tenenbaum would have been assessed a six-figure penalty for walking out of a record store with a handful of CD’s stuffed under his jacket. The methodology he used to arrive at his 22,500:1 ratio is flawed in that it fails to account for the fact that a single song, made available over a peer-to-peer system, could be copied innumerable times, thus resulting in more than one lost sale to the plaintiffs. Nonetheless, the award is strikingly high given the nature of the offense. The judge has already expressed considerable sympathy for Tenenbaum and distaste for the record industry’s strategy of suing individual file sharers; the argument that a penniless college student should not be bankrupted for a relatively petty offense could well resonate with the court.
Tenenbaum also argued that the damages award violated due process under the standard applied to punitive damages. A punitive damages award which is “grossly excessive” in relation to the state’s interest in punishment and deterrence enters “the zone of arbitrariness that violates the Due Process Clause of the Fourteenth Amendment.” BMW v. Gore, 517 U.S. 559, 568 (1996). Courts examine three “guideposts” to determine whether punitive damages are appropriate: (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the damages award; and (3) the difference between the award and the civil penalties authorized or imposed in comparable cases. Id. at 575. Tenenbaum contended that his conduct was not reprehensible, involving only economic harm not motivated by intentional malice and conduct that “even now many see as having been unauthorized but not morally wrong”; that the Supreme Court has noted that “few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process”; and that statutory damage awards in file-sharing cases in which the defendants lost by default or on summary judgment have been limited to the minimum possible statutory damage amount.
In citing Williams as the standard for assessing the appropriateness of a statutory damages award in the copyright context, and addressing Gore as an alternative argument, Tenenbaum departed from the post-trial strategy employed by Jammie Thomas-Rasset, the other file sharer to seek modification of a massive statutory damages award. Thomas-Rasset was found liable for copyright infringement for sharing 24 songs, and a jury initially awarded the plaintiffs $222,000. The court vacated that award due to concerns over the propriety of the jury instructions concerning liability. After a second trial, Thomas-Rasset was again found liable, and the jury awarded the plaintiffs $1.9 million in damages. Thomas-Rasset moved for a new trial, relying primarily on the standard set forth in Gore, essentially conflating the two tests (“The Due Process jurisprudence that is today embodied in BMW v. Gore has its roots in Williams, a case involving statutory damages”).
Tenenbaum then argued that if the court does not grant him a new trial, it should reduce the statutory damages award to the minimum amount. Remittitur is appropriate where an award is “grossly excessive, inordinate, shocking to the conscience of the court, or so high that it would be a denial of justice to permit it to stand.” Here, Tenenbaum’s strategy mirrored Jammie Thomas-Rasset’s; she also sought remittitur as an alternative to her due process argument. The court recently granted Thomas-Rasset’s request, reducing the $1.9 million award to $54,000.
Tenenbaum argued that Congress set the currently applicable range of statutory damages to combat large-scale commercial piracy of software over the Internet, but did not intend to subject consumers like Tenenbaum to the upper limit of available damages. According to Tenenbaum, Congress sought to remedy the tremendous costs of software piracy to software companies, their employees and the economy – concerns that sound strikingly familiar in the music file-sharing context – but that it envisioned imposing those damages on those who made the software available for download on a widespread basis and not the individuals who actually downloaded them. Of course, Tenenbaum himself placed songs in the shared folder of his hard drive, making them available for download to anyone within his peer network, so it is unclear how, in practical effect, his conduct differed from that of the software pirates, except perhaps in degree.
Moreover, Tenenbaum offered no justification for why the minimum statutory damages amount is the appropriate award, as opposed to some other amount. This omission underscores the difficulty associated with his request; namely, how the court can defensibly set a damages award within such a large range of potential statutory damages. Perhaps the court will look for guidance to the recent decision in the Thomas-Rasset case; there, the judge settled on a trebling of the minimum award per sound recording as the appropriate amount, based on treble damage provisions in other federal statutes.
The Department of Justice, intervening to defend the constitutionality of the Copyright Act’s statutory damages provisions, and the plaintiffs have submitted their briefs opposing Tenenbaum’s motion. A hearing is scheduled to occur on February 23, 2010.