Debate  |  Volume 158

Unconstitutionally Excessive Statutory Damage Awards in Copyright Cases

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Last updated: Oct. 1, 2009

Debate - Unconstitutionally Excessive Statutory Damage Awards in Copyright Cases






In successive months during the summer of 2009, the music labels won two monstrous jury verdicts for willful copyright infringement against two peer-to-peer file sharers. In June, a Minneapolis jury found single mother Jammie Thomas-Rasset liable for $1.92 million for downloading and sharing twenty-four songs on KaZaA’s file-sharing network. One month later, a Boston jury ordered college student Joel Tenenbaum to pay $675,000 for downloading and sharing thirty songs in the same manner. Neither jury made a finding about the damage caused to the music labels by the defendants’ activities. Rather, both awards were based on the Copyright Act’s range of statutory damages of $750 to $150,000 per work—available to those who register their works prior to infringement.

In this month’s debate, Professor Pamela Samuelson and Ben Sheffner discuss whether such "whopping" statutory damage awards are constitutional. In her Opening Statement, Samuelson argues that while not all statutory damage awards—or even all those extracted from peer-to-peer file sharers—are unconstitutional, it is "difficult to square [the verdicts from this summer] with Congressional intent or with the Supreme Court’s due process jurisprudence." Relying on the "guideposts" established by the Court in BMW of North America, Inc. v. Gore to judge punitive damage awards, Samuelson lays out the case for reducing the "grossly excessive" jury verdicts. In response, Sheffner argues that the guideposts set out in Gore have no application to statutory damages because the Court in Gore was primarily concerned with "fair notice" to defendants. And although the range of statutory damages is broad, notice is not a valid concern where that range is "set forth in black and white" in the Copyright Act. Thus, while reasonable people may disagree on the proper damages for defendants like Thomas-Rasset and Tenenbaum, those concerns are "essentially legislative" not constitutional.


Opening Statement — Pamela Samuelson

The Unconstitutional Excessiveness of Some Statutory Damage Awards in Peer-to-Peer File-Sharing Copyright Cases

Richard M. Sherman Distinguished Professor of Law, Berkeley Law School
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A substantial number of persons in the United States have been sued for copyright infringement for engaging in peer-to-peer file sharing of copyrighted sound recordings and motion pictures.  See Jeff Leeds, Labels Win Suit Against Song Sharer, N.Y. Times, Oct. 5, 2007, available at http://www.nytimes.com/2007/10/05/business/media/05music.html (estimating that about 30,000 people had been sued).  The overwhelming majority of these lawsuits have been settled by the file sharer’s agreement to pay some compensation to the plaintiffs, generally between $2,000 and $5,000.  J. Cam Barker, Note, Grossly Excessive Penalties in the Battle Against Illegal File-Sharing:  The Troubling Effects of Aggregating Minimum Statutory Damages for Copyright Infringement, 83 Tex. L. Rev. 525, 528 n.19 (2004).  At least ten defendants in reported peer-to-peer cases involving sound recordings have either allowed default judgments to be entered against them or have lost on summary judgment motions.  See, e.g., Warner Bros. Records Inc. v. Tait, No. 07-134-J16-HTS, 2008 WL 2415036 (M.D. Fla. June 12, 2008); UMG Recordings, Inc. v. Blake, No. 06-00120-BR, 2007 WL 1853956 (E.D. N.C. June 26, 2007).  In each case, courts have awarded $750 per infringed song, the statutory damages minimum for non-innocent infringements.  17 U.S.C. § 504(c)(1) (2006).  The number of infringed songs ranged between seven and eleven, producing total statutory damage awards against these ten file sharers between $5,250 and $8,250.  Two other file-sharing defendants went to trial, were found liable for infringement, and were also ordered to pay $750 per infringed song, for total awards in one case of $22,500, BMG Music v. Gonzales, 430 F.3d 888 (7th Cir. 2005), and $40,500 in the other, Atl. Recording Co. v. Howell, No. 06-02076-PHX-NVW, 2008 WL 4080008, at *3 (D. Ariz. Aug 29, 2008).  These twelve awards are obviously higher than the typical settlement amounts, and likely made a substantial difference to the defendants’ pocketbooks, probably enough to deter them from further infringements as well as to compensate the recording companies for the infringement and other costs.

Despite the high multiple of $750 per infringed song in these twelve cases as compared with the actual damages incurred from infringement, these awards are consistent with Congressional intent, see H.R. Rep. No. 106-216, at 2-3 (1999) (citing concern about internet user "piracy"), as well as with the Supreme Court’s jurisprudence on due process limitations on grossly excessive money damage awards.  In BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), the Supreme Court set forth guidelines for determining whether money damage awards were so grossly excessive as to run afoul of the Due Process Clause of the Constitution.  Reprehensibility of the defendant’s conduct is, the Court said, "[p]erhaps the most important indicium" for determining whether a punitive monetary award is excessive.  Id. at 575.  Although the relevant ratio for judging excessiveness is generally ten to one between the award claimed to be excessive and actual damages, the Court also recognized that higher ratios might be appropriate when the actual damages were small and the reprehensibility greater.  Id. at 580-82.

In subsequent cases, the Court has made clear that very high multiples over actual damages (e.g., more than 100:1) cannot be justified merely because the jury believed that a particular defendant might have engaged in wrongful conduct as to others.  See, e.g., Phillip Morris USA v. Williams, 127 S. Ct. 1057, 1065 (2007) (striking down a jury award because the jury had been instructed that it could punish the defendant for harm that it had done to others besides the plaintiff); State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 427-29 (2003) (striking down a $145 million award because it was excessive in relation to actual damages and was aimed at punishing the defendant for unsavory acts not related to the acts that gave rise to the Campbells’ lawsuit).  The Court’s reluctance to affirm awards of very high multiples over actual damages arises from concerns that high-ratio jury awards may be based on speculation or unwarranted assumptions.  In addition, very high multiples pose risks of arbitrary and capricious awards and double recovery since other similarly injured persons could bring suit on the same or similar grounds.  Finally, very high-ratio awards are quasi-criminal in nature, yet lack the due process safeguards that would attend criminal actions.  See, e.g., Gore, 517 U.S. at 586-97 (Breyer, J., concurring).

In the twelve peer-to-peer file-sharing cases mentioned above, the ratio of actual damages to award is very high, but the Court has recognized that higher ratios may be permissible where, as here, actual damages are small.  Judges who have awarded statutory damages in these twelve cases seem to regard file sharing as reprehensible, but not so reprehensible as to justify an award of more than the statutory minimum.

The jury awards against file-sharers Jammie Thomas-Rasset and Joel Tenenbaum are, by contrast, difficult to square either with Congressional intent or with the Supreme Court’s due process jurisprudence.  Their file-sharing activities were no more heinous than the file-sharing activities of the twelve plaintiffs against whom the minimum statutory damages were awarded.  Yet Thomas-Rasset was punished (there is no other word for it) at a first trial with a jury award of $9,250 per infringed song, and then upon retrial with an award (for the very same conduct) of $80,000 per infringed song. The statutory damage award against Tenenbaum was $22,500 per infringed song.  The jury awards in these two cases were arbitrary and capricious, fueled by speculation, and lacking in sound justification.  Both awards were grossly excessive, but especially egregious was the $1.92 million award against Thomas-Rasset.

Thomas-Rasset is not the sort of infringer against whom Congress intended awards of enhanced statutory damages (now up to $150,000 per infringed work, 17 U.S.C. § 504(c)(2) (2006)).  The conduct at issue in RSO Records, Inc. v. Peri, 596 F. Supp. 849 (S.D.N.Y. 1984), by contrast, exemplifies the kind of egregious infringement for which enhanced damages should be available.  See S. Rep. No. 94-473, at 144-45 (1975) (stating that enhanced damages should be available in "exceptional cases"); H.R. Rep. No. 94-1476, at 162 (1975) (same).  Peri ran a counterfeit sound recording business for years.  He made substantial profits from infringement, although he kept such dreadful records that the extent of his profits was difficult to determine.  Out of the nearly two million recordings Peri had made and sold, nearly ninety percent were copyright infringements.  Peri was charged with infringing twenty-seven of RSO’s copyrighted works, and the award against him was $1.45 million.

Thomas-Rasset and Tenenbaum are far from innocent or inadvertent infringers, but their copyright sins are far less reprehensible than Peri’s.  They were merely young and foolish, not commercial counterfeiters; they merely enjoyed the songs they downloaded and shared, not sold them to others for profit.  Yet, the awards against these two file sharers involve significantly higher ratios of actual harm to the statutory damage award than in Peri.

The only plausible explanation for the outlandishly large jury awards against Thomas-Rasset and Tenenbaum was the jury’s desire to punish them for the sins of all file sharers at the direct or indirect urging of the recording industry plaintiffs.  See Pamela Samuelson & Tara Wheatland, Statutory Damages in Copyright Law:  A Remedy in Need of Reform, 51 Wm. & Mary L. Rev. (forthcoming 2009) (manuscript pt. I-B), available at http://ssrn.com/abstract=1375604 (explaining that courts and commentators are increasingly recognizing that statutory damage awards, especially at the high end of the range, are punitive in intent and punitive in effect).  Under the Supreme Court’s due process jurisprudence, juries seem to be punishing these individuals for the acts of millions of other file sharers who are "strangers to the litigation" on behalf of copyright owners who are also "strangers to the litigation" as to copyrighted works that are not before the court.  Williams, 127 S. Ct. at 1063 ("[T]he Constitution’s Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation.").  Because there are insufficient constraints on jury awards of statutory damages, courts should draw upon the Court’s due process jurisprudence by reducing grossly excessive statutory damage awards in peer-to-peer music file-sharing cases either to the $750 minimum, which seems to have become the norm in the reported cases, or to something much closer to the minimum.  See, e.g., Cooper Indus. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001) (directing de novo review of excessive jury awards).


Rebuttal — Ben Sheffner

Constitutional Limits on Copyright Statutory Damages

Ben Sheffner is a copyright attorney in Los Angeles currently employed by NBC Universal, Inc., and editor of the Copyrights & Campaigns blog. The opinions expressed here do not necessarily represent the views of any past, present, or future clients or employers.
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Copyright used to be a relatively obscure subject, of interest mainly to authors, composers, artists, and the publishers, record companies, and movie studios who exploited their works. The Internet, however, has brought once-obscure copyright issues into the homes of ordinary citizens, who now have the technical ability—though not the legal right—to copy and distribute music and movies to anyone else with a web connection, all without permission from or payment to the copyright owners. This past summer witnessed perhaps a new height of public attention to copyright, as two among the thousands of individuals targeted by the major U.S. record labels for illegally downloading and “sharing” music over peer-to-peer networks went to trial. In the first case, a jury in Minneapolis awarded the plaintiffs $80,000 per song, totaling a whopping $1.92 million, after finding that Jammie Thomas-Rasset had willfully infringed twenty-four works. Barely a month later, a Boston jury ordered Joel Tenenbaum to pay $675,000, or $22,500 per song, for downloading and “sharing” thirty songs.

There is no dispute that such awards were stunningly huge. Even the victorious record labels agree. “We were shocked,” said Sony Music Entertainment Deputy General Counsel Wade Leak a few days after the Thomas-Rasset verdict. “I suspected we were going to win, but I really thought they would come in with a lower number.” Posting of Ben Sheffner to Copyrights & Campaigns, Sony BMG Attorney: ‘We were shocked’ by Size of Verdict; Concedes $1.92 Million Award Could Be Reduced on Appeal, http://copyrightsandcampaigns.blogspot.com/2009/06/sony-bmg-attorney-we-were-shocked-by.html (June 20, 2009) (quoting Press Release, Columbia Law School, Aggressive Pursuit of Illegal File-Sharers Defended by Top Music-Industry Lawyer (June 20, 2009)).

Though I support the labels’ litigation campaign against individual peer-to-peer infringers, I have serious reservations about the size of the Thomas-Rasset and Tenenbaum awards. At some gut level, they just feel “too big.” I also fear that the public relations hit the industry took from these verdicts may eventually lead to a loss of political support for copyright owners. But we’re not here to debate whether the Thomas-Rasset and Tenenbaum verdicts were “too big” for our taste, or whether they were helpful or hurtful to the music industry. Rather, we were asked to debate whether such large awards of statutory damages violate the U.S. Constitution. I believe the answer is no.

First, a little history is in order. Statutory damages have been part of the U.S. copyright landscape since the first days of the Republic. Actually, before then: the issue was discussed in the Continental Congress in 1783. See Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340, 350 (1998). And, in language that mirrored Britain’s 1710 Statute of Anne, the First Congress included in the Copyright Act of 1790 a statutory damages provision making an infringer liable for “the sum of fifty cents for every sheet which shall be found in his or their possession.” Act of May 31, 1790, §2, 1 Stat. 124, 125. Congress has periodically increased the amount of available statutory damages over the centuries; under the most recent iteration of the Copyright Act, the jury may award statutory damages “in a sum of not less than $750 or more than $30,000 as the court considers just,” or up to $150,000 per infringed work if they find the infringement to be “willful.” 17 U.S.C. §504(c) (2006).

There are two justifications for permitting copyright plaintiffs to pursue statutory, rather than actual, damages. First, statutory damages “give the owner of a copyright some recompense for injury done him, in a case where the rules of law render difficult or impossible proof of damages or discovery of profits.” F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 231 (1952) (citation omitted). Second, statutory damages may be imposed to punish the infringer, and thus deter him, and others, from further infringement. See, e.g., On Davis v. Gap, Inc., 246 F.3d 152, 172 (2d Cir. 2001) (“The purpose of punitive damages—to punish and prevent malicious conduct—is generally achieved under the Copyright Act through the provisions of 17 U.S.C. §504(c)(2), which allow increases to an award of statutory damages in cases of willful infringement.”); L.A. News Serv. v. Reuters Television Int’l, Ltd., 149 F.3d 987, 996 (9th Cir. 1998) (“Because awards of statutory damages serve both compensatory and punitive purposes, a plaintiff may recover statutory damages ‘whether or not there is adequate evidence of the actual damages suffered by plaintiff or of the profits reaped by defendant,’ in order ‘to sanction and vindicate the statutory policy of discouraging infringement.’” (citations omitted)).

Statutory damages, though their origins pre-date the Internet by centuries, are tailor-made for peer-to-peer cases like Thomas-Rasset’s and Tenenbaum’s. Actual damages in such cases are difficult, perhaps impossible, to calculate. Though it is tempting to say that an infringer who used KaZaA to obtain a song that costs ninety-nine cents on iTunes caused no more than ninety-nine cents in actual damages, such analysis would be flawed. For such a calculation completely ignores the distribution or “sharing” engaged in by peer-to-peer users. The songs Thomas-Rasset and Tenenbaum were found to have infringed were located in the “shared” folder of their hard drives and were downloaded by untold numbers of other KaZaA users; indeed that is the very purpose of such networks. Yet because of the way that KaZaA is configured and the lack of record-keeping by KaZaA itself, the plaintiffs were forced to admit that they are unable to determine how many others Thomas-Rasset and Tenenbaum “shared” their songs with. The availability of statutory damages prevents infringers and their facilitators from profiting from such willful blindness, whose primary intent is to thwart copyright enforcement.

Additionally, statutory damages are useful in deterring both the actual infringer and others from committing similar bad acts in the future. Compensating copyright owners for their actual losses in the case at bar is insufficient; as then-District Judge Sonia Sotomayor once ruled, “statutory damages must be sufficient enough to deter future infringements and should not be calibrated to favor a defendant by merely awarding minimum estimated losses to a plaintiff.” Top Rank, Inc. v. Allerton Lounge, Inc., No. 96-7864, 1998 WL 35152791, at *1 (S.D.N.Y. Mar. 25, 1998). As the Supreme Court itself has acknowledged, peer-to-peer use involves “infringement on a gigantic scale,” Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 940 (2005), and it is the public policy of the United States that it be curbed. Imposing statutory damages on such infringers is an important tool in combating it.

Professor Samuelson argues that the Supreme Court’s cases imposing limits on punitive damages similarly limit the imposition of statutory damages. Respectfully, I disagree. In BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), the Court made clear that its underlying concern about punitive damages was that they failed to provide “fair notice not only of the conduct that will subject [a potential defendant] to punishment but also of the severity of the penalty that a State may impose.” Id. at 574. This concern is absent in the context of copyright statutory damages. While it is true that the statutory range of $750 to $150,000 is broad, it is set forth in black and white at 17 U.S.C. §504, and infringers have, at least, constructive notice of the penalties that may be imposed on them for their bad acts. The due process concerns present in the case of unlimited punitive damages are simply not present here.

Moreover, attempting to impose Gore’s rubric for analyzing punitive damages awards on copyright statutory damages awards involves attempting to pound the proverbial square peg into a round hole. Gore set forth three “guideposts” for determining whether a punitive damages award is unconstitutionally excessive: 1) the “degree of reprehensibility” of the defendant’s conduct, id. at 575; 2) the ratio between the punitive and actual damages, id. at 580; and 3) “the civil or criminal penalties that could be imposed for comparable misconduct,” id. at 583. But at least two of those don’t work in the context of statutory damages. We can debate how “reprehensible” infringers like Thomas-Rasset and Tenenbaum are; I agree that they aren’t the worst of the worst. But saying, for example, they’re in the mid-range of reprehensibility doesn’t tell us much about where in the statutory range the award should fall; as we saw with Thomas-Rasset, even an award in the middle of the range can represent an enormous sum when multiplied by the number of infringed works (and keep in mind that the plaintiffs sued on only a tiny fraction of the 1,702 songs she was caught “sharing”).

Further, Gore guideposts two and three don’t work at all with copyright statutory damages. In many copyright cases (Thomas-Rasset and Tenenbaum included), it is impossible to compare actual to statutory damages because, as noted above, it is difficult or impossible to measure actual damages. Indeed, statutory damages exist in part to relieve copyright owners of the burden of proving up actual damages where, as a practical matter, they cannot. See F.W. Woolworth Co. v. Contemporary Arts, Inc., 344 U.S. 228, 231 (1952). And it makes no sense to speak of comparing the actual damages with “the civil or criminal penalties that could be imposed for comparable misconduct,” Gore, 517 U.S. at 583; statutory damages are the “civil... penalties” that Congress has chosen to impose on copyright infringers. If we’re going to debate the constitutionality of statutory damages, we’re going to have to do so under the much more deferential standard set forth in St. Louis, Iron Mountain & Southern Railway v. Williams, 251 U.S. 63 (1919)—under which, as far as I am aware, no award has ever been invalidated.

Reasonable people can disagree over the proper amount of statutory damages for individual non-profit infringers like Thomas-Rasset and Tenenbaum. I, for one, would likely be willing to trade a significantly lower range of available damages for a cheap and streamlined process for adjudicating such cases. See, e.g., Mark Lemley & R. Anthony Reese, Reducing Digital Copyright Infringement Without Restricting Innovation, 56 Stan. L. Rev. 1345 (2004) (“Another way to reduce the cost of enforcement is to create some sort of quick, cheap dispute resolution system that enables copyright owners to get some limited relief against abusers of peer-to-peer systems....”). But these are essentially legislative choices. Those who are outraged by the recent high, and high-profile, statutory damages awards in copyright cases should take their case to Congress, and argue for a change in the statute. I suspect that they are instead focusing on untested constitutional arguments because they realize that, unlike many in academia and the copyleft or “free culture” movement, members of Congress view Internet piracy as a serious problem, deserving of serious punishment. I doubt that the Supreme Court will interfere with Congress’s judgment on this subject. As Justice Ginsburg noted in a different context, “[T]his Court has been...deferential to the judgment of Congress in the realm of copyright.” Eldred v. Ashcroft, 537 U.S. 186, 198 (2003). I expect the Court to exhibit similar deference should the issue of the constitutionality of large copyright statutory damages awards ever reach its docket.



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