Jury Awards in File-Sharing Cases Add Fuel to Debate on Copyright Act Reform

The cases

Capitol Records, Inc. v. Thomas-Rasset

The plaintiffs, Capitol Records, Inc., Sony BMG Music Entertainment, Arista Records LLC, Interscope Records, UMG Recordings, Inc., and Warner Bros. Records, filed suit against Jammie Thomas-Rasset under the Copyright Act seeking statutory damages and injunctive relief in the first file-sharing copyright infringement lawsuit in the US to reach a jury.

After the 2007 trial, Thomas-Rasset was found liable for copyright infringement after she willfully distributed 24 songs on the file-sharing site KaZaA. Thomas-Rasset was ordered to pay $222,000 in statutory damages. Initially, Thomas-Rasset, a mother of four, declined a settlement offer of $5,000. In 2008, the court granted a motion for a new trial, holding that the original jury instructions, which stated that Thomas-Rasset violated copyright owners’ exclusive distribution right by “making available” the copyrighted songs through file-sharing, were in error. After reviewing the precedent and close examination of the Nimmer on Copyright treatise, the court concluded that “making available” did not constitute distribution and granted Thomas-Rasset a new trial. Thomas-Rasset declined a second settlement offer of $25,000.

After the second trial in 2009, a jury awarded the plaintiffs $1,920,000, which was later reduced to $54,000. The plaintiffs moved for a new trial and a third trial was held to determine the damages. In 2010, a jury awarded the plaintiffs $1.5 million. The court later reduced the jury award to $54,000 based on the calculation of $2,250 per song for 24 songs. (Although there was evidence that Thomas-Rasset made over 1,700 songs available through file-sharing, the lawsuit only targeted 24 songs.) The copyright owners appealed the decision and in 2012, the Eighth Circuit Court of Appeals reversed the District Court decision and awarded $222,000 to the plaintiffs, the original jury award.

Sony BMG Music Entertainment v. Tenenbaum

In the second file-sharing case to go to trial, a jury found Joel Tenenbaum liable for $675,000 in 2009 (based on the calculation of $22,500 per song for 30 songs) after the Recording Industry Association of America (RIAA) sued him on behalf of four record labels. A federal judge reduced the damages to $67,500 based on constitutional grounds rather than a remittitur. The First Circuit Court of Appeals held that the federal judge had unnecessarily come to the question of constitutionality and remanded the case to district court. A different district court judge found no cause for remittitur and held that the original award was constitutional. In 2013, Tenenbaum appealed again to the First Circuit, which upheld the award.

The Supreme Court denied certiorari to both Thomas-Rasset and Tenenbaum, leaving unanswered questions surrounding the implications of both decisions.

Constitutionality Debate

In a law journal debate, Professor Pamela Samuelson of Berkeley Law School and Ben Sheffner, a practicing attorney, examined whether the excessive statutory damages awards in both of the aforementioned cases were constitutional.

Samuelson argued that the statutory damages were unconstitutional because excessive fines are not in line with Congress’s intent or the Supreme Court’s jurisprudence. The Copyright Act provides a broad range for damages of $750 to $30,000 per infringed work, and up to $150,000 per work if the infringement is deemed willful. Though Thomas-Rasset and Tenenbaum were not unintentional in their infringement, the Copyright Act was arguably intended primarily to deter parties who infringe copyrights for commercial purposes, like the defendants in RSO Records, Inc. v. Peri. Since Thomas-Rasset and Tenenbaum did not profit financially from their file-sharing, Samuelson reasoned that the statutory damages of $9,250 and $22,500 per song, respectively, are unwarranted.

In addition, Samuelson noted that BMW of North America, Inc. v. Gore established guideposts for determining whether money damages are so grossly excessive that they violate the Due Process Clause of the Constitution. The Supreme Court in Gore provided the following factors for determining whether a punitive monetary award is excessive: 1) the “degree of reprehensibility” of the defendant’s conduct, 2) the punitive damages award’s ratio to the actual harm, and 3) “the civil or criminal penalties that could be imposed for comparable misconduct.” Applying the Supreme Court’s reasoning, Samuelson argued that the awards from the Thomas-Rasset and Tenenbaum cases are unconstitutional.

In response, Sheffner argued that statutory damages are not unconstitutional although the decisions could lead to loss of political support for copyright owners. Sheffner provided two justifications for statutory damages in copyright cases: 1) to give copyright owners relief for their injuries in cases where the court would have difficulty proving damages and 2) to punish the infringer(s) and discourage others from future violations. Sheffner reasoned that actual damages were difficult to calculate due to the form of distribution Thomas-Rasset and Tenenbaum engaged in. The defendants both used peer-to-peer networks that made an unknown number of KaZaA users able to download their files on a shared drive. Therefore, the courts in Thomas-Rasset and Tenenbaum appropriately used statutory damages to calculate plaintiffs’ awards.

Furthermore, Sheffner argued that the Supreme Court’s concern in Gore was that punitive damages failed to provide “fair notice” of the severe penalties. However, due process concerns do not exist in the Thomas-Rasset and Tenenbaum cases, because the Copyright Act provides constructive notice of penalties for which infringers could be liable. Moreover, the guideposts from the Gore decision do not apply to the context of statutory damages for multiple violations. While defendants’ reprehensibility can be debated, a court’s conclusion would not be useful in calculating a sum of damages, because even a low-range multiplier could lead to a large award. In addition, the second and third guideposts are not applicable, because statutory damages came about so that the injured party does not have the burden of proving actual damages

Re-evaluating Statutory Damages

The Thomas-Rasset and Tenenbaum cases and subsequent denial of certiorari by the Supreme Court pose significant questions regarding jury awards for copyright infringement, particularly in cases of mid to low-income infringers. These opinions have sparked widespread discussion and criticism in the call for reform in the next Copyright Act.

In “The Copyright Principles Project: Directions for Reform,” Samuelson emphasized that the commercial value of an infringement should be weighed when determining the scope of a party’s exclusive rights. This will further protect “non-harmful activity” from excessive damages. Samuelson stressed that developing consistent tests for infringement and consistent guidelines for reasonable damages would ensure increased regularity in the outcomes of cases.

Maria Pallante, the Register of Copyright, has indicated that while statutory damages “have long been an important part of copyright law to ensure that copyright owners are compensated for infringement, … where actual damages are unworkable,” there may be “plenty to do on the edges” to harmonize damages awards against individuals.

In collaboration with the Berkeley Center for Law and Technology, BTLJ will host a symposium that will further explore challenges and opportunities surrounding copyright reform, including statutory damages proposals in the wake of Thomas-Rasset and Tenenbaum cases.

Cite as: Golda Calonge, Jury Awards in File-Sharing Cases Add Fuel to Debate on Copyright Act Reform, Berkeley Tech. L.J. Bolt (January 6, 2014), http://btlj.org/?p=3148.
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