$1.92 Million Damage Award for Filesharing

Posted on Categories Intellectual Property Law

Musical Notes$1,920,000 for filesharing. As reported by the L.A. Times, Ars Technica, and Ben Sheffner, that’s what a jury in Minnesota just awarded several record labels for the willful infringement of their recordings by Jammie Thomas (now Jammie Thomas-Rasset), the Minnesota woman who allegedly downloaded and uploaded copyrighted songs over KaZaA. $1.92 million is an astounding figure, seemingly out of all proportion to any harm Jammie Thomas-Rasset could have caused, or to any reasonable deterrent. Even the record labels appear to be backing away from the award; nearly the first words out of spokesperson Carla Duckworth’s mouth were that they remain “willing to settle.” Ben Sheffner, of the Copyright & Campaigns blog, correctly notes that the verdict might in fact be “too huge” for the recording industry’s own good.

This is hardly a new issue. Record companies and movie studios often sue filesharers for far fewer works than the defendant actually copied, and settle for relatively small amounts given the range of statutory damages. It’s a problem if the law that media companies use to protect their works is so draconian that they are afraid to deploy it to their full advantage. You don’t see this in other areas of the law; no one routinely files breach of contract actions for one-tenth of their expectation damages just to avoid the appearance of a windfall.

So what’s the source of the problem? I think the explanation is the massive inertia of the copyright system in dealing with the fundamental alteration of the information universe: namely, that everyone is now a publisher. And, while it’s easy to scoff at the existing situation, it’s harder than most people think to figure out how to fix it. Which is why we are where we are.

I think the jury, in coming up with their damages award, picked one in about the middle of the range of options that they had. Statutory damages for copyright infringement range from a minimum of $750 to a maximum of $30,000 per work infringed. If the trier of fact finds willful infringement, the maximum award increases to $150,000 per work infringed. The jury here apparently found willful infringement, meaning that their options for damages ranged from $750 to $150,000 per work infringed.

I strongly suspect they were influenced in their award by that range of options. There’s psychological studies out there that show that people will change their estimates of an amount based on what alternatives are presented to them. I seriously doubt, absent any guidance at all, the jury would have awarded the labels $1.92 million. My suspicion is that they only settled on that amount because it was in about the middle of the range. (The defense strategy of calling attention to the unfairness of the law by emphasizing the maximum end of the range seems to have backfired in that regard.)

That just backs the inquiry up a step, however. Why is the range of statutory damages for filesharing as high as it is? Copyright skeptics typically tell a public choice story for how this has come about, but I don’t think it’s quite that simple. There are two things going on, in my opinion.

The first is that the basis for calculating the statutory damage award is a holdover from a much different era of copyright enforcement. The 1976 Act bases the statutory award on the number of works infringed. That was originally intended as a pretty strict limit on how high statutory damages can go. That’s because, until recently, a typical infringer was someone who was making multiple copies of one work and selling them. Whatever you think of Jammie Thomas-Rassert, clearly someone who is stamping thousands of copies of a hit single on CDs and selling them in stores is a worse offender. But that person would be subject to a maximum statutory damages award of $150,000, because that award is based on the number of works, not the number of copies. And that’s what Congress intended. Statutory damages was supposed to be a fallback.

But infringement lawsuits in the era of the networked home computer have changed. Now it’s feasible for one person to distribute, for free, hundreds or thousands of copyrighted works. Now, all of a sudden, the language of the statutory damages provision has become a multiplier, not a limit. Distributing a few copies of a large personal library of music makes even the minimum statutory damages remedy humongous. The noncommercial, casual infringement of just 100 songs—maybe 10 CDs—has a minimum statutory damage award of $75,000, approximately 500 times the size of the average speeding ticket.

OK, you might say, Congress should change the law. But that’s the other half of my story. Congress has been convinced, correctly in my opinion, that the protection of the copyright system is in jeopardy in the digital age. But because of the growing number of interests deeply affected by copyright, changing the Copyright Act has become increasingly difficult. It used to be that if you wanted to change the federal Copyright Act, you called up a discrete number of groups: the authors, the publishers, the librarians, maybe a few others. But since then television broadcasters, cable operators, the record industry, film and television production companies, satellite broadcasters, jukebox owners, computer software developers, computer hardware manufacturers, consumer electronics manufacturers, consumer groups, free speech advocates, internet service providers, telecommunications providers, developers of encryption schemes, distance education providers, disabled persons, church groups, Girl Scouts, anti-pornography groups and many others have come to believe their interests are substantially and directly affected by copyright law. Achieving consensus among such a broad diversity of interests is difficult, if not impossible.

So that’s why, in my opinion, Congress has repeatedly opted for the easy fix. If copyright infringement is increasing, the easiest thing to do, both from a drafting standpoint and in terms of legislative compromise, is to simply increase the penalties. Increasing the penalties doesn’t change the way liability is determined, and so most groups are in the same position as before.

So Congress has twice increased both the maximum and, more troubling, the minimum statutory damages award by 100% of the 1976 amounts, from $250 minimum, $10,000 maximum, $50,000 maximum for willful infringement, to $500, $20,000, and $100,000, to the current amounts of $750, $30,000, and $150,000. It’s kept the basis for the award as “per work infringed.” And Congress has increased other remedies as well, such as criminal penalties, and civil forfeiture.

The recent filesharing suits indicate to me that mass media content owners like the labels and the movie studios are increasingly aware that the Copyright Act’s statutory damages are becoming about as good a tool to combat the infringement problem as a nuclear arsenal is to combat a local insurgency. As the Eisenhower Administration discovered in the 1950s, nuclear weapons might be useful in deterring World War III, but aren’t much good in dealing with a regional flare-up—for that, you need more fine-grained military approaches. The same is true for copyright law. That will require, as Jessica Litman recently proposed in her Nies Lecture, a rethinking of the entire statute. But that is certainly not the legislatively easy approach.

[Updated 6/21/09 to add missing text.]

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