By Tamlin H. Bason
A jury's $675,000 damages award, which was well within the Copyright Act's statutory allowance, did not violate the due process rights of an individual who was found liable for willfully infringing 30 songs, the U.S. Court of Appeals for the First Circuit held June 25 (Sony BMG Music Entertainment v. Tenenbaum, 1st Cir., No. 12-2146, 6/25/13).
Relevant Supreme Court precedent states that a defendant's due process is violated by a statutory damages award only where the award is, among other things, “wholly disproportioned to the offense and obviously unreasonable,” the appeals court said. In this case, there was ample evidence to support the jury's determination that the defendant wilfully infringed the plaintiff's copyrights, the court said. Accordingly, the award, which was in fact far below the maximum amount permitted under the Copyright Act, did not violate the defendant's due process, the court said.
Absent an appeal to the Supreme Court, the First Circuit's opinion seemingly concludes another lengthy dispute between the music industry and a defendant found liable for infringing copyrights through peer-to-peer file sharing services. In March, the Supreme Court declined to review a challenge to the U.S. Court of Appeals for the Eight Circuit's determination that the Due Process Clause does not bar a statutory damages award of $222,000 for the willful infringement of 24 songs.Capitol Records Inc. v. Thomas-Rasset, (U.S., No. 12-715, review denied 3/18/12)(53 PTD, 3/19/13).
The Tenenbaum case began in 2007 when several record companies--Sony BMG Music Entertainment, Warner Bros. Records Inc., Arista Records L.L.C., Atlantic Recording Corp., and UMG Recordings Inc.--sued Joel Tenenbaum, a student at Boston University, seeking more than $1 million in statutory damages for his use of peer-to-peer file-sharing software to copy and disseminate without authorization copyrighted musical recordings. The court ultimately consolidated Tenenbaum's case with more than 100 similar cases filed by the music industry against students.
In 2009, the government filed a brief with the court defending as constitutional the Copyright Act's allowance of up to $150,000 in statutory damages for each act of willful infringement (57 PTD, 3/27/09). The court also denied Tenenbaum the opportunity to argue before the jury that his file sharing constituted fair use (144 PTD, 7/30/09).
In July 2009, a jury handed down a $675,000 judgment against Tenenbaum for infringement of 30 works. Capitol Records Inc. v. Alaujan, No. 1:03-cv-11661-NG (D. Mass., directed verdict ordered July 31, 2009) (146 PTD, 8/3/09). The court affirmed the jury's award (237 PTD, 12/14/09).
Tenenbaum challenged the jury award, arguing that it was grossly excessive and violated the Due Process Clause, and he sought a new trial or remittitur, raising both common law and constitutional grounds.
Judge Nancy Gertner of the U.S. District Court for the District of Massachusetts ruled that the $675,000 award was unconstitutionally excessive because it was far greater than necessary to serve the government's legitimate interest in compensating copyright owners and deterring infringement. This was a violation of due process under the Fifth Amendment, given that Tenenbaum had not realized any monetary benefit from his infringement, according to Gertner. The court reduced the award by a factor of 10 to $2,250 for each of the infringed works.
The record companies appealed, seeking reinstatement of the full award. Tenenbaum also appealed on the issues of liability and damages, challenging the constitutionality of the Copyright Act, and its applicability to his conduct. Tenenbaum further sought a new trial and additional reduction of damages.
The First Circuit ruled that the district court erred in failing to consider Tenenbaum's motion for remittitur under common law.
Furthermore, the appeals court said there was no support for the argument that infringement liability in general or statutory damages in particular as provided for under the Copyright Act were not applicable to a “consumer infringer.”
The First Circuit reinstated the original award but directed the district court to consider the issue of remittitur, which is a common law doctrine that permits a court to reduce an award by a jury that is grossly excessive, inordinate, shocking to the conscience of the court, or so high that it would constitute a denial of justice to permit it to stand. 660 F.3d 487, 100 U.S.P.Q.2d 1161 (1st Cir. 2011) (183 PTD, 9/21/11).
On remand, Judge Rya W. Zobel said that under the applicable legal standard there was “no basis for common law remittitur” in this case. 2012 BL 215825, 103 U.S.P.Q.2d 1902 (D. Mass. 2012) (166 PTD, 8/28/12).
The district court also denied Tenenbaum's due process challenge. The award in this case was within the range set by Congress, and it was even lower than the maximum statutory penalty for non-willful infringement, the district court noted. Thus, it determined that the award did not violate Tenenbaum's due process.
Tenenbaum appealed the due process ruling. He did not challenge the district court's remittitur holding.
Tenenbaum argued that the district court applied the incorrect standard when ruling on his due process challenge. Specifically, Tenenbaum said that the court should have looked to the Supreme Court's 1996 decision in BMV v. Gore, 517 U.S. 559 (1996), rather than the high court's 1919 St. Louis, Iron Mountain, and Southern Railway Co. v. Williams, 251 U.S. 63 (1919), holding. The First Circuit disagreed.
Gore set forth three considerations for due process challenges to a jury's punitive damages award:
(1) the degree of reprehensibility of the defendant's conduct; (2) the ratio of the punitive award to the actual or potential harm inflicted on the plaintiff; and (3) the disparity between the punitive award and the civil or criminal penalties authorized in comparable cases.
Williams, on the other hand, “applies to awards of statutory damages, which the jury awarded in this case,” Judge Jeffrey R. Howard said. Under Williams, “[A] statutory damage award violates due process only 'where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable,” the court said, quoting the Supreme Court's nearly century-old opinion.
Accordingly, the appeals court said the district court was correct to apply Williams and not Gore because:
The concerns regarding fair notice to the parties of the range of possible punitive damage awards, which underpin Gore, are simply not present in a statutory damages case where the statute itself provides notice of the scope of the potential award. Moreover, Gore's second and third guideposts cannot logically apply to an award of statutory damages under the Copyright Act. The second due process guidepost requires a comparison between the award and the harm to the plaintiff, but a plaintiff seeking statutory damages under the Copyright Act need not prove actual damages.
The court looked both to Tenenbaum's activities and to the purpose of the Copyright Act's statutory damages provision in order to determine whether the $675,000 damages award was “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”
Tennenbaum argued that the award was wholly disproportioned to his offense, which he estimated cost Sony only $450, a figure equaling the cost of 30 albums sold at $15 each. However, “Statutory damages under the Copyright Act are designed not only to provide 'reparation for injury,' but also 'to discourage wrongful conduct,' ” the court said, quoting F.W. Woolworth Co. v. Contemporary Arts Inc., 344 U.S. 228, 95 U.S.P.Q. 396 (1952).
Thus, Tenenbaum's argument that his conduct cost Sony less than $500 in lost profits “asks us to disregard the deterrent effect of statutory damages, the inherent difficulty in proving damages in a copyright suit, and Sony's evidence of the harm that it suffered from conduct such as Tenenbaum's,” the court said.
The court noted that the record clearly demonstrates that Tenenbaum willfully infringed Sony's copyrights. Indeed, “Tenenbaum carried on his activities for years in spite of numerous warnings, he made thousands of songs available illegally, and he denied responsibility during discovery,” the court said, recounting just some of the evidence that factored into the jury's willfulness determination. “Therefore, we do not hesitate to conclude that an award of $22,500 per song, an amount representing 15% of the maximum award for willful violations and less than the maximum award for non-willful violations, comports with due process,” the court said, affirming the district court's $675,000 award.
Chief Judge Sandra L. Lynch and Judge Juan R. Torruella joined the court's opinion.
Sony was represented by Paul D. Clement of Bancroft, Washington, D.C. Tenenbaum was represented by K.A.D. Camara of Camara & Sibley, Houston.
Text is available at http://www.bloomberglaw.com/public/document/Sony_BMG_Music_et_al_v_Tenenbaum_Docket_No_1202146_1st_Cir_Sept_2.