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A statutory damages award against peer-to-peer file-sharer Joel Tenenbaum was not so excessive as to constitute a violation of due process, the U.S. District Court for the District of Massachusetts ruled Aug. 23 (Sony BMG Music Entertainment v. Tenenbaum, D. Mass., No. 1:07-cv-11446-RWZ, 8/23/12).
Upholding the damages award, the court also found there was no cause to reduce the damages through common law remittitur.
The Tenenbaum case began in 2007 when several record companies--Sony BMG Music Entertainment, Warner Bros. Records Inc., Arista Records LLC, 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 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.
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 also sought a new trial and further reduction of the damages.
The U.S. Court of Appeals for 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 “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. Sony BMG Music Entertainment v. Tenenbaum, 660 F.3d 487, 100 USPQ2d 1161 (1st Cir. 2011) (237 PTD, 12/14/09).
On remand, Judge Rya W. Zobel first set forth what the court characterized as a “stringent standard” for granting of remittitur. For example, according to Smith v. Kmart Corp., 177 F.3d 19 (1st Cir. 1999), a court must find that the jury award exceeds “any rational appraisal or estimate of the damages that could be based on the evidence before the jury.”
[A] rational appraisal of the evidence before the jury, viewed in the light most favorable to the verdict, supports the damages award. The jury learned that music recording companies' primary source of revenue stems from their exclusive rights to copy and distribute the musical works of their contracted artists. … It learned about the operation of peer-to-peer file-sharing networks and how such networks facilitated “the unauthorized and illegal downloading and distribution of copyrighted materials--especially music recordings….” … The jury also heard evidence from which it could rationally conclude that the value of a blanket license to upload music recordings to the internet for public consumption would be “enormous.”
Similarly, the court said that there was sufficient evidence regarding the “scope and scale” of the infringement in this case--eight years and thousands of affected works. Furthermore, there was ample evidence of willfulness on Tenenbaum's part, the court said, including a series of warnings from multiple parties, including his parents, his university, and the plaintiffs themselves, before the claims were laid against him.
Disposing of the remittitur issue, the court turned to the question of due process. According to the court, the First Circuit “strongly suggested, without deciding,” that it should apply St. Louis, Iron Mountain and Southern Railway Co. v. Williams, 251 U.S. 63 (1919), rather than BMV v. Gore, 517 U.S. 559 (1996).
(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.
The court noted the First Circuit's suggestion that the facts in Gore were distinguishable from the instant case to the extent that in Gore there were concerns about fair notice to the parties regarding punitive damages, in that the Copyright Act itself offers adequate notice.
Furthermore, the court noted that the second and third Gore “guideposts” were inapplicable in this case, on the basis that the award was within the range established by statute.
Thus, the court applied the Williams standard, which it considered “highly deferential”: It would strike down a statutory damages award only if it were “so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable.” Also relevant, according to Williams, are “the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence” to law.
The court concluded that the award in this case did not violate Tenenbaum's due process, given not only that it was within the range set by Congress, but that it was also lower than the maximum statutory penalty for non-willful infringement.
The verdict and the damages award were thus allowed to stand, as reinstated by the appeals court.
Sony was represented by John R. Bauer of Robinson & Cole, Boston. Tenenbaum was represented by Charles Nesson of Harvard University, Cambridge, Mass.
Opinion at http://pub.bna.com/ptcj/SonyBMG2012Aug23.pdf
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