Damages Against File Sharer Reinstated, But Case Remanded to Weigh Remittitur

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By Anandashankar Mazumdar

A federal district court that drastically reduced a damages award against Harvard student Joel Tenenbaum for online file sharing erred in making its decision based on the Fifth Amendment without addressing Tenenbaum's motion for remittitur under common law, the U.S. court of Appeals for the First Circuit ruled Sept. 16 (Sony BMG Music Entertainment v. Tenenbaum, 1st Cir., No. 10-1883, 9/16/11).

Rejecting Tenenbaum's arguments regarding the constitutionality of the Copyright Act and its damages provision, the court said that there was no support in the text of the Copyright Act that infringement liability in general or statutory damages in particular were not applicable to “consumer infringers.”

The court also said that the lower court erred under the doctrine of constitutional avoidance in skipping over the remittitur issue and going straight to the constitutional due process question.

The court reinstated the original award but sent the matter back to the district court for reconsideration of Tenenbaum's motion for remittitur. Remittitur 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 be a denial of justice to permit it to stand.

Tenenbaum Raises Constitutional Issues

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 download and disseminate copyright 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 (237 PTD, 12/14/09).

Tenenbaum challenged the jury award, contending 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 did not gain income from his infringement. the court said, reducing 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.

Tenenbaum's History Reveals Knowledge of Law

Chief Judge Sandra L. Lynch first offered an extensive review of the facts and background of the case, detailing Tenenbaum's extensive infringement of thousands of musical recordings from about 1999 to 2007, at home and at school, and its continuation through a series of warnings from university officials, internet service providers, and others. The court also reviewed Tenenbaum's own admissions in court that he had repeatedly made false statements about his conduct in the run-up to the original trial.

“Before the trial, Tenenbaum also attempted to shift responsibility for his conduct to other individuals by claiming they could have used his computer in order to illegally download and distribute the copyrighted works,” the court noted. “These individuals included a foster child living in his family's home, burglars who had broken into the home, his family's house guest, and his own sisters.”

Feltner Argument Waived

Turning to the substantive issues, the court first rejected Tenenbaum's argument that the Copyright Act is unconstitutional under Feltner v. Columbia Pictures Television Inc.,523 U.S. 340, 46 USPQ2d 1161 (1998).

Feltner stated that a defendant in a copyright infringement case had the right to have a jury evaluate the appropriateness of a statutory damages award. Tenenbaum argued that this altogether invalidated the statutory damages provision of the Copyright Act, 17 U.S.C. §504(c).

According to the court, however, Tenenbaum had failed to “clearly make the argument” before the lower court and, therefore, this issue had been waived.

Nonetheless, the court addressed the substance of the argument, concluded that “it is both wrong and foreclosed by our circuit precedent.” The First Circuit and other federal appeals courts have held in a series of cases that Feltner did not strike down Section 504(c) as unconstitutional. This was also reflected in Supreme Court jurisprudence, the court said.

‘Consumer Copying' Argument Also Waived

Next, the court rejected the argument that Congress did not intend to impose liability or statutory damages for copyright infringement when the infringement in question was nothing more than “consumer copying.” Here again, Tenenbaum had failed to raise this issue properly before the district court and thus the issue was waived, the court said.

As before, the court still concluded that had the argument not been waived, it would still have failed. The court noted that there was no clear definition of “consumer-copier” offered by Tenenbaum. Regardless, Tenenbaum was not one. The court said:

 

He is not a consumer whose infringement was merely that he failed to pay for copies of music recordings which he downloaded for his own personal use. Rather, he widely and repeatedly copied works belonging to [the record companies] and then illegally distributed those works to others, who also did not pay …. Further, he received, in turn, other copyrighted works for which he did not pay.

The court also said that Tenenbaum could not claim to be making non-commercial use of the works in question.

“His use and distribution was for private gain and involved repeated and exploitative copying,” the court said.

The interpretation of the Copyright Act proposed by Tenenbaum was contrary to the plain language of the Copyright Act, the court said. The statute makes no mention of distinctions between consumer copying and other kinds of copying. The court said:

 

Instead, the Act renders those, like Tenenbaum, who use or distribute a copyrighted work without authorization liable in copyright. Indeed, the Act does not use the term “consumer” at all, much less as a term excluded from the category of infringers. Rather, the statute refers to “anyone” as potential infringers.”

Here, the court cited 17 U.S.C. §501(a), which says, “Anyone who violates any of the exclusive rights of the copyright owner … is an infringer of the copyright or right of the author, as the case may be.” The court noted that there is no provision that makes any exception for “consumer infringers” as a group.

The same kind of statutory language defeated Tenenbaum's argument that statutory damages did not apply to consumer infringers.

“The statute does not condition the availability of either set of damage calculations on whether the offending use was by a consumer or for commercial purposes or not,” the court said.

A lengthy discussion addressed the point that the text of the Copyright Act does make explicit exemptions, exclusions, and exceptions in circumstances in which Congress intended that they exist. Thus, there was no basis to infer that Tenenbaum's “consumer infringer” exception was a part of congressional intent.

Actual Harm Not Needed for Statutory Damages

Finally, the court rejected Tenenbaum's argument that Congress intended that statutory damages be available only upon a showing of actual harm.

As with Tenenbaum's other arguments, the plain text of Section 504, which provides for either actual damages or statutory damages, supported no such interpretation. Additionally, the statutory damages option has been repeatedly reaffirmed by Supreme Court decisions, the court said.

Furthermore, the court rejected the argument that there was insufficient evidence of harm presented in evidence. The court said:

 

Tenenbaum downloaded the thirty copyrighted works at issue and distributed those works to innumerable network users. [The record companies] presented extensive testimony regarding the loss in value of the copyrights at issue that resulted from Tenenbaum's conduct, and the harm of Tenenbaum's actions to itself and the recording industry, including reduced income and profits, and consequent job loss to employees.

Tenenbaum's numerous challenges to the district court's instructions to the jury were also rejected. Again, some of these arguments had been waived for failure to raise them properly before the district court.

District Court Erred in Bypassing Remittitur

The one instance in which the court rejected the lower court's ruling was in the bypassing of Tenenbaum's motion for remittitur in favor of slashing the damages under the due process clause of the Fifth Amendment.

The court rejected the lower court's conclusion that addressing the Fifth Amendment argument was “inevitable.” Specifically, if the award had been reduced through remittitur and the record companies had accepted that reduction, then the constitutional question need not have been reached.

This possibility should have been considered by the district court, even given the fact that the record companies opposed Tenenbaum's remittitur argument in court. In failing to follow this course, the court violated the doctrine of constitutional avoidance and “led the court to address questions that had not yet been fully developed.” In essence, the court was answering “hypothetical questions.”

Furthermore, had the remittitur path been taken, the district court would also have avoided an issue arising under the Seventh Amendment, namely, “whether a statutory damage award under the Copyright Act may be reduced without offering the plaintiffs a new trial.”

The court thus affirmed the finding of liability against Tenenbaum and the injunction imposed against him. The court also reversed the reduction of the jury's statutory damages award and reinstated the original award.

However, the matter was remanded for further consideration whether common law remittitur justified reduction of the damages as being excessive. Should the damages be thus reduced, the court said that the record companies had the right to demand a new trial. Finally, the court awarded costs to the record companies.

The court's opinion was joined by Judges Juan R. Torruella and Ojetta Rogeriee Thompson.

The record companies were represented by Paul D. Clement of King & Spalding, Washington, D.C. Supporting the record companies' brief was Jeffrey Clair of the U.S. Department of Justice, Washington, D.C. Tenenbaum was represented by Charles R. Nesson, a law professor at Harvard University. Amicus curiae the Electronic Frontier Foundation was represented by Julie A. Ahrens of the Center for Internet and Society, Stanford University, Stanford, Calif.


Opinion at http://pub.bna.com/ptcj/101883Sept16.pdf