Due Process Considerations Lead Court To Trim $1.5 Million Award Down to $54,000

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• Case Summary: Following jury award of $1.5 million in statutory damages for willful infringement of 24 sound recordings by an individual for personal use, a district court holds that $54,000 is maximum constitutionally permissible award under facts of this case.

• Key Takeaway: U.S. Constitution's due process clause constrains statutory damages awards to those that are reasonable and proportionate to the offense.

A jury award of $1.5 million in statutory damages for willful copyright infringement arising from an individual's act of downloading 24 sound recordings for personal use is “appalling” and unconstitutional because it is too severe, oppressive, and disproportionate to the offense, the U.S. District Court for the District of Minnesota ruled July 22 (Capitol Records Inc. v. Thomas-Rasset, D. Minn., No. 06-1497, 7/22/11).

After he found the jury's award of $62,500 for each infringed recording to be unconstitutionally harsh, Chief Judge Michael J. Davis reduced the damage award to $2,250 per song—three times the minimum statutory penalty allowed for willful infringement under the Copyright Act. The court found that the reduced award was the maximum allowable by the U.S. Constitution's due process clause under the facts of this case.

 

“There is no doubt that a multi-million dollar penalty is overkill to deter a private individual from obtaining free songs online.”

Hon. Michael J. Davis, U.S. District Court for the District of Minnesota

Along the way, the court rejected the defendant's argument that the plaintiff's damages should be set at $0, or at $1 per recording, based on the prevailing rate for purchasing individual sound recordings on Apple's iTunes storefront.

The court's ruling was the latest in a long-running lawsuit against the defendant, Jammie Thomas-Rasset, who was found was found by a jury to have willfully infringed the plaintiffs' copyright in 24 sound recordings by copying them to her personal computer via the Kazaa peer-to-peer file-sharing network.

Jury's Award Unconstitutional

At 17 U.S.C. §504(c) the Copyright Act provides for statutory damages of up to $150,000 for each willful infringement of a copyrighted work. It was under this statute that a jury in November returned a special verdict that included a statutory damages assessment of $62,500 for each shared song, or $1.5 million (215 PTD, 11/9/10).

Both parties filed motions asking the court to alter or amend the damage award. The defendant argued that such a steep award—which was issued despite the fact that the plaintiffs never demonstrated any actual loss—violated the due process clause. Chief Judge Michael J. Davis agreed.

The court first determined that the appropriate test for the constitutionality of a statutory damage award was found in St. Louis, Iron Mountain & Southern Railway Co. v. Williams, 251 U.S. 63 (1919), where the court considered the issue of whether a jury's award within a statutorily prescribed range violated the due process clause.

In Williams, the court upheld a damage award of $75 for a plaintiff who had been charged 66 cents more than the statutorily prescribed fare for a train ticket. The statute under which the suit was brought provided for damages between $50 and $300 for each overcharge. The railroad, however, argued that the damage award was unconstitutionally excessive.

The Williamscourt determined that a statutory damage award is constitutional so long as it is not “so severe and oppressive as to be wholly disproportionate to the offense or obviously unreasonable.”

Statute Serves Public Interest; Compliance Needed

In reaching its conclusion, the court examined three factors that the Williamscourt identified as essential in a determination of whether an statutory damage award is excessive. Under Williams, a court must consider:

• the public interest being served by the statute;

• the opportunities for committing the offense; and

• the government's need to secure uniform adherence to the statute.

Here the court said that the public has a strong interest in encouraging innovation by rewarding copyright owners for their works.

The court then found that the defendant had numerous opportunities to infringe the plaintiffs’ copyrights. At the time that the defendant downloaded the files, the evidence presented at trial demonstrated that there were more than 2 million users who were sharing over 800 million files online over peer-to-peer networks. In such an environment, the court said that the defendant and others who wished to illegally download songs over the internet had ample opportunity to do so.

Lastly, the court said that there was substantial interest in securing uniform adherence to the provisions of the Copyright Act. The court said that because online infringement is so widespread and so easy to do, artists may be less likely to create content for fear that their work will simply be downloaded for free online. Accordingly, the court said that significant penalties were needed in order to deter others from illegally downloading content online.

The court found that in the aggregate the illegal downloading of songs online has caused substantial harm to the recording industry.

But, the court said that the defendant's contribution to this problem were too “miniscule” to support the jury's award:

 

[A]n award of $1.5 million for stealing and distributing 24 songs for personal use is appalling. Such an award against an individual consumer, of limited means, acting with no attempt to profit, is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.

Tenenebaum Persuasive on Damage Cap

To determine what amount of damages were appropriate, the court looked to another file sharing case in which the U.S. District Court for the District of Massachusetts found that a jury's $675,000 statutory damages 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, Sony BMG Music Entertainment v. Tenenbaum, No. 07-11446 (D. Mass. July 9, 2010) (133 PTD, 7/14/10).

In Tenenbaum, the court concluded that “an award of $2,250 per song, three times the statutory minimum, is the outer limit of what a jury could reasonably (and constitutionally) impose … .” The Tenebaumdecision has been appealed to the U.S. Court of Appeals for the First Circuit.

Although there is no basis for treble damages in the Copyright Act, and despite its recognition that any cap on damages would be “to some extent arbitrary,” the court concluded that the Tenenbaum court's decision to set a cap of three times the statutory minimum “is the most reasoned solution.”

Jammie Thomas-Rasset was represented by Garrett D. Blanchfield Jr. of Reinhardt Wendorf & Blanchfield, in St. Paul, Minn. Arista Records LLC, Capitol Records Inc., Interscope Records, Sony BMG Music Entertainment, UMG Recordings Inc., and Warner Bros. Records Inc. were represented by Felicia J. Boyd of Barnes & Thornburg, Minneapolis.

By Tamlin H. Bason

Opinion at http://pub.bna.com/eclr/07cv1497_072211.pdf .