Tenenbaum and Statutory Damages

I’ve been thinking about the implications of Judge Gertner’s ruling in Sony v. Tenenbaum, and have had the good fortune to discuss it with copyright expert Thinh Nguyen. One unexpected effect of the decision, I believe, will be to increase the cost of copyright litigation, perhaps significantly. Judge Gertner employs the Supreme Court’s Due Process rulings on damages, especially punitive damages, to hold that there must be some relation (how close a relation, we’re not sure) between actual damage / actual harm, and the amount of statutory damages awarded. This is problematic, for two reasons.

First, this means that copyright plaintiffs must make some showing of actual damages in order to receive statutory damages. Perhaps they can still obtain the Copyright Act’s minimum level of damages – $750 per work, with the potential of treble damages for willful infringement (as with Tenenbaum) – but that minimum is unlikely to motivate many plaintiffs to enforce their rights. If they want more than the floor, though, plaintiffs will have to introduce some evidence or testimony about the sum of the harm they’ve suffered. This increases their costs. In the case of digital works, it may increase those costs significantly. One aspect of the Tenenbaum case that seems most dubious is the court’s treatment of his infringement of the distribution right in the sound recordings he uploaded. (Props to Thinh for this point.) The judge effectively treats that harm as zero. But, this can’t be right – the other users who downloaded the songs may well have forgone purchases due to file-sharing, and this also means that Sony doesn’t get any additional compensation for the uploads, as opposed to the downloads. The thought experiment is this: imagine Tenenbaum downloads an MP3 file that infringes. According to Gertner, the damages are about $.70. Now, Tenenbaum uploads the file to BitTorrent. What are the additional damages? According to Gertner, they are zero. That can’t be right. However, proving actual harm from uploading / distribution is very hard, for technological reasons, as opposed to proving downloading. If plaintiffs want compensation for uploading, they’ll have to go to the expense of providing that evidence.

Second, Gertner’s ruling seems to imply that Congress cannot make the choice it has made here in the Copyright Act. Under the Act, plaintiffs can choose between actual damages (which must be proved with requisite certainty) and statutory damages. Picking statutory damages caps your award at $30,000 per work infringed, but relieves you of the need to prove actual harm. Congress did this in part because it’s sometimes tough to demonstrate the amount of actual harm, even when it has clearly occurred. Well, if Judge Gertner’s ruling stands, that’s not longer quite the case. The actual damages proof framework starts to sneak into the statutory damages approach, unless Congress is more specific in its findings about what damages exist for various works (as the damages schedule used to be under the 1909 Act). Thus, either Congress has to tailor statutory damages more closely to actual ones through some factual findings and specific legislative provisions, or plaintiffs will have to fill the gap.

So, I think that this ruling has some troubling implications for damages awards in a zone – digital media and file-sharing – where proving actual harm is particularly hard. The Supreme Court’s Due Process jurisprudence might in fact mandate this, but unless it’s clear (I don’t believe it is – Gertner and I disagree on how to read Williams), I think the district court should have been more careful about the effects of this decision.

P.S. Please notice my prescience regarding predictions about this constitutional question. Evidently I need to consult Paul the Octopus before blogging.

2 Responses to “Tenenbaum and Statutory Damages”

  1. Thanks for this post – these are all great comments. In my mind, the biggest problem is the mixing of an uncertain, uncapped, unstatutory rule (punitives) with a certain (at the top), capped, statutory rule. It’s just two different animals.

  2. Derek I agree with your observation that this ruling will make copyright litigation even more expensive. But I would go even further and suggest that this decision will erode copyright enforcement.

    If a copyright owner (contrary to the intent of the statute) has to demonstrate actual damages as a condition of recovering statutory damages many copyright cases may never be prosecuted for a number of reasons.

    First, the value of a copyright is, by its nature, difficult to establish. How much is an unpublished novel worth?

    Second, in cases involving public performances, the only direct loss is the lost license fee; as the Copyright Office recognized years ago, an award in such amount is an invitation to infringe with no risk of loss to the infringer.

    Third, actual damages are often less than the cost of detecting, investigation and, for sure, litigating. So why bother.

    Fourth the option of recovering an infringer’s lost profit may also be foreclosed if the infringer has conveniently destroyed the records reflecting sales of the infringer product or never kept records.

    I also think there are a number of reasons, as you also indicate, why the Gore guideposts do not apply. Here are two:

    1. The second Gore guidepost weighs the relationship between the punitive award and the actual harm. But this guidepost has no application to statutory damages which may be awarded without any showing of harm.

    2. The third Gore guidepost judges the propriety of the award by focusing on its relationship with the applicable civil penalty. But this guidepost makes no sense here because the award is by definition the applicable civil penalty.

    I expand this analysis in a post on my blog at at http://www.ipinbrief.com/are/. I also post there the post-trial briefs of the plaintiffs and the government. I hope your readers find this information useful.