It’s not about the money.

Friday’s First Circuit opinion in Sony BMG v. Tenenbaum is about a lot of things, but what it’s not about — and what will nevertheless get the most attention — is the $675,000 a jury awarded against Joel Tenenbaum for downloading and distributing 30 songs, which the District Court reduced to $67,500, and which the appellate court reinstated.

It’s a lot of money, of course. I think it’s highly unlikely any of the jurors who awarded the damages really expect Tenenbaum to be able to pay it all in a lifetime, and certainly Sony and the other record labels aren’t expecting to receive a check for anywhere near that amount.

Instead, this case has taken on constitutional dimensions, concerning due process, the right to a jury trial, and the boundaries and roles of different institutions — courts, juries, and Congress — in our legal system.

It’s about whether disagreement over the effects of laws can justify bypassing bedrock legal principles — whether we can sacrifice the processes that make democracy work for expediency.

In that respect, the First Circuit should be commended for saying “no”.

This is an interesting decision and worth a read. There’s quite a bit inside it, more than I’ll cover in this post.

What’s most interesting about this case is that the one line by the court that has been noted by those disappointed in the decision as the one positive1 may not be as positive as they believe. In the opinion, the court says, “We comment that this case raises concerns about application of the Copyright Act which Congress may wish to examine.” The court is not so much talking to Congress as it is to the lower court. It’s saying, in essence, if you don’t like the results of the Copyright Act’s statutory damages, take it up with Congress, because it’s highly unlikely that we will find a constitutional limitation in cases like this.

Joel Tenenbaum and Jammie Thomas-Rasset

Because Tenenbaum is very similar to Capitol Records v. Thomas-Rasset, the only other major label end user downloading case to make it to trial, it can be easy to confuse the two. To recap:

In Thomas-Rasset, the judge reduced the jury’s award of $1.92 million through the common law process of remittitur. The record labels opted for a new trial, solely on damages, instead of accepting the remitted amount.2 After a new jury awarded $1.5 million against Thomas-Rasset, the court reduced the award on constitutional grounds, ruling that the award violated due process under the standard set by the Supreme Court in St. Louis IM & S v. Williams.

In Tenenbaum, after the jury returned a verdict of $675,000, the court, noting that the record labels had not accepted the remitted award in Thomas-Rasset, skipped straight to the constitutional ground. As in Thomas-Rasset, the court reduced the award on due process grounds, but unlike Thomas-Rasset, it used a different standard, one developed to address punitive damages (which generally aren’t set by statute) and set out in BMW v. Gore.

The decision

The main holding in this case is fairly narrow. The First Circuit held that the District Court erred when it skipped over the question of remittitur and reduced the damages on constitutional grounds. It reversed the reduction in damages and remanded to the lower court to reconsider the remittitur question.

But the court ruled on a number of other issues brought by Tenenbaum. It held that the Copyright Act is not unconstitutional after the Supreme Court decision in Feltner v. Columbia Pictures Television, so-called “consumer copying” is not exempt from damages, and statutory damages are available without a showing of actual harm.

The harm of P2P piracy

The First Circuit begins by describing how P2P piracy has effected the recording industry. It notes that record labels have never granted blanket licenses for uploading music files to the Internet for public consumption. “Such a license,” said the court, “would deprive the companies of their source of income and profits and essentially drive them out of business.” But the development of digital audio and P2P made such uploading easy and commonplace.

The proliferation of [P2P] networks from 1999 onward and the piracy they enable has had a significant negative impact on the recording industry. Between 1999 and 2008, the recording industry as a whole suffered a fifty percent drop in both sales and revenues, a figure plaintiffs attribute to the rise of illegal downloading. This reduction in revenues has, in turn, diminished recording companies’ capacities to pursue, develop and market new recording artists. It also affected the companies’ employees. The loss in revenues has resulted in a significant loss of industry jobs. Sony BMG Music Entertainment and Warner Music Group, for example, each have suffered a fifty percent reduction in workforce since 2000.

The court then traced the history of the record labels’ response to P2P piracy, beginning with consumer education and legal actions against P2P services and leading to its campaign against individual infringers, including Joel Tenenbaum.

Tenenbaum’s Conduct

The First Circuit devotes over 8 pages in the 65 page opinion to describing Tenenbaum’s actions that led to the trial. The portrait they paint is one of an avid “file-sharer” who downloaded and distributed music continuously for nearly a decade. The court said that “Over the duration of Tenenbaum’s conduct, he intentionally downloaded thousands of songs to his own computers from other network users. He also purposefully made thousands of songs available to other network users.” It also observed that “Tenenbaum regularly looked at the traffic tab, and he admitted it ‘definitely wasn’t uncommon’ for other users to be downloading materials from his computer.”

The court notes too the warnings Tenenbaum received that his conduct was illegal: from his father, his mother, his college, his ISP, and finally from the record labels themselves. Up until the trial, Tenenbaum denied he did anything wrong, shifting the blame to seemingly any individual he could think of. According to the court, “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.”

It wasn’t until asked at trial that Tenenbaum finally admitted responsibility for his conduct.

All of Tenenbaum’s arguments rejected

Next the court rejected three of Tenenbaum’s arguments raised on appeal.

The first is that the Supreme Court decision in Feltner rendered the Copyright Act’s statutory damage provisions unconstitutional. Although the court found that Tenenbaum waived this argument because he didn’t clearly make it in the district court, it nevertheless found it wrong. Feltner held that, although the statutory damages provision only refers to “the court”, statutory damages must be determined by a jury (unless a jury trial is not requested by the plaintiff). Tenenbaum’s argument was a stretch — I won’t spend any time on this, so you can read the opinion if you want to see the details.

Next, Tenenbaum argues that the statutory damages provision doesn’t apply to “consumer copiers.” Again, although the court found this argument waived, it took the time to explain why it was wrong.

We start with the inaccuracy of the labels that Tenenbaum’s argument uses. Tenenbaum is not a “consumer-copier,” a term he never clearly defines. 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 Sony and then illegally distributed those works to others, who also did not pay Sony. Further, he received, in turn, other copyrighted works for which he did not pay. Nor can Tenenbaum assert that his was merely a “noncommercial” use and distribution of copyrighted works as those terms are used elsewhere in the Act. His use and distribution was for private gain and involved repeated and exploitative copying.

But even if the court did agree that Tenenbaum was engaged in “consumer copying” it wouldn’t have mattered. The language of the Copyright Act is crystal clear: the distinctions or exceptions that Tenenbaum asks the court to read into the law simply don’t exist. The court continued:

Asking us to ignore the text and the plain meaning of the statute, Tenenbaum argues Congress was unaware that suits like this could be brought and so could not have intended the statute to apply here. The argument is wrong both on the law and on the facts.

The First Circuit observed that Congress “specifically acknowledged that consumer-based noncommercial use of copyrighted materials constituted actionable copyright infringement” when it increased the amounts available under the statutory damage provisions in 1999. Two years before that, it amended the Copyright Act to impose criminal liability even when the infringement is noncommercial. And the fact that the record labels’ pursuit of end-user infringers cuts against Tenenbaum’s argument rather than supporting it:

Even if we assume that copyright owners have historically chosen first to litigate against the providers of new technologies of reproduction and dissemination rather than the users of those new technologies, that may best be explained by the owners using a cost benefit analysis, and says nothing about Congressional intent. Historically, the costs of prosecuting infringement actions against individual users could be thought by owners to have exceeded the benefits. That the copyright owners have turned to litigation against individual infringers only underscores that the balance of the copyright holder’s cost-benefit analysis has been altered as peer-to-peer networks and digital media become more prevalent.

The Circuit also rejected Tenenbaum’s argument that there must be some relation between statutory damages and actual harm. It points to the language of the Copyright Act, which allows a copyright holder to elect to receive statutory damages instead of actual damages — language that the Supreme Court has affirmed means statutory damages are available as an alternative remedy from actual damages, “[e]ven for uninjurious and unprofitable invasions of copyright.” Besides that, Sony had provided “extensive testimony” of the harm caused by Tenenbaum’s conduct during trial.

Finally, Tenenbaum raised a number of arguments that the jury instructions were in error. Even though all but one of these arguments were not preserved for appeal, the First Circuit nevertheless took the time to explain why they are wrong.

Doctrine of Constitutional Avoidance

The First Circuit next held that the district court erred when it bypassed the issue of common law remittitur and reduced the jury verdict on due process grounds. This is the most important portion of the decision in Tenenbaum, and it sheds some light on the future of not only this case, but also Thomas-Rasset.

The court declined to adhere to the doctrine of constitutional avoidance on the ground that it felt resolution of a constitutional due process question was inevitable in the case before it. A decision on a constitutional due process question was not necessary, was not inevitable, had considerable impermissible consequences, and contravened the rule of constitutional avoidance. That rule had more than its usual import in this case because there were a number of difficult constitutional issues which should have been avoided but were engaged.

The court notes two of those issues: first, the proper standard for measuring the due process limitations on awards of statutory damages, and second, whether reducing statutory damages in this fashion, without allowing plaintiffs the option of accepting them or seeking a new trial, violates the Seventh Amendment.

The doctrine of constitutional avoidance, where courts must avoid reaching a constitutional question if it can decide an issue on nonconstitutional grounds, seems counterintuitive to many people at first glance. The Constitution is the “supreme law of the land”,3 after all — if something violates the Constitution, why wouldn’t we want judges to put a stop to it?

The answer to that is in the Constitution itself. The power of the Judicial branch is not unlimited — Article III provides that courts may only hear “cases or controversies” and not render advisory opinions. The Constitution also provides for separation of powers. Congress is vested with the power to make laws, and a court that is too active in its efforts to rule laws unconstitutional is essentially encroaching on this power.

From this foundation, along with principles of judicial restraint, the doctrine of constitutional avoidance has developed. Though it is a long-standing doctrine, it received its most famous elaboration by Supreme Court Justice Brandeis in his concurrance to Ashwander v. Tennessee Valley Authority.

Gore vs. Williams

But while the First Circuit declined to rule on the proper standard for analyzing statutory damage awards, it did hint that it is leaning more toward Williams than Gore.

First, it noted that the presumptive standard for statutory damages is Williams and questioned whether courts would have “leeway and reason” to bypass this standard and apply a different one.4

Second, it questioned the applicability of Gore to copyright statutory damages. These damages serve different purposes than punitive damages. In addition, both Gore and Williams involved review of state-authorized awards, not one set by Congress pursuant to one of its specifically enumerated powers.

Finally, Williams remains good precedent, and the Supreme Court has never suggested Gore should extend to constitutional review of statutory damages. The First Circuit rounds out its skepticism by observing that the concerns which led to the standard in Gore aren’t present in a statutory damage context, and the only other circuit court to address an issue like this declined to apply Gore and instead applied Williams.5

While not overtly endorsing the Williams standard, this decision hints that, should the First Circuit confront this issue in the future, it will go down that road. And, based on its comment noting “concerns about application of the Copyright Act which Congress may wish to examine”, the circuit court judges suggest they are inclined to think such a verdict would survive a due process challenge under Williams.

This saga is far from over — it remains to be seen if the parties settle or continue the litigation, and it remains to be seen how the district court responds if they do continue. The Thomas-Rasset appeal is also waiting in the wings, with the record labels’ opening brief due October 13th.

Footnotes

  1. See the EFF, Techdirt, and Ars Technica. []
  2. The Seventh Amendment right to a jury trial requires that plaintiffs be given this choice. []
  3. US Constitution, Article VI. []
  4. The court hypothesized that this different standard could be “the Gore standard, some combination of Williams and Gore, or some other standard”. []
  5. That case is Zomba Enterprises v. Panorama Records, 491 F.3d 574 (6th Cir. 2007). []

5 Comments

  1. I guess I’m not the only one that thinks that this won’t be over until either the Tenenbaum or Thomas-Rasset case makes it before the Supreme Court.

    • That’s always a possibility — all the ingredients to make it to the Supreme Court are there.

      • Thus far, both defendants and their legal teams seem more interested in politicising the issue than reaching the least damaging outcome (both had been offered settlements much lower than even the reduced verdicts). The label plaintiffs seem to be in it for the long haul as well – which is understandable, given how the outcomes of these cases will affect the application of copyright to similar cases in the future, not to mention the potential implications to their lobbying strength for addititional protections (PIPA, say) if they are shown to be less than totally determined in pursuing claims under existing law.

        I see these cases – together with Viacom – as fundamental to the question of how copyright law is to be applied in the new technological context and given the strong anti-copyright interests working in the background, I can’t really see anything short of a Supreme Court ruling settling the issue.

  2. Footnote 28: “If the district court determines that the jury’s award does not merit common law remittitur, the court and the parties will have to address the relationship between the remittitur standard and the due process standard for statutory damage awards, should the issue continue to be raised.”

    I don’t see how Judge Gertner could think it violates due process yet not merit remittitur. Can someone explain what that means? Thanks.

  3. This law review analysis of remittitur may prove useful in sorting through some of the issues presented in this and the JRT cases.

    http://moritzlaw.osu.edu/lawjournal/issues/volume64/number3/thomas.pdf