On Friday, a federal judge slashed the verdict awardedÂ Â by a juryÂ against illegal downloader Jammie Thomas-Rasset last November.
This decision brings a mix of good news and bad news for copyright owners.Â It also represents a somewhat striking departure from judicial deference to Congress’s authority to set damages in civil cases by statute.
To put it another way, this decision and last year’s decision against Joel Tenenbaum represent the first time in historyÂ that a US court has found a substantive due process limit on damages set by statute. Regardless of how much one agrees with the result of the courts’ decisions, one should appreciate the need for caution when those courts depart dramatically from historical practice and enter new constitutional territory.
Judge Davis, sitting in the District Court of Minnesota, called the $1.5 million verdict for stealing 24 songs “appalling” and reduced it to $54,000 on constitutional grounds. This is similar to last July’s ruling in Sony v. Tenenbaum, where Judge Gertner, in the District Court of Massachusetts, reduced a $675,000 verdict against the college student for downloading and distributing 31 songs on constitutional grounds (though Judge Gertner reached her conclusion using a different standard than Judge Davis used, as explained below). Both parties in TenenbaumÂ have appealed that decision; that appeal is currently pending in the First Circuit.
The Tale of Thomas-Rasset
This is the second time Judge Davis has reduced a jury award against Thomas-Rasset. The history of Capitol v. Thomas-Rasset 1Although the plaintiffs include six record labels, I’ll be referring to the plaintiff as Capitol to keep things simple. is a bit involved, so it’s worth reviewing it. 2For more background, I highly recommend Ben Sheffner’s posts at Copyrights and Campaigns on the Thomas-Rasset and Tenenbaum lawsuits.
On October 4, 2007, a jury award damages of $222,000, or $9,250 per song. The verdict was vacated after the court held it had erred in one of the jury instructions, and a new trial was set. On June 18, 2009, the jury in the second trial returned an award of $1,920,000 against Thomas-Rasset, $80,000 per song. The court reduced that award under the common-law doctrine of remittitur. Capitol rejected the remitted award and a third trial, solely to determine the amount of damages, was set. 3Under the Seventh Amendment, a plaintiff has the right to reject a remitted award, see Hetzel v. Prince William County, 523 US 208, 211 (1998). This time, the jury awarded $1,500,000 against Thomas-Rasset, or $62,500 a song.
After this judgment, both parties moved to amend the verdict. It’s on this motion that Judge Davis reduced the verdict on constitutional grounds.
The court’s exact holding was that in copyright cases “involvingÂ a first-time willful, consumer infringer who committed illegal song file-sharing for her own personal use”, the maximum award that due process allows is three times the statutory minimum, or $2,250 per song.
Before looking at the decision in more detail, I think it’s important to note three things.
First, since this decision come from a district court, it is not binding precedent. Other courts may find Judge Davis’s reasoning persuasive if they are ever faced with a similar case, but no court is required to follow his holding.
Second, whether one agrees or disagrees with the court’s holding, it should be pointed out that this is a veryÂ limited holding. It would seem that it doesn’t apply if a defendant was found liable for distributingÂ a copyrighted work rather than just reproducingÂ it. For various reasons, during their end-user litigation campaign, the record labels relied largely on the theory that simply making a copyrighted work available (by using a program like Kazaa that, by default, shares a user’s music files with other users) constitutes distribution. The Minnesota District Court ultimately rejected this theory, so Thomas-Rasset was only found liable for reproduction. Many other courts, however, have adopted the “making available” approach. 4SeeÂ Peter S.Â Menell, In Search of Copyrightâ€™s Lost Ark: Interpreting the Right to Distribute in the Internet Age (October 08, 2010).
Joel Tenenbaum, by the way, was found liable for distribution after admitting to it at trial.
Finally, I don’t want to minimize concerns about the size of statutory damage awards in copyright cases, especially cases like these. It’s certainly an important policy issue. But the fact remains that this verdict was rendered by a jury and falls within the range set by Congress through law. The question here is not whether one personally thinks the award is too high, but rather whether something in the Constitution limits an award rendered in this manner.
Setting the Standard
The decision in full:
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Most people would (understandably) assume that a decision like this was made under the Eighth Amendment of the Constitution, which states that excessive fines shall not be imposed. But that’s not the case. A “fine” is a payment “directly imposed by, and payable to, the government.” 5Browning-Ferris Industries of Vt. v. Kelco Disposal, 492 US 257, 268 (1989).Â A jury award is not a fine since it is imposed by a private plaintiff and payable to that plaintiff.
The basis for this decision is instead the Fifth Amendment, which says “No person shallÂ â€¦Â be deprived of life, liberty, or property, without due process of law.” Due process limits “grossly excessive” damages awards based on notions of “fundamental fairness.” 6TXO Production Corp. v. Alliance Resources Corp., 509 US 443, 454-55 (1993). But note that not everyone is convinced that due process does any such thing. Justice Scalia, in particular, has been consistently skeptical of the Supreme Court’s adoption of a “substantive due process” approach in its punitive damages jurisprudence; see BMW v. Gore, 517 US 559, 598-607 (1996)Â (Scalia, J., dissenting in judgment);Â TXO v. Alliance Resources Corp,Â 509 US 443, 470 (1993) (Scalia, J., concurring in judgment);Â Pacific Mut. Life Ins. Co. v. Haslip, 499 US 1, 25-28 (Scalia, J., concurring in judgment).
At the heart of this case and the pending appeal in Sony v. TenenbaumÂ is which standard should be used to determine the maximum award allowed by due process. In Tenenbaum, the court analyzed the statutory damages award using the standardÂ developed to address excessive awards of punitive damages, specificallyÂ BMW of North America v. Gore, 7517 US 559 (1996). Capitol and the government argued, however, that such awards should be analyzed under the far more deferential standard set down inÂ St. Louis, I.M. & S.Â Ry. Co. v.Williams, which addresses due process limits on damage awards that have been set by statute. 8251 U.S. 63, 67 (1919).
The court sided with Capitol and the government. Punitive damages awards present due process concerns that aren’t present when the amount of damages are set by statute; for example, defendants have notice of their potential liability under statutory damages, while punitive damages theoretically have no upper cap. Leslie Burns notes that this is good news for copyright owners; I imagine it’s not quite as welcome news for Joel Tenenbaum.
Things start to get weird from here, however. Judge Davis begins by stating that WilliamsÂ “highlightedÂ three factorsÂ when analyzing whether the statutoryÂ damages award complied with the due processÂ clause: ‘the interests of theÂ public, the numberless opportunities for committing the offense, and the needÂ for securing uniform adherence to establishedÂ passenger rates.'” He then considers these three factors in the context of this case. However, this considerationÂ seems to be an analysis of the constitutionality of the statute itself, rather than the amount of damages awarded in a particular case. That is, if Judge Davis found these factors weren’t present here, would that mean due process neverÂ allows statutory damages in copyright infringement cases?
Nevertheless, the court did find these factors supported an award of statutory damages, and his analysis is very favorable to copyright owners. For the first factor, the court remarked that “There is aÂ significant public interestÂ in vindicating copyright.Â In fact, ‘theÂ primary object in conferring the monopoly lie[s] in the generalÂ benefits derivedÂ by the public from the labors of authors.'” There are numberless opportunities for infringing copyright through P2P networks since it is “easy, costless,Â and quick.” Finally, the need for deterrence is high. Said Judge Davis, “Online infringement is easy to complete; it causes real damage to theÂ copyrightÂ holders, and, thereby injures the public by leading to a decrease in the incentive to create artistic works; and it is widespread.”
“Obviously”Â â€” You keep using that word…
The court did not think, however, that an award of $1,500,000 for stealing 24 songs was appropriate under the due process clause. It cites only two reasons for its conclusion: (1) Thomas-Rasset is an individual and not a business and infringed for personal use rather than commercial gain; and (2) the statutory damages award is too far away from the actual damages suffered by Capitol. The court may be correct as a matter of policy, but this seems rather flimsy reasoning for saying the damages award is prohibited by the Constitution.
I’m not alone in thinking the court was on shaky ground arriving at this conclusion. Attorney Christopher Harrison notes:
Judge Davisâ€™ entire constitutional due process analysis appears to boil down to, “I personally think this is too high an award.” Â There is no further legal support to his position.Â In fact, later in the opinion he states “The Court accords deference to the juryâ€™s verdict. Yet an 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 andÂ obviously unreasonable.”
But the juryâ€™s verdict is quite clearlyÂ notÂ obviously unreasonable.Â As noted above, the three juries in this case awarded damages of $9,250, $80,000, and $62,500 per song.Â The jury inÂ TenenbaumÂ awarded $22,500 per song.Â While that range is pretty wide, the juries have awarded between 4 and 35 times as much as both Judge Davis and Judge Gertner find “obviously unreasonable.”
Indeed, I think you can present more legal support that the court misapplied the WilliamsÂ standard rather than applying it correctly. For starters, reducing an award of statutory damages is extremelyÂ rareÂ â€” while courts since WilliamsÂ have stated that due process places a limit on statutory damages, they almost always uphold verdicts.Â I’ve only been able to come across one previous case where an award hasn’t been upheld.
In Southwestern Telegraph & Telephone Co. v. Danaher, the Supreme Court struck down a damages award against a telephone company on due process grounds in part because it found the company had been acting reasonably. 9238 US 482 (1915). The Court noted, “There was no intentional wrongdoing; no departure from any prescribed or known standard of action, and no reckless conduct.”Â None of those hold true in this case.
The District Court of Minnesota has broken new ground and entered terra incognitaÂ in due process jurisprudence with this decision.Â It’s difficult to see how a jury award for a willful violation of a law, within the range of damages that Congress has provided by statute, is so “obviously unreasonable” to be unconstitutional.
What happens now? Either side can appeal this decision to the Eighth Circuit Court. This would put appeals in two separate circuit courts on the issue of due process limitations on statutory damages in file-sharing cases. No word yet on whether this will happen.
|↑1||Although the plaintiffs include six record labels, I’ll be referring to the plaintiff as Capitol to keep things simple.|
|↑2||For more background, I highly recommend Ben Sheffner’s posts at Copyrights and Campaigns on the Thomas-Rasset and Tenenbaum lawsuits.|
|↑3||Under the Seventh Amendment, a plaintiff has the right to reject a remitted award, see Hetzel v. Prince William County, 523 US 208, 211 (1998).|
|↑4||SeeÂ Peter S.Â Menell, In Search of Copyrightâ€™s Lost Ark: Interpreting the Right to Distribute in the Internet Age (October 08, 2010).|
|↑5||Browning-Ferris Industries of Vt. v. Kelco Disposal, 492 US 257, 268 (1989).|
|↑6||TXO Production Corp. v. Alliance Resources Corp., 509 US 443, 454-55 (1993). But note that not everyone is convinced that due process does any such thing. Justice Scalia, in particular, has been consistently skeptical of the Supreme Court’s adoption of a “substantive due process” approach in its punitive damages jurisprudence; see BMW v. Gore, 517 US 559, 598-607 (1996)Â (Scalia, J., dissenting in judgment);Â TXO v. Alliance Resources Corp,Â 509 US 443, 470 (1993) (Scalia, J., concurring in judgment);Â Pacific Mut. Life Ins. Co. v. Haslip, 499 US 1, 25-28 (Scalia, J., concurring in judgment).|
|↑7||517 US 559 (1996).|
|↑8||251 U.S. 63, 67 (1919).|
|↑9||238 US 482 (1915).|