Profs protest massive P2P damage awards

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A new academic paper argues that statutory damages have spiraled out of control, especially in P2P cases, and that reform or abolition is necessary.

Statutory damages in the US can be claimed by copyright holders in lieu of actual damages, and they range from $750 to $30,000 per infringement (or up to $150,000 when the infringement is "willful"). These huge ranges, and the lack of useful guidance on how to implement them, have led to both wildly inconsistent damage awards and huge penalties for small crimes. Here's how two leading copyright professors sum up the problem, drawing on the Jammie Thomas P2P case in Minnesota:

Actual damages in the Thomas case were arguably about $50. Given the defendant’s lack of innocence, the jury had no choice but to award Capitol Records at least $750 per infringed work (which would have totaled $18,000). Some jurors were so outraged by Thomas’ conduct that they wanted to award Capitol Records $3.6 million for this infringement.

Recent rulings have "exacerbated the potential for excessive and arbitrary awards when skillful lawyers are able to persuade juries to become outraged about infringing conduct."

So how do we fix the system? Pam Samuelson and Tara Wheatland, both of the University of California, Berkeley, have some suggestions.

First, though, they provide a thorough recap of the statutory damages provision in US copyright law, currently ensconced in section 504© of the US copyright code. The law gives little guidance about application, and "as a result, awards of statutory damages are frequently arbitrary, inconsistent, unprincipled, and sometimes grossly excessive."

The authors aren't opposed to the idea of statutory damages, which were designed to provide relief in cases where it was quite difficult to quantify the actual losses suffered by the copyright holder. They also don't object to using statutory damages in a punitive fashion. "Awards are sometimes quite modest in close cases," they write, "approximate actual damages in other cases, or are enhanced by modest amounts (e.g., 2 or 3 times actual damages) in somewhat egregious cases and somewhat more (e.g., 8 to 10 times actual damages) in more egregious infringement cases."

Damages vs. actual damage

But ending up on the hook for up to $150,000 just for swapping a single song on a file-sharing network? Craziness—and far too likely to be used against regular people. "In today’s world, where the average person in her day-to-day life interacts with many copyrighted works in a way that may implicate copyright law," says the paper, "the dangers posed by the lack of meaningful constraints on statutory damage awards are particularly acute."

The Jammie Thomas case, in which Thomas was fined $222,000 by a jury for uploading a few dozen songs, stands out as an example. In that particular case, the authors argeu, "jury instructions should have asked the jury to consider more carefully the relative reprehensibility of Thomas’s conduct and the reasonableness of the ratio of harm that this defendant caused these plaintiffs to a proper award aimed at deterring and punishing her, but no more." (The $222,000 verdict was thrown out over one of these jury instructions, in fact, and the case is currently moving toward a retrial this summer.)

And MP3.com, a service that ripped nearly 5,000 CDs, put the results on its servers, and offered them over the Internet to users who had already purchased copies on CD, had to pay $118 million, based on statutory damages of $25,000 per disc. The verdict came down "despite the absence of any evidence of actual harm to the plaintiffs or profits to the defendant," and is another example of how being the target of a single copyright infringement lawsuit can now endanger the livelihoods of both individuals and businesses.

The authors provide pages of suggestions for reforming the system, privileging awards that are small multiples of damages suffered. They also argue for more judicial discretion in one direction: down. "We also think courts should have the power to lower statutory damage awards below the $750 minimum in the current statute when an award based on this minimum would be grossly disproportionate to the harm caused," they write, "as in the p2p file-sharing cases."

Finally, when Congress eventually turns to overhaul copyright law again, Samuelson and Wheatland have a final suggestion. "Congress might even want to reconsider whether statutory damages are serving a truly useful purpose in copyright law, given that the rules of evidence about proof of damages and profits are much less rigorous now than they were when statutory damages were first created and given how few other countries have statutory damage regimes."

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