Was the $675,000 damage award against Joel Tenenbaum for file sharing excessive?

August 24th, 2012 by Barry Sookman Leave a reply »

Was the statutory damages award of $675,000 against Joel Tenebaum for downloading and distributing 30 music files over peer-to-peer networks excessive? Did it violate US due process? According to a decision released by a U.S. District Court yesterday in the Sony BMG Music Entertainment v Tenebaum 2012 WL 3639053, (D.Mass., Aug. 23, 2012) case, the answer to both questions is no.

After a five-day jury trial, the jury found that Tenenbaum’s infringement was willful as to each of the thirty sound recordings in issue, and returned a verdict within the US statutory range of $22,500 per infringement, for a total damages award of $675,000.  After an appeal of the jury verdict, the Court was charged with the duty of determining whether the award was excessive under the common law remittitur doctrine and whether it violated due process.

Remittitur is appropriate if the award exceeds “any rational appraisal or estimate of the damages that could be based on the evidence before the jury”. Here are the judge’s reasons for upholding the award on the remittitur review:

Under this stringent standard, there is no basis for common law remittitur. The jury was given a list of non-exhaustive factors to consider in issuing its award, including: the nature of the infringement; the defendant’s purpose and intent, the profit that the defendant reaped if any, and/or the expense that the defendant saved; the revenue lost by the plaintiff as a result of the infringement; the value of the copyright; the duration of the infringement; the defendant’s continuation of infringement after notice or knowledge of copyright claims and the need to deter this defendant and other potential infringers. Tenenbaum, 660 F.3d at 503-04. Tenenbaum did not object to these instructions.

In light of these factors, a rational appraisal of the evidence before the jury, viewed in the light most favorable to the verdict, supports the damages award. The jury learned that music recording companies’ primary source of revenue stems from their exclusive rights to copy and distribute the musical works of their contracted artists. Id.  at 491. It learned about the operation of peer-to-peer file-sharing networks and how such networks facilitated “the unauthorized and illegal downloading and distribution of copyrighted materials – especially music recordings. . . .” Id. The jury also heardevidence from which it could rationally conclude that the value of a blanket license to upload music recordings to the internet for public consumption would be “enormous.” Id. at 491 and n.3 (quoting testimony by a representative from Universal Music Group which suggested the grant of a such a license would result in the record companies losing complete control over their assets and drive them out of business). See also  Kmart, 177 F.3d at 30 (“Translating legal damage into money damages is a matter ‘peculiarly within a jury’s ken’. . . .”).

There was further evidence about the scope and scale of Tenenbaum’sinfringement activities. His illegal conduct lasted for at least eight years, from 1999 to 2007. Id. at 492-93. During that time, he not only downloaded but also distributed thousands of copyrighted works to users of peer-to-peer file-sharing networks. Id. at 493.

 The trial evidence also supports the jury’s determination that Tenenbaum willfully infringed plaintiffs’ copyrights. He conducted his infringing activities while knowing that lawsuits were being brought against individuals who downloaded and distributed music without authorization. Id. He personally received multiple warnings from various sources – including his father in 2002, his college in 2003, and plaintiffs in 2005 – and he was warned that his activities could subject him to liability of up to $150,000 per infringement. Id. at 493-94. In spite of these warnings, he continued to download and distribute copyrighted materials; indeed, even after receiving Sony’s 2005 cease and desist letter, trial evidence shows that defendant continued his activities for two more years, until Sony filed this lawsuit against him. Id. at 495

Plaintiffs’ 2005 letter also informed Tenenbaum about the impact of his activities on the music industry and instructed him to preserve all evidence of his activities, including any recordings he made available for distribution; yet in spite of these instructions, Tenenbaum had his operating system on his laptop reinstalled and its hard drive reformatted. Id. at 494-95 and n.7. Furthermore, as the First Circuit noted, “[s]trong evidence established that Tenenbaum lied in the course of these legal proceedings in a number of ways.” Id. at 495. At trial, Tenenbaum admitted that he lied in responding to Sony’s discovery requests about the scope of his conduct using online media distribution systems, his use of peer-to-peer networks, and the installment of such networks on his computer. Id. When he was confronted at trial with his attempts to shift blame for his actions to others – including a foster child living in his family’s home, his sisters, a family house guest, and burglars – Tenenbaum finally admitted responsibility. Id. at 496. In short, there was ample evidence of willfulness and the need for deterrence based on Tenenbaum’s blatant contempt of warnings and apparent disregard for the consequences of his actions. In spite of the overwhelming evidence from which the jury could conclude that Tenenbaum’s activities were willful, the award of $22,500 per infringement not only was at the low end of the range – only 15% of the statutory maximum – for willful infringement, but was below the statutory maximum for non-willful infringement. Considering all of the aforementioned evidence, the jury’s damage award was not so excessive as to merit remittitur.

The court also rejected Tenebaum’s due process challenge to the award. The Court quoted from a US House Report which explained the rational for statutory damages:

By the turn of the century the Internet is projected to have more than 200 million users, and the development of new technology will create additional incentive for copyright thieves to steal protected works. The advent of digital video discs, for example, will enable individuals to store far more material than on conventional discs and, at the same time, produce perfect secondhand copies . . . . Many computer users are either ignorant that copyright laws apply to Internet activity, or they simply believe that they will not be caught or prosecuted for their conduct. Also, many infringers do not consider the current copyright infringement penalties a real threat and continue infringing, even after a copyright owner puts them on notice that their actions constitute infringement and that they should stop the activity or face legal action. In light of this disturbing trend, it is manifest that Congress respond appropriately with updated penalties to dissuade such conduct. H.R. 1761 increases copyright penalties to have a significant deterrent effect on copyright infringement.

It then rejected the due process challenge saying:

Statutory damages have been available as a federal remedy for copyright infringement since the Copyright Act of 1790. Act of May 31, 1790, ch. 15, §§ 2,6, 1 Stat. 124, 125. See also Feltner, 523 U.S. at 349-51 (discussing history of award of statutory damages for copyright infringement). As discussed above, Congress elected to give copyright holders the option of collecting statutory damages rather than actual damages because of the difficulty of measuring and proving the latter. In amending the Copyright Act’s statutory damages provision in 1999, Congress found that infringement causes public harms including “lost U.S. jobs, lost wages, lower tax revenue, and higher prices for honest purchasers of copyrighted [works].” H.R. Rep. No. 106-216 (1999), 1999 WL 446444, at *3. The 1999 amendments, which increased penalties for willful infringement, were expressly designed to address behavior like that of Tenenbaum. See Tenenbaum, 660 F.3d at 500 (citing legislative history of the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774, which increased the minimum and maximum awards available under section 504(c)).

Given the deference afforded Congress’ statutory award determination and the public harms it was designed to address, the particular behavior of plaintiff in this case as explained above, and the fact that the award not only is within the range for willful infringement but also below the limit for non-willful infringement, the award is neither “wholly disproportioned to the offense” nor “obviously unreasonable.” It does not offend due process.

 

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