Downloading Copyrighted Songs on File-Sharing Network Is Not 'Fair Use'

In an important decision interpreting the fair use provision of the Copyright Act (17 U.S.C. '107), the U.S. Court of Appeals for the Seventh Circuit recently held that downloading full copies of copyrighted material without compensation to authors cannot be deemed “fair use.” In BMG Music v. Gonzalez, 430 F.3d 888 (7th Cir. 2005), Judge Frank H. Easterbrook, writing for a unanimous three-judge panel, rejected the defendant's argument that she was immune from liability because she was merely sampling songs that she had downloaded from the KaZaA file-sharing network on a “try-before-you-buy basis.”

Although the recording industry has filed hundreds of complaints against users of KaZaA and similar peer-to-peer file-sharing networks, many of those cases have settled or remain tied up in district courts. Gonzalez is the first such case to reach the appellate level and result in an opinion directly addressing the issue of whether downloading music through those networks qualifies as a “fair use” under the Copyright Act.

Defendant Cecilia Gonzalez acknowledged that she downloaded more than 1370 copyrighted songs during a few weeks and kept them on her computer until she was caught. Gonzalez claimed that she owned compact discs that contained some of the songs before she downloaded them, and that she purchased others later. She conceded, however, that she never owned legitimate copies of 30 songs that she downloaded, and the plaintiff recording companies moved for summary judgment as to those 30 songs. That motion was granted by Judge Blanche M. Manning of the U.S. District Court for the Northern District of Illinois, BMG Music v. Gonzalez, Case No. 03 CV 6276, 2005 WL 106592, 2005 U.S. Dist. LEXIS 910 (N.D. Ill. Jan. 7, 2005). The district court enjoined Gonzalez from further infringement and also awarded the recording companies $22,500 in statutory damages.

The issues on appeal were whether: 1) the downloading of the songs constituted a “fair use” of the material; 2) the user qualified for an “innocent infringer” reduction in the amount of statutory damages; 3) the user was entitled to a jury trial on the amount of statutory damages; and 4) the court improperly awarded injunctive relief.

'Fair Use' Defense Rejected

The court began by referring to the Supreme Court's recent unanimous decision in MGM Studios, Inc. v. Grokster, Ltd., 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005), and Judge Richard A. Posner's decision in In re Aimster Copyright Litig., 334 F.3d 643, 645 (7th Cir. 2003), noting that both rest on the assumption that people who post or download music files on file-sharing networks are primary infringers. The only issue then, according to the court, was whether Gonzalez qualified for a fair use defense to infringement.

The court first distinguished Gonzalez's downloading of music from the recording of television broadcasts that was at issue in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984) (“Betamax“). The premise of Betamax, the court said, is that the television broadcast is licensed for one transmission and thus one viewing, and that shifting the time of that single viewing is fair use. In contrast, the court said, the files that Gonzalez downloaded were posted in violation of copyright law, and thus there was no license covering a single transmission or hearing. In addition, the court noted, Gonzalez kept the copies. “Time-shifting by an authorized recipient this is not,” the court concluded.

The court also rejected Gonzalez's claim that she was engaged in fair use under the terms of 17 U.S.C. '107 because she was simply sampling the songs on a “try-before-you-buy basis.”

Section 107 of the Copyright Act (17 U.S.C. '107) provides that when considering a defense of fair use, the court must consider: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.” The court quickly found no basis for fair use under the first three considerations, since “Gonzalez was not engaged in a nonprofit use; she downloaded (and kept) whole copyrighted songs (for which, as with poetry, copying of more than a couplet or two is deemed excessive); and she did this despite the fact that these works often are sold per song as well as per album.”

As for the fourth consideration ' “the effect of the use upon the potential market for or value of the copyrighted work” ' Gonzalez argued that because she was simply sampling music to determine what she liked enough to buy, her conduct actually increased the value of the owners' copyrights. The court rejected this claim, noting that the Supreme Court found otherwise in Grokster, where there was empirical evidence suggesting that the rise in file-sharing was connected with a decline in the sale of recorded music. The court also relied on A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1014-19 (9th Cir. 2001), for the proposition that downloading copyrighted songs cannot be defended as fair use simply because the user plans to purchase those songs she likes.

Although plaintiffs only sought damages for the 30 songs that Gonzalez conceded she never purchased, the court found that all 1370 copyrighted songs she downloaded were infringements, since all “created copies of an entire work” and all “undermined the means by which authors seek to profit.”

The court also disagreed with Gonzalez's position that the copyright owners' only interest is in selling compact discs containing their works. For example, the court said, authors and publishers collect royalties from radio broadcasts of recorded music, even though those broadcasts may increase sales. Similarly, the court noted, licensed Internet sellers, such as Apple's iTunes Music Store, offer access to large collections of songs that customers may sample, or even rent indefinitely, in the case of subscription services such as the revived Napster.

The court concluded: “With all of these means available to consumers who want to choose where to spend their money, downloading full copies of copyrighted material without compensation to authors cannot be deemed 'fair use.'”

Damages and Injunction Affirmed

The court also affirmed the district court's award of $22,500 in statutory damages, which was calculated under 17 U.S.C. '504(c)(1) at the statutory minimum of $750 for each of the 30 songs Gonzalez downloaded.

Gonzalez argued that the amount of damages should only be $200 per song, pursuant to 17 U.S.C. '504(c)(2), because she was an “innocent infringer” who had no reason to believe her acts constituted an infringement of plaintiffs' copyrights. The court disagreed, noting that 17 U.S.C. '402(d) specifically bars any reduction in the minimum award if a notice of copyright appears on the published phonorecords to which the defendant had access. In this case, the court found, Gonzalez had access to compact discs bearing the proper notice, and thus she “readily could have learned, had she inquired, that the music was under copyright.”

The court further rejected Gonzalez's claim that, under Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998), she was entitled to a jury trial to determine the amount of damages. The court held that the right to a jury trial on the amount of statutory damages under Feltner was only applicable in those cases where “there is a material dispute of fact to be resolved or discretion to be exercised in selecting a financial award.” In this case, the court noted, the plaintiff recording companies had only sought the minimum statutory damages of $750 per song, which the district court awarded on summary judgment. Because there was no material dispute as to the minimum award of statutory damages, the court concluded that summary judgment on the issue was appropriate.

Finally, the court affirmed the district court's award of an injunction, pursuant to 17 U.S.C. '502(a), prohibiting Gonzalez from downloading recordings owned by the plaintiffs. Gonzalez argued that she had “learned her lesson” and no longer had broadband access to the Internet, and thus was unlikely to download copyrighted material again. The court disagreed, noting that “[a]n injunction remains appropriate to ensure that the misconduct does not recur as soon as the case ends.”

In an important decision interpreting the fair use provision of the Copyright Act (17 U.S.C. '107), the U.S. Court of Appeals for the Seventh Circuit recently held that downloading full copies of copyrighted material without compensation to authors cannot be deemed “fair use.” In BMG Music v. Gonzalez , 430 F.3d 888 (7th Cir. 2005), Judge Frank H. Easterbrook, writing for a unanimous three-judge panel, rejected the defendant's argument that she was immune from liability because she was merely sampling songs that she had downloaded from the KaZaA file-sharing network on a “try-before-you-buy basis.”

Although the recording industry has filed hundreds of complaints against users of KaZaA and similar peer-to-peer file-sharing networks, many of those cases have settled or remain tied up in district courts. Gonzalez is the first such case to reach the appellate level and result in an opinion directly addressing the issue of whether downloading music through those networks qualifies as a “fair use” under the Copyright Act.

Defendant Cecilia Gonzalez acknowledged that she downloaded more than 1370 copyrighted songs during a few weeks and kept them on her computer until she was caught. Gonzalez claimed that she owned compact discs that contained some of the songs before she downloaded them, and that she purchased others later. She conceded, however, that she never owned legitimate copies of 30 songs that she downloaded, and the plaintiff recording companies moved for summary judgment as to those 30 songs. That motion was granted by Judge Blanche M. Manning of the U.S. District Court for the Northern District of Illinois, BMG Music v. Gonzalez, Case No. 03 CV 6276, 2005 WL 106592, 2005 U.S. Dist. LEXIS 910 (N.D. Ill. Jan. 7, 2005). The district court enjoined Gonzalez from further infringement and also awarded the recording companies $22,500 in statutory damages.

The issues on appeal were whether: 1) the downloading of the songs constituted a “fair use” of the material; 2) the user qualified for an “innocent infringer” reduction in the amount of statutory damages; 3) the user was entitled to a jury trial on the amount of statutory damages; and 4) the court improperly awarded injunctive relief.

'Fair Use' Defense Rejected

The court began by referring to the Supreme Court's recent unanimous decision in MGM Studios, Inc. v. Grokster, Ltd., 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005), and Judge Richard A. Posner's decision in In re Aimster Copyright Litig., 334 F.3d 643, 645 (7th Cir. 2003), noting that both rest on the assumption that people who post or download music files on file-sharing networks are primary infringers. The only issue then, according to the court, was whether Gonzalez qualified for a fair use defense to infringement.

The court first distinguished Gonzalez's downloading of music from the recording of television broadcasts that was at issue in Sony Corp. of America v. Universal City Studios, Inc. , 464 U.S. 417 (1984) (“ Betamax “). The premise of Betamax, the court said, is that the television broadcast is licensed for one transmission and thus one viewing, and that shifting the time of that single viewing is fair use. In contrast, the court said, the files that Gonzalez downloaded were posted in violation of copyright law, and thus there was no license covering a single transmission or hearing. In addition, the court noted, Gonzalez kept the copies. “Time-shifting by an authorized recipient this is not,” the court concluded.

The court also rejected Gonzalez's claim that she was engaged in fair use under the terms of 17 U.S.C. '107 because she was simply sampling the songs on a “try-before-you-buy basis.”

Section 107 of the Copyright Act (17 U.S.C. '107) provides that when considering a defense of fair use, the court must consider: “(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.” The court quickly found no basis for fair use under the first three considerations, since “Gonzalez was not engaged in a nonprofit use; she downloaded (and kept) whole copyrighted songs (for which, as with poetry, copying of more than a couplet or two is deemed excessive); and she did this despite the fact that these works often are sold per song as well as per album.”

As for the fourth consideration ' “the effect of the use upon the potential market for or value of the copyrighted work” ' Gonzalez argued that because she was simply sampling music to determine what she liked enough to buy, her conduct actually increased the value of the owners' copyrights. The court rejected this claim, noting that the Supreme Court found otherwise in Grokster, where there was empirical evidence suggesting that the rise in file-sharing was connected with a decline in the sale of recorded music. The court also relied on A&M Records, Inc. v. Napster, Inc. , 239 F.3d 1004, 1014-19 (9th Cir. 2001), for the proposition that downloading copyrighted songs cannot be defended as fair use simply because the user plans to purchase those songs she likes.

Although plaintiffs only sought damages for the 30 songs that Gonzalez conceded she never purchased, the court found that all 1370 copyrighted songs she downloaded were infringements, since all “created copies of an entire work” and all “undermined the means by which authors seek to profit.”

The court also disagreed with Gonzalez's position that the copyright owners' only interest is in selling compact discs containing their works. For example, the court said, authors and publishers collect royalties from radio broadcasts of recorded music, even though those broadcasts may increase sales. Similarly, the court noted, licensed Internet sellers, such as Apple's iTunes Music Store, offer access to large collections of songs that customers may sample, or even rent indefinitely, in the case of subscription services such as the revived Napster.

The court concluded: “With all of these means available to consumers who want to choose where to spend their money, downloading full copies of copyrighted material without compensation to authors cannot be deemed 'fair use.'”

Damages and Injunction Affirmed

The court also affirmed the district court's award of $22,500 in statutory damages, which was calculated under 17 U.S.C. '504(c)(1) at the statutory minimum of $750 for each of the 30 songs Gonzalez downloaded.

Gonzalez argued that the amount of damages should only be $200 per song, pursuant to 17 U.S.C. '504(c)(2), because she was an “innocent infringer” who had no reason to believe her acts constituted an infringement of plaintiffs' copyrights. The court disagreed, noting that 17 U.S.C. '402(d) specifically bars any reduction in the minimum award if a notice of copyright appears on the published phonorecords to which the defendant had access. In this case, the court found, Gonzalez had access to compact discs bearing the proper notice, and thus she “readily could have learned, had she inquired, that the music was under copyright.”

The court further rejected Gonzalez's claim that, under Feltner v. Columbia Pictures Television, Inc ., 523 U.S. 340 (1998), she was entitled to a jury trial to determine the amount of damages. The court held that the right to a jury trial on the amount of statutory damages under Feltner was only applicable in those cases where “there is a material dispute of fact to be resolved or discretion to be exercised in selecting a financial award.” In this case, the court noted, the plaintiff recording companies had only sought the minimum statutory damages of $750 per song, which the district court awarded on summary judgment. Because there was no material dispute as to the minimum award of statutory damages, the court concluded that summary judgment on the issue was appropriate.

Finally, the court affirmed the district court's award of an injunction, pursuant to 17 U.S.C. '502(a), prohibiting Gonzalez from downloading recordings owned by the plaintiffs. Gonzalez argued that she had “learned her lesson” and no longer had broadband access to the Internet, and thus was unlikely to download copyrighted material again. The court disagreed, noting that “[a]n injunction remains appropriate to ensure that the misconduct does not recur as soon as the case ends.”