Analysis of Appeals Courts' Views on File Sharer Damages

Cases Background

In 2011, the First Circuit reinstated a $675,000 damages award against Boston University graduate student Joel Tenenbaum for illegal music downloading in a similar case. Sony BMG Music Entertainment v. Tenenbaum, 660 F.3d 487 (1st Cir. 2011) In May 2012, the U.S. Supreme Court declined to grant certiorari in that case. Then in August 2012, District Judge Rya Zobel of the U.S. District Court for the District of Massachusetts affirmed the award in Tenenbaum, citing “the deference afforded Congress' statutory award determination.” Sony BMG Music Entertainment v. Tenenbaum, 07-11446 (D.Mass. 2012).

In Thomas-Rasset, Capitol, Sony BMG Music Entertainment, Arista Records, Interscope Records, Warner Bros. Records and UMG Recordings Inc. had started in 2005 investigating suspected infringement of copyrights through illegal Internet distribution. The labels brought thousands of cases, most of which settled.

But the companies sued Thomas-Rasset in 2006, seeking statutory damages and injunctive relief for willful copyright infringement under the Copyright Act.

The first jury to hear the case issued a $222,000 verdict against Thomas-Rasset in 2007, but the judge ordered a new trial due to a jury instruction error. The second jury awarded $1.92 million in damages, or $80,000 per work, in 2009. After the judge cut that verdict to $54,000, or $2,250 per work, the record labels refused to accept that amount. The third jury awarded the companies $1.5 million in damages, or $62,500 per work, against Thomas-Rasset in 2010. The judge again reduced the award to $54,000 total. Under the Copyright Act, statutory damages for willful copyright infringement range from $750 to $150,000 per infringed work.

When the recording companies appealed, according to the Eighth Circuit, they sought the smaller total award issued by the first jury “because they wanted a ruling on the legal issue whether making works available is part of the distribution right protected by the Copyright Act.”

Congress' Discretion

Appeals Judge Steven M. Colloton issued the Eighth Circuit opinion, joined by Judges Michael Melloy and Diana Murphy. On the damages issues, Colloton wrote that Congress exercised its discretion in setting a wide range of statutory damages for copyright infringement: “With the rapid advancement of technology, copyright infringement through online file-sharing has become a serious problem in the recording industry. Evidence at trial showed that revenues across the industry decreased by [50%] between 1999 and 2006, a decline that the record companies attributed to piracy. This decline in revenue caused a corresponding drop in industry jobs and a reduction in the number of artists represented and albums released.” Colloton observed that “Congress no doubt was aware of the serious problem posed by online copyright infringement” when it last reviewed he Copyright Act in 1999.

Colloton took apart the lower court's holding that any award higher than $2,250 per work would violate the U.S. Constitution because it imposed a treble damages limit on the $750 minimum statutory damages award: “The limits of treble damages to which the district court referred, such as in the antitrust laws or other intellectual property laws, represent congressional judgments about the appropriate maximum in a given context. They do not establish a constitutional rule that can be substituted for a different congressional judgment in the area of copyright infringement.”

Colloton went on to describe Thomas-Rasset's action as “an aggravated case of willful infringement” without a profit motive: “If an award near the bottom of the statutory range is unconstitutional as applied to her infringement of [24] works, then it would be the rare case of noncommercial infringement to which the statute could be applied.”

Injunction

On the injunction issue, Colloton agreed with the recording companies' argument that once Thomas-Rasset made copyrighted works available, she completed all of the steps necessary for her to engage in the same distribution the court enjoined. He also wrote that the district court's narrower injunction could be difficult to enforce because of the practical difficulties of detecting the transfer of recordings to third parties: “An injunction against making recordings available was lawful and appropriate under the circumstances, even accepting the district court's interpretation of the Copyright Act.”

The Eighth Circuit nevertheless declined to rule directly on the issue of whether the Copyright Act protects a right to “making available” sound recordings. Colloton wrote: “Important though the 'making available' legal issue may be to the recording companies, they are not entitled to an opinion on an issue of law that is unnecessary for the remedies sought or to a freestanding decision on whether Thomas-Rasset violated the law by making recordings available.”

Aaron Moss, an intellectual property partner at Greenberg Glusker Fields Claman & Machtinger in Los Angeles who didn't work on the Eighth Circuit case, said it involved an activist district judge who was shocked by the degree to which individual defendants were being punished for noncommercial infringement. “Now, based on the First Circuit ruling and [the Thomas-Rasset] ruling, there's a clear indication that when Congress passes a statutory damages regime ' it is almost by definition going to be constitutional.”

In 2012, the U.S. Court of Appeals for the Eighth Circuit issued what was only the second federal appellate ruling on statutory damages against an infringing file sharer. Capitol Records Inc. v. Thomas-Rasset , 692 F.3d 899 (8th Cir. 2012). In Thomas-Rasset, the Eighth Circuit reinstated statutory damages of more than $220,000 against a woman who illegally file-shared two dozen songs, finding the damages to be constitutional.

A unanimous panel held that Jammie Thomas-Rasset had to pay $222,000 in damages, or $9,250 per work, to several recording companies. That was the amount the labels were awarded in October 2007 after the first of three trials in the case. The appeals court also held that Chief Judge Michael Davis of the District of Minnesota erred by ruling in July 2011 that the due process clause allowed statutory damages of only $54,000. That ruling followed the third trial.

Paul D. Clement, a partner at Bancroft in Washington, DC, and a former U.S. solicitor general, had argued for the record companies at the Eighth Circuit. Other lawyers on the case were from Bryan Cave, Washington, DC's Oppenheim + Zebrak and the Recording Industry Association of America. Barnes & Thornburg served as local counsel for the record companies. Kiwi Camara of Houston-based Camara & Sibley served as Jammie Thomas-Rasset's lawyer.

Cases Background

In 2011, the First Circuit reinstated a $675,000 damages award against Boston University graduate student Joel Tenenbaum for illegal music downloading in a similar case. Sony BMG Music Entertainment v. Tenenbaum , 660 F.3d 487 (1st Cir. 2011) In May 2012, the U.S. Supreme Court declined to grant certiorari in that case. Then in August 2012, District Judge Rya Zobel of the U.S. District Court for the District of Massachusetts affirmed the award in Tenenbaum, citing “the deference afforded Congress' statutory award determination.” Sony BMG Music Entertainment v. Tenenbaum, 07-11446 (D.Mass. 2012).

In Thomas-Rasset, Capitol, Sony BMG Music Entertainment, Arista Records, Interscope Records, Warner Bros. Records and UMG Recordings Inc. had started in 2005 investigating suspected infringement of copyrights through illegal Internet distribution. The labels brought thousands of cases, most of which settled.

But the companies sued Thomas-Rasset in 2006, seeking statutory damages and injunctive relief for willful copyright infringement under the Copyright Act.

The first jury to hear the case issued a $222,000 verdict against Thomas-Rasset in 2007, but the judge ordered a new trial due to a jury instruction error. The second jury awarded $1.92 million in damages, or $80,000 per work, in 2009. After the judge cut that verdict to $54,000, or $2,250 per work, the record labels refused to accept that amount. The third jury awarded the companies $1.5 million in damages, or $62,500 per work, against Thomas-Rasset in 2010. The judge again reduced the award to $54,000 total. Under the Copyright Act, statutory damages for willful copyright infringement range from $750 to $150,000 per infringed work.

When the recording companies appealed, according to the Eighth Circuit, they sought the smaller total award issued by the first jury “because they wanted a ruling on the legal issue whether making works available is part of the distribution right protected by the Copyright Act.”

Congress' Discretion

Appeals Judge Steven M. Colloton issued the Eighth Circuit opinion, joined by Judges Michael Melloy and Diana Murphy. On the damages issues, Colloton wrote that Congress exercised its discretion in setting a wide range of statutory damages for copyright infringement: “With the rapid advancement of technology, copyright infringement through online file-sharing has become a serious problem in the recording industry. Evidence at trial showed that revenues across the industry decreased by [50%] between 1999 and 2006, a decline that the record companies attributed to piracy. This decline in revenue caused a corresponding drop in industry jobs and a reduction in the number of artists represented and albums released.” Colloton observed that “Congress no doubt was aware of the serious problem posed by online copyright infringement” when it last reviewed he Copyright Act in 1999.

Colloton took apart the lower court's holding that any award higher than $2,250 per work would violate the U.S. Constitution because it imposed a treble damages limit on the $750 minimum statutory damages award: “The limits of treble damages to which the district court referred, such as in the antitrust laws or other intellectual property laws, represent congressional judgments about the appropriate maximum in a given context. They do not establish a constitutional rule that can be substituted for a different congressional judgment in the area of copyright infringement.”

Colloton went on to describe Thomas-Rasset's action as “an aggravated case of willful infringement” without a profit motive: “If an award near the bottom of the statutory range is unconstitutional as applied to her infringement of [24] works, then it would be the rare case of noncommercial infringement to which the statute could be applied.”

Injunction

On the injunction issue, Colloton agreed with the recording companies' argument that once Thomas-Rasset made copyrighted works available, she completed all of the steps necessary for her to engage in the same distribution the court enjoined. He also wrote that the district court's narrower injunction could be difficult to enforce because of the practical difficulties of detecting the transfer of recordings to third parties: “An injunction against making recordings available was lawful and appropriate under the circumstances, even accepting the district court's interpretation of the Copyright Act.”

The Eighth Circuit nevertheless declined to rule directly on the issue of whether the Copyright Act protects a right to “making available” sound recordings. Colloton wrote: “Important though the 'making available' legal issue may be to the recording companies, they are not entitled to an opinion on an issue of law that is unnecessary for the remedies sought or to a freestanding decision on whether Thomas-Rasset violated the law by making recordings available.”

Aaron Moss, an intellectual property partner at Greenberg Glusker Fields Claman & Machtinger in Los Angeles who didn't work on the Eighth Circuit case, said it involved an activist district judge who was shocked by the degree to which individual defendants were being punished for noncommercial infringement. “Now, based on the First Circuit ruling and [the Thomas-Rasset] ruling, there's a clear indication that when Congress passes a statutory damages regime ' it is almost by definition going to be constitutional.”