Factors in Assessing Statutory Damages for Digital Copyright Infringement

Yet, as notable as this case appears for content owners, a close look at the LiveUniverse decision demonstrates limits for plaintiffs who seek sizable statutory damages awards for willful digital copyright infringement.

In the LiveUniverse litigation, the music publishers sought $100,000 under 17 U.S.C. '504(c), which provides a maximum of $150,000 in statutory damages for each work willfully infringed. In an earlier tentative ruling, the district court had noted that the defendants' “blatant disregard for the civil justice system favors a substantial damages award.” But the court added that, “due to the scale of the infringement, an award of damages in the amount requested by Plaintiffs would result in a ridiculously huge judgment.” The court then asked the music publishers to bolster their submissions regarding “the licensing fees which Defendants would have been charged had they properly obtained licenses to use the copyrighted lyrics in the first place.”

But in the recent LiveUniverse ruling, Judge Wu found that the supplemental memorandum the music publishers submitted failed to include per-song licensing fees “even though such information is readily available to them.” Instead, the publishers argued that an award of statutory damages shouldn't be related to compensatory damages. But Judge Wu emphasized, “in seeking to learn of the licensing rates for the infringed songs, this Court did not intend to set the statutory damages in an amount based simply on the loss of licensing revenues.” Thus, in addition to the publisher's lost licensing revenues and LiveUniverse's willfulness, the website defendant's saving and profits from the infringing activity could also be considered in determined statutory damages. Nevertheless, Judge Wu acknowledged: “Because awards of statutory damages serve both compensatory and punitive purposes, a plaintiff may recover statutory damages 'whether or not there is adequate evidence of the actual damages suffered by plaintiff or of the profits reaped by defendant,'” (citing Harris v. Emus Records Corp., 734 F.2d 1329 (9th Cir. 1984)).

Just one week before Judge Wu issued the latest LiveUniverse decision, the Northern District of California had determined a statutory damages award in a default judgment against a lounge operator who failed to enter into a public performance license to use songs represented by the songwriter/publisher rights society Broadcast Music Inc. (BMI). Broadcast Music Inc. v. Kiflit, 12-CV-00856 (N.D.Calif. 2012).

BMI sought statutory damages of $3,000 for each of four songs infringed, for a total of $12,000. But Northern District Judge Lucy H. Koh observed: “Plaintiffs submit evidence that, if Defendant had entered into a licensing agreement at the time BMI first contacted him in July 2010, the total estimated licensing fee would have been approximately $2,806.90. There is no evidence of how much Defendant made in profits, or continues to make, as a result of the infringement.”

Judge Koh continued: “Plaintiffs' request for statutory damages is approximately four times the amount Plaintiffs would have received in licensing fees from Defendant had Arsimona [the Oakland, CA venue the defendant operated] been licensed properly. However, Plaintiffs do not explain why this specific figure is appropriate, particularly given that the four-fold multiple of license fees is at the upper range of many statutory damage awards throughout the country.”

Judge Koh concluded that a statutory damages award of $9,000, a multiple of just over three times the purported licensing fee, “is more than adequate and just to compensate Plaintiffs for lost profits and to deter Defendant's future infringement.” In tallying the statutory award, Judge Koh pointed to the plaintiffs' “diligent efforts over the course of two years to encourage Defendant to enter into a licensing agreement, and thereby avoid litigation at all costs. Plaintiffs should not have been forced to send Defendant at least 20 letters, telephone Defendant at least 37 times, and send a BMI-music researcher to Arsimona on three separate occasions, simply to protect the rights of the publishers and writers affiliated with BMI.”

In LiveUniverse, Judge Wu cited a conservative “single digit multiple of lost licensing revenues” as “a good starting point” in determining statutory damages. In response to the music publishers' push for LiveUniverse's website profits to be considered in assessing statutory damages, Judge Wu quoted the earlier tentative ruling: “It is not entirely clear that Plaintiffs' claim that Defendants generated millions of dollars in revenue solely from the infringement of Plaintiffs' songs [is correct]. Plaintiffs proffer various evidentiary items regarding Defendants' revenues which do seem to indicate that revenues as to Live Universe were ' for at least one month ' over $500,000. However, the revenues were generated not only from the presence of the lyrics on the sites but also from other endeavors (e.g., 'hosting' and 'social').”

Do the Math

Judge Wu also admonished the music publishers for using the $500,000 revenue amount (from an April 2007 LiveUniverse financial statement) by noting that the Web company's “net income after taxes for the Month of April was a loss of $1.6 million.” The district judge went on to clarify a comment in the earlier tentative ruling that statutory damages against LiveUniverse “should be at least above the low limit of willful infringement at $30,000.” But Judge Wu now took the position that “[w]hile a statutory award of $30,000 for each willful infringement of multiple copyrights can be granted within the court's discretion ', it is not a mandatory minimum threshold.”

At $12,000 per work infringed, Judge Wu's per-work damages determination was about 25% higher than the $9,250 per each of 24 sound recordings willfully infringed in Thomas-Rasset, but well below the $22,500 for each of 30 sound recordings willfully infringed in Tenenbaum. (The latter damages were enforced in August 2012 on remand to the U.S. District Court for the District of Massachusetts. Sony BMG Music Entertainment v. Tenenbaum, 07-11446.)

But certainly worth noting is how the Thomas-Rasset appeals court qualified its statutory damages calculation for what was so-called non-commercial infringement: “The absolute amount of the award, not just the amount per violation, is relevant to whether the award is 'so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.'”

A recent federal district court award of $6.6 million in statutory damages to music publishers for the unlicensed use of song lyrics by the website LiveUniverse and its operator was hailed as the first of its type for owners of song lyrics, and thus a significant milestone for content owners in the digital era. Peermusic III Ltd. v. LiveUniverse Inc., 09-6160 (C.D.Calif. 2012). In addition, since September 2011 two federal appeals courts, in cases against unauthorized file-sharers, declined to void the Copyright Act's statutory damages provisions as violating constitutional due process. Capitol Records Inc. v. Thomas-Rasset , 692 F.3d 899 (8th Cir. 2012); Sony BMG Music Entertainment v. Tenenbaum , 660 F.3d 487 (1st Cir. 2011). (See the retrospective article on the Thomas-Rasset decision on page 5 of this issue of Entertainment Law & Finance .)

In the LiveUniverse case, Judge George H. Wu of the U.S. District Court for the Central District of California awarded $12,500 for each of 528 songs' lyrics posted on the defendant website. The district judge also issued a permanent injunction and awarded attorney fees and costs in favor of the publishers. The statutory damages, for which judges have wide discretion, followed three contempt orders, violation of a preliminary injunction and a default judgment against LiveUniverse.

Statutory Damages

Yet, as notable as this case appears for content owners, a close look at the LiveUniverse decision demonstrates limits for plaintiffs who seek sizable statutory damages awards for willful digital copyright infringement.

In the LiveUniverse litigation, the music publishers sought $100,000 under 17 U.S.C. '504(c), which provides a maximum of $150,000 in statutory damages for each work willfully infringed. In an earlier tentative ruling, the district court had noted that the defendants' “blatant disregard for the civil justice system favors a substantial damages award.” But the court added that, “due to the scale of the infringement, an award of damages in the amount requested by Plaintiffs would result in a ridiculously huge judgment.” The court then asked the music publishers to bolster their submissions regarding “the licensing fees which Defendants would have been charged had they properly obtained licenses to use the copyrighted lyrics in the first place.”

But in the recent LiveUniverse ruling, Judge Wu found that the supplemental memorandum the music publishers submitted failed to include per-song licensing fees “even though such information is readily available to them.” Instead, the publishers argued that an award of statutory damages shouldn't be related to compensatory damages. But Judge Wu emphasized, “in seeking to learn of the licensing rates for the infringed songs, this Court did not intend to set the statutory damages in an amount based simply on the loss of licensing revenues.” Thus, in addition to the publisher's lost licensing revenues and LiveUniverse's willfulness, the website defendant's saving and profits from the infringing activity could also be considered in determined statutory damages. Nevertheless, Judge Wu acknowledged: “Because awards of statutory damages serve both compensatory and punitive purposes, a plaintiff may recover statutory damages 'whether or not there is adequate evidence of the actual damages suffered by plaintiff or of the profits reaped by defendant,'” (citing Harris v. Emus Records Corp. , 734 F.2d 1329 (9th Cir. 1984)).

Just one week before Judge Wu issued the latest LiveUniverse decision, the Northern District of California had determined a statutory damages award in a default judgment against a lounge operator who failed to enter into a public performance license to use songs represented by the songwriter/publisher rights society Broadcast Music Inc. (BMI). Broadcast Music Inc. v. Kiflit, 12-CV-00856 (N.D.Calif. 2012).

BMI sought statutory damages of $3,000 for each of four songs infringed, for a total of $12,000. But Northern District Judge Lucy H. Koh observed: “Plaintiffs submit evidence that, if Defendant had entered into a licensing agreement at the time BMI first contacted him in July 2010, the total estimated licensing fee would have been approximately $2,806.90. There is no evidence of how much Defendant made in profits, or continues to make, as a result of the infringement.”

Judge Koh continued: “Plaintiffs' request for statutory damages is approximately four times the amount Plaintiffs would have received in licensing fees from Defendant had Arsimona [the Oakland, CA venue the defendant operated] been licensed properly. However, Plaintiffs do not explain why this specific figure is appropriate, particularly given that the four-fold multiple of license fees is at the upper range of many statutory damage awards throughout the country.”

Judge Koh concluded that a statutory damages award of $9,000, a multiple of just over three times the purported licensing fee, “is more than adequate and just to compensate Plaintiffs for lost profits and to deter Defendant's future infringement.” In tallying the statutory award, Judge Koh pointed to the plaintiffs' “diligent efforts over the course of two years to encourage Defendant to enter into a licensing agreement, and thereby avoid litigation at all costs. Plaintiffs should not have been forced to send Defendant at least 20 letters, telephone Defendant at least 37 times, and send a BMI-music researcher to Arsimona on three separate occasions, simply to protect the rights of the publishers and writers affiliated with BMI.”

In LiveUniverse, Judge Wu cited a conservative “single digit multiple of lost licensing revenues” as “a good starting point” in determining statutory damages. In response to the music publishers' push for LiveUniverse's website profits to be considered in assessing statutory damages, Judge Wu quoted the earlier tentative ruling: “It is not entirely clear that Plaintiffs' claim that Defendants generated millions of dollars in revenue solely from the infringement of Plaintiffs' songs [is correct]. Plaintiffs proffer various evidentiary items regarding Defendants' revenues which do seem to indicate that revenues as to Live Universe were ' for at least one month ' over $500,000. However, the revenues were generated not only from the presence of the lyrics on the sites but also from other endeavors (e.g., 'hosting' and 'social').”

Do the Math

Judge Wu also admonished the music publishers for using the $500,000 revenue amount (from an April 2007 LiveUniverse financial statement) by noting that the Web company's “net income after taxes for the Month of April was a loss of $1.6 million.” The district judge went on to clarify a comment in the earlier tentative ruling that statutory damages against LiveUniverse “should be at least above the low limit of willful infringement at $30,000.” But Judge Wu now took the position that “[w]hile a statutory award of $30,000 for each willful infringement of multiple copyrights can be granted within the court's discretion ', it is not a mandatory minimum threshold.”

At $12,000 per work infringed, Judge Wu's per-work damages determination was about 25% higher than the $9,250 per each of 24 sound recordings willfully infringed in Thomas-Rasset, but well below the $22,500 for each of 30 sound recordings willfully infringed in Tenenbaum. (The latter damages were enforced in August 2012 on remand to the U.S. District Court for the District of Massachusetts. Sony BMG Music Entertainment v. Tenenbaum, 07-11446.)

But certainly worth noting is how the Thomas-Rasset appeals court qualified its statutory damages calculation for what was so-called non-commercial infringement: “The absolute amount of the award, not just the amount per violation, is relevant to whether the award is 'so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.'”