Copyright Violation and the Constitutionality of Excessive Damages – Music Downloaders Beware!

The Eight Circuit affirmed the constitutionality of statutory damages for copyright infringement against the challenge that it is disproportionately excessive.

Capitol Records, Inc. v. Thomas-Rasset, 692 F.3d 899 (8th Cir. 2012). In 2011, record companies sued a woman for making copyrighted music available to others for free download by using a file-sharing service. First the jury awarded the record companies $222,000 in damage. Months after the verdict, however, the district court granted a new trial sua sponte after considering whether it had erred in instructing the jury that the defendant could be found liable for distribution, by making recordings available for download, without the showing of actual distribution.

In the second trial, the jury was instructed that distributing copyrighted recordings to other users on a peer-to-peer network without license violated the copyright owners’ exclusive distribution right.  The jury, again, found the defendant liable and awarded damages totaling over $1.9 million. The district court, stating that the award was “shocking,” remitted the damages to $54,000 and the record companies moved for a new trial solely on damages.

In the third trial, the jury awarded the recording companies $1.5 million, and the defendant again asked the court that the damages be reduced. The district court held that the Fifth Amendment’s Due Process Clause permitted no more than a $54,000 judgment, the remitted amount in the second trial.  The record companies appealed to reinstate the first jury’s award of $222,000, and the defendant cross-appealed on the Constitutional grounds.

In determining whether a $222,000 statutory damage violated the Due Process Clause, the Eight Circuit drew a sharp line between statutory damages and punitive damages. It noted that applying punitive damages guideposts from BMW of North America v. Gore, 517 U.S. 559 (1996) would be inappropriate in the context of statutory damages. The three guideposts in Gore are 1) the degree of reprehensibility of the non-disclosure; 2) the disparity between the harm by plaintiff and the punitive damage; and 3) the difference between the remedy and the civil penalties in similar cases. The Eight Circuit held that, first, considering “the disparity between ‘actual harm’ and an award of statutory damages” would be inappropriate because statutory damages are established specifically for cases in which calculating actual harm is difficult. Second, a court could never consider the difference between a statutory damage award and the civil penalties permitted in comparable cases because the statutory damages are the civil penalties that are permitted.

The Eight Circuit then relied on St. Louis, I.M. & S. Ry. Co. v. Williams, which held that statutory damages violate the Due Process Clause if they are “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” In determining whether $222,000 award violates the Williams standard, the Eight circuit gave deference to Congress’ discretion to set damages for willful copyright infringement. The defendant argued that the even the statutory minimum was unconstitutional because it was not based on any evidence of actual harm caused by her specific infringement. However, the court stressed that given that protecting copyrights is a public interest, the statutory damages are imposed as a substitute for unprovable actual damages. The Eight Circuit accordingly held the $222,000 award did not violate the Williams standard.

In upholding the damages despite the fact that the defendant was not involved in a for-profit venture, the Eight Circuit noted that the statute does not provide an exception for those who are not motivated by profit. Further, the legislative record suggested that Congress was concerned about the threat of noncommercial copyright infringement when it established the damages at the lower end of the range.

More recently, the First Circuit also agreed with the Eighth Circuit’s rationale in vacating a district court’s decision to reduce the statutory damage award in a case with similar facts, namely in Sony BMG Music Entertainment v. Tenenbaum, 719 F.3d 67, 71-72 (1st Cir. 2013). The First Circuit affirmed judgment in favor of recording companies, holding that the statutory damage award of $675,000 for willfully infringing 30 copyrighted songs did not violate the defendant’s constitutional right to due process.

The two cases above are a stark reminder of the dangers to individuals and companies alike in understanding the terms and conditions of any file download services, and to be very careful in such seemingly innocent behavior as music sharing.