Copyright Statutory Damages Award Violates Constitutional Due Process–Sony v. Tenenbaum

By Eric Goldman

Sony BMG Music Entertainment v. Tenenbaum, 2010 WL 2705499 (D. Mass. July 9, 2010)

I have largely skipped blogging the Sony v. Tenenbaum lawsuit because (1) it was well-discussed elsewhere, and (2) for the most part, it was a pretty straightforward case. Then, on Friday, the judge dropped an opinion that should make my list of top 10 most important Cyberlaw cases of 2010.

The Sony v. Tenenbaum lawsuit is one of the multitudinous file-sharing copyright infringement cases. Tenenbaum admitted to impermissible file sharing, made an unsuccessful fair use defense, and was hit with a statutory damages award of $675,000. This ruling concludes that the jury award of statutory damages violated Constitutional Due Process, but a lesser award of $67,500 (10% of the jury award) would be Constitutional. This ruling is critically important because it has the potential to affect every copyright litigation’s damages calculations when statutory damages are at issue.

I expect the copyright industry to FREAK OUT about this opinion. Recall their histrionic response to the Viacom v. YouTube opinion, which was 1/10 as damaging to them as this opinion. Meanwhile, as much as we might sympathize with the judge’s normative sentiments in the opinion, the judge’s doctrinal arguments did not completely convince me, so this may be a challenging opinion to uphold. Further, this ruling sends copyright litigation into anarchy until we get additional judicial guidance.

The Ruling

The opinion starts with an unusually public hand-wringing by a judge. Judge Gertner expresses frustration that the parties wouldn’t settle and the plaintiffs made it clear they would refuse a remittitur. This meant she had no other options than to do the remittitur anyway (and force a new trial) or address a constitutional challenge she would have clearly rather avoided.

The court’s substantive discussion involves civil procedure and Constitutional Due Process, two areas that aren’t my strength. Despite my limited expertise in those areas, I spotted three fundamental assumptions that are likely to be critically tested on appeal.

First, the opinion subjects punitive damages and statutory damages to the same Constitutional analysis. The opinion acknowledges differences between the two types of damages, but it concludes that there is no Constitutional difference.

Second, the court apparently believes that statutory damages for non-commercial infringement that minimally harmed the copyright owner raises special Constitutional due process concerns that the rest of the copyright universe apparently does not.

Third, the court arbitrarily selects a Constitutional cap of 3x the statutory damages minimum. Of course, any bright line rule is going to be arbitrary, but computing the Constitutional cap using the statutory damages floor seems especially odd. It makes sense if the problem is notice to the defendant, but if the problem is the high ratio of statutory damages to actual damages–the court’s main focus–then using the statutory floor makes no sense. Derek Bambauer explores this point more.

One more oddity (of several I could mention): Although it was ultimately irrelevant to her holding, Judge Gertner had a bizarre digression arguing that some members of Congress *like* peer-to-peer file sharing (see pages 36-37 of the PDF). She does this by citing a few examples where key members of Congress expressed lukewarm enthusiasm towards peer-to-peer file sharing. This conveniently ignores the mountains of evidence that Congress actually HATES peer-to-peer file sharing with a passion. For example, there’s the pre-Napster No Electronic Theft Act, where Congress sent the clear signal that it wanted to jail non-commercial online infringers. See my lengthy deconstruction of that statute. Congress went back to the well in the ART Act in 2005, reinforcing that it wanted non-commercial file sharers to go to jail if they traded pre-release works. And there’s the Higher Education Opportunity Act (HEOA) of 2008, which mandated that universities deploy efforts to block file-sharing. Finally, let’s not forget the many (dozens?) Congressional hearings that had the sole objective of publicly excoriating file sharing. As I said, Gertner’s argument wasn’t essential to her ruling (the Constitutional dimension of her ruling negates Congress’ role), but I thought the digression significantly damaged the opinion’s credibility.

The Implications

I expect two immediate consequences of this decision.

First, I expect more litigation battles over statutory damages. Basically, almost every copyright infringement defendant can advance a non-frivolous argument that statutory damages in their case would be unconstitutional. As a result, statutory damages cases will take more time and money.

Second, I expect it will be harder to settle copyright cases pre-litigation. Right now, it’s hard enough to settle a case when statutory damages are available, because the copyright owner may (over-optimistically) value the case at the statutory maximum ($150k per infringed work) while defendants often value the damages at much lower numbers. With such a wide range of possible damages, it’s already hard enough to reach a compromise value. However, after this ruling, defendants will have increased confidence in their low case valuations (given the possibility that statutory damages will be Constitutionally capped at $2,250/work), while most copyright owners will not accept this discount. As a result, due to the doctrinal uncertainty, the litigants will have an even harder time reaching a compromise value.

Because the judge found Constitutional limits to Congress’ authority, it’s not clear to me how Congress could overturn this decision even if it wanted to. For now, this battle will need to play out in the courts. Personally, because of the arbitrariness of the court’s distinction between commercial/non-commercial infringement and the arbitrary computation of a damage “cap,” I would be surprised if this opinion survives intact on appeal.

Conclusion

Given its questionable doctrinal analysis, I think this opinion is best viewed as a judicial nullification (the analogue to jury nullification, but done by a judge). The judge essentially concludes that copyright law goes too far, and the judge decides not to countenance that. Nullification isn’t normally within a judge’s toolkit, but I can understand the judge’s sentiment. The bad brew of an aggressive copyright lobby and pliable politicians have created a copyright legal scheme that often conflicts with mainstream norms about fairness. It’s not surprising to see some smart folks balk at this scheme, no matter how clear the statute is.

Trivia: Judge Gertner also wrote the quirky Hearts on Fire v. Blue Nile opinion. One commonality: the rulings in both that opinion and this one have the natural consequences of significantly jacking up the litigants’ costs.

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