Michael Geist points us to an amusing ruling in a Canadian lawsuit over copyright infringement, where the plaintiff demanded $27 million in damages... and ended up with $500. Yes, $500 period. Not $500 thousand. Just $500. One would imagine that the plaintiff spent a hell of a lot more than that on legal fees. The judge seemed to waste no opportunities to point out how ridiculous the case was, even if the plaintiff's copyright was, actually, infringed upon. Some key quotes:
Generally speaking, the evidence adduced concerning infringement of copyright suggests that the Plaintiff's claims are disproportionate and opportunistic....
In relation to breach of copyright, the Plaintiff entered the trial seeking $27,000,000.00 (CD) as compensation for acts that, even if proved, would be fairly contained and/or inconsequential forms of infringement....
The Plaintiff speculates that further use was made of the Report but there is no evidence before me to support anything more than the limited uses outlined above.... Also, I can find no evidence that multiple copies of the Report were made and disseminated.... The only action that could have resulted in broader dissemmation occurred when Re-defining Water placed the original version of the Report on its website, but there is no evidence before me, apart from Mr. Reif's downloading of a single copy for purposes of this lawsuit, that anyone either viewed the Report on the website or downloaded it.
I can find no evidence that any of the Defendants made any money, or gained any other advantage, from either copying or using the Report or any modified version of the Report, or that they have deprived, or could deprive, the Plaintiff of any profits that the Plaintiff might earn from the Report. In fact, the Plaintiff does not even allege that the Defendants sold copies of the Report or that the conduct of the Defendants prevented him from selling or otherwise exploiting the Report with someone else, and it is difficult to see how the Plaintiff might make money from any such activities given the limited purpose of the Report and the context in which it was produced.
It goes on and on in this nature and finally concludes by awarding $500 in statutory damages, noting that the defendant did a good job defending themselves "as best they can in the face of an obviously dubious claim for a substantial sum of money" and then defends the small sum by noting:
I say this because there is no evidence here that the Plaintiff has suffered any damages or that the Defendants have made any profit as a result of the infringing act. This is simply a technical breach and does not warrant the Plaintiff receiving a substantial windfall . Statutory damages require an assessment of the reality of the case and a just result.
That last line is interesting, though (obviously) meaningless in the context of the US cases involving Jammie Thomas and Joel Tenenbaum over that very same question.
Last Friday, we quickly covered the news that Judge Nancy Gertner had declared the original jury award of $675,000 against Joel Tenenbaum for downloading and sharing some songs unconstitutionally excessive. Over the weekend, however, I had some more time to read the full ruling (posted by Eric Goldman) and get a sense of what Gertner's full argument meant. You can read the ruling here, and I highly recommend taking the time to read the whole thing:
In it, she clearly explains why the Constitutional analysis was necessary (she could have just reduced the award using the remittitur process, but noted that the RIAA made it clear they would challenge such a ruling, and thus it would eventually come around to the Constitutional questions no matter what.
So with that in mind, she clearly gave a lot of thought to the Constitutional questions, and goes back to the key point, that if the punishment is seriously out of line with any sort of "harm" caused, then it's unconstitutional. She notes that she must give deference to Congress' intent with the statutory rates it set for copyright infringement, as well as to the jury's verdict. But, even so, she suggests that the jury's award was way out of line with reasonable awards in other copyright lawsuits... and (more importantly) way out of line with Congress' intent of using statutory rates to deter infringement:
This award is far greater than necessary to serve the government's
legitimate interests in compensating copyright owners and deterring infringement. In fact, it
bears no meaningful relationship to these objectives.
In attacking the Constitutional questions, Judge Gertner spent a lot of time highlighting the case law on the Due Process Clause, noting many, many cases where the Supreme Court has made it clear that there are limits to what should be considered Constitutional when it comes to jury awards -- even in the case of statutory awards (even if the courts often seem to rule that in the cases they're looking at, the line has not been crossed).
Defenders of both the original Jammie Thomas award and the Joel Tenenbaum award have frequently claimed that the case law (mainly the BMW v. Gore case) doesn't apply since that was not for statutory damages, where the rates are clear and already set. That's going to be a key point made in the inevitable challenge to this ruling. But Gertner aptly explains why it's reasonable to explore whether or not the award is unconstitutionally excessive, even when it's within the statutory rates, and even suggests that both the government and the RIAA are misreading other precedents -- with the key one being the Williams case, which found a damages award acceptable because it fell within statutory rates. Gertner points out that the RIAA and the government are taking that ruling out of context, and only looking at the result, rather than the actual reasoning.
At their root, the standards articulated in Williams, BMW,
and State Farm all aim at providing defendants with some protection against arbitrary government
action in the form of damages awards that are grossly excessive in relation to the objectives that
the awards are designed to achieve. Indeed, early twentieth century cases such as Williams were
the seedlings from which the Supreme Court's recent punitive damages jurisprudence sprouted.
She also notes that even in the Congressional record in efforts to increase the statutory rates, Congressional members suggested that courts would make sure the actual awards were reasonable and not excessive:
In fact, Senator Orrin Hatch, a sponsor of the Digital
Theft Deterrence and Copyright Damages Improvement Act of 1999, which increased section
504(c)'s statutory damages ranges to their current levels, stated in remarks regarding a
predecessor of that bill, "In most cases, courts attempt to do justice by fixing the statutory
damages at a level that approximates actual damages and defendant's profits."
That line right there might be pretty damaging to the RIAA's typical claim that courts are just supposed to assume that Congress knows best in setting the rates, and shouldn't try to approximate actual damages with statutory rates.
From there, Judge Gertner applies the test found in the BMW case, and points out that (contrary to some of the silliest claims from copyright system defenders), Congress clearly did not expect lawsuits against individuals sharing files for personal use when it set such high rates:
Later statements by Senators Orrin Hatch and Patrick Leahy, two sponsors of
the Digital Theft Deterrence Act, strongly suggest that Tenenbaum is correct; they did not
anticipate that individuals such as Tenenbaum who engaged in noncommercial file-sharing
would be subjected to liability for statutory damages under section 504(c). Hatch and Leahy
presided over a Senate Judiciary Committee hearing titled "Music on the Internet: Is There an
Upside to Downloading?" on July 11, 2000.... During the
hearing, the committee members demonstrated how the peer-to-peer system Gnutella is used by
downloading and then playing a song by the band Creed. ... As the committee was
downloading the Creed song, Senator Leahy proudly proclaimed that he was doing some of his
own downloading on his laptop. ... When one of the developers of Gnutella pointed
out to the committee members that they might be engaging in copyright infringement, Senator
Hatch responded that their downloading and public performance of the Creed song qualified as
"fair use" since it was carried out for "educational and governmental purposes." ...
Nevertheless, the senators' willingness to download copyrighted sound recordings through a
peer-to-peer network during a committee hearing suggests, at the very least, that they did not
view such downloading as particularly reprehensible.
And this inference from the senators' conduct is largely confirmed by their words. Although Senator Hatch noted that peer-to-peer technology had the capacity, "if misused, to rob [artists] of their livelihood," ... he also praised the development of Gnutella as "quite an
accomplishment," ... And Senator Leahy added:
[W]hen I go on college campuses, as many of us do, to talk and
everybody is talking about what they have downloaded, how they
share, and so on, and when my kids pick up a "Black Muddy
River," which happens to be one of my favorites of the Dead, and
send it to me -- they have heard a new version -- and I log on in the
morning while I am having my breakfast and there it is, I mean this
is a whole different world, and I think we have to recognize that on
where we go.
Senator Hatch's tolerance of, if not admiration for, peer-to-peer networks was even more
on display at a special Judiciary Committee hearing held on October 9, 2000, at Brigham Young
University ("BYU"). ...
Shawn Fanning, the founder of Napster, was the star witness at this hearing, and Senator Hatch
repeatedly praised Fanning, expressing how "proud" he was of Fanning and even suggesting that
Fanning should become a professor at BYU or run for political office. ...
Obviously, Senator Hatch's comments should be taken with a large grain of salt... But his comments nevertheless suggest that he did
not anticipate that the statutory damages scheme over which his committee had jurisdiction
would be applied to users of Napster and other peer-to-peer networks.
I have to admit that I was unaware of these quotes from Senators Hatch and Leahy -- both of whom are normally seen as being very strongly in favor of strict copyright laws (Hatch, famously, once suggested coming up with a way to destroy the computers of file sharers).
On top of that, Judge Gertner compares the fines for Tenenbaum with restaurants and bars that have not paid their licenses, noting that those are clear cases of infringement for commercial reasons, yet the fines are a small multiple of the cost of a license. She points out that this seems like a much more egregious case, yet the awards are much lower:
The jury's award in this case also appears egregious in light of the damages typically
imposed on restaurants, bars, and other businesses that play copyrighted songs in their
establishments without first acquiring the appropriate licenses. These defendants are arguably
more culpable than Tenenbaum. Unlike Tenenbaum, who did not receive any direct pecuniary
gain from his file-sharing, defendants in these cases play copyrighted music to create a more
pleasurable atmosphere for their customers, thus generating more business and, consequently,
more revenue.... In addition, defendants accused of unlicensed public performances
often receive several notices that their conduct is unlawful before they are sued. Thus, like
Tenenbaum's file-sharing, their infringing conduct is generally willful. .... Nevertheless, the awards in such cases are generally no more than "two to six times the license fees defendants 'saved' by not obeying the Copyright Act"--a ratio of
statutory to actual damages far lower than the ratio present in this case.
Clearly, this case is nowhere close to over, but it is still interesting to read through the details of the ruling. Obviously, Gertner knows this is going to be appealed, and she put a lot of effort into making the case for why this ruling was excessive, in hopes of having her reasoning help carry the later appeals.
It seems like the Joel Tenenbaum case is simply an echo on the Jammie Thomas case. Both lawsuits involved very flawed defendants who probably shouldn't have gone through with their fights against the RIAA. In both cases, juries awarded huge statutory damages awards to the record labels. In Thomas' case it was $1.92 million or $80,000 per song. In the Tenenbaum case, it was $675,000 or $22,500 per song. Even though both cases were what I considered to be "bad" cases (too much evidence that both Thomas and Tenenbaum were actually heavily involved in file sharing), both have used the rulings to challenge the statutory damages awards as being unconstitutional.. and now the judges in both cases have agreed.
As you probably recall, the judge in the Thomas case reduced the $1.92 million award to $54,000 (or $2,250 per song) and today comes the news that Judge Gertner in the Tenenbaum case has declared the original damages award to be "unconstitutionally excessive" and slashed the total by 90% down to $67,500. In both cases, the judges actually set the per song damages award down to $2,250. There were lots of questions when Judge Davis did this in the Jammie Thomas case if a judge could actually do that, and that's still being fought to some extent. It seems likely that, as with the Thomas case, the RIAA will appeal this particular ruling because it most certainly does not want a precedent on the books that can lower the statutory damages rate for copyright.
This could start to get very interesting. Both judges are clearly taking a stand that the actual statutory rates set by Congress are ridiculously high and totally out of proportion with the actions done by the defendants. There is definitely some precedent for ridiculously high damages awards being thrown out as unconstitutionally excessive... but not when it comes to statutory rates, where the courts have generally said Congress has great leeway to determine what is and what is not excessive. However, with two judges pointing out that a number within the range provided by Congress is excessive, it's setting up a potentially very important legal battle about the statutory damages associated with copyright.
The industry has always pushed for higher and higher damages, somehow believing that will act as a disincentive for infringing. Yet, there doesn't appear to be any evidence at all that it's working. Instead, such high damages have actually done the opposite. They've convinced many, many people of just how ridiculously unfair and out of touch copyright laws are. The general public can recognize that sharing a single file shouldn't lead to a fine of tens of thousands of dollars. It's so out of proportion with reality that they begin to question the overall setup of copyright law itself. The industry's focus on higher and higher copyright damages has been a major strategic mistake that has backfired. These rulings -- which the industry will fight tooth and nail -- might actually be a blessing in disguise for the industry. If the actual damages weren't so ridiculous, people probably wouldn't be so up in arms over copyright issues.
Remember how the USTR and various lobbyists keep insisting that ACTA won't change US law? Or even limit its flexibility in changing the law? Well, if you take the latest leak and the fact that the USTR is now admitting that it's hoping ACTA will cover patents, and then look at the newly released patent reform bill, you'll discover that, on the issue of damages, it certainly looks like the two are in conflict. This is pretty important, since the "damages" part of patent reform was the key stumbling block last year, with a lot of back and forth going into the development of the language. For the USTR to then come along and potentially screw that up with poorly thought out language in ACTA could be a big problem...
We had discussed earlier this year just how damages should be figured out (and if they should be available at all) for bogus DMCA takedowns. The law, technically, says that there can be punishment, but it's rare to see a case ever get that far. In the ongoing Lenz v. Universal Music, however, (about the video takedown of a child dancing to less than 30 seconds of a Prince song), the judge has ruled that damages are available, but at the same time limited how those damages might be calculated. So, there's some good, in that filing bogus DMCA takedowns can lead to damages, but the amounts are likely to be so small in most cases as to be meaningless. Compare this, of course, with the statutory damages given to those who infringe on copyrights -- starting at $750 for sharing a single item and going way up from there. How is that equitable? Basically, the incentive is quite strong for copyright holders to continue to file DMCA's willy-nilly, knowing that the threat of errors is mostly minimal, even as the impact is to silence one's free speech -- which should be seen as a bigger issue than interfering with someone's business model.
It continues to amaze me that there's anyone out there who thinks that the damages awarded in many copyright suits are anywhere close to reasonable or proportional to the "crime" at hand. Copycense points us to an article about a guy who was found guilty of putting software on the internet that allowed people to unlock Dish Network programming on unauthorized receivers. Because of this, Dish and another satellite TV provider, NagraStar, were awarded $51 million. $51 million -- for putting the software on the internet. That's all. The amount was determined based on the number of people who downloaded the software, even though, in all likelihood, a much, much smaller percentage would have ever actually paid for an authorized satellite TV account. Furthermore, this guy did not do the actual act of accessing the unauthorized signal, or breaking any encryption. He merely provided the tools to do so. Charging him with the bogus "cost" of each user of his software makes no sense at all. Even if you accept what he did was wrong and clearly illegal, it's difficult to see how that justifies the ridiculousness of the award.
Lately, we've been seeing a lot more copyright lawsuits coupled with trademark lawsuits. Quite often, the idea is to use the trademark claim to get around any DMCA safe harbor that's been claimed, but some may be doing it to try to increase damages. It looks like at least one court has stopped one attempt to do just that. Michael Scott points us to a ruling in NY, where a software developer charged someone else with both copyright and trademark infringement. The accused never responded to the lawsuit, so the original developer won a default judgment. However, on requesting separate statutor claims for infringing on copyrights and trademarks, as well as on violating the DMCA, the court said no, pointing out that it was really only one copy, not three, and thus the end result only "produced one harm."
After admitting flat out yesterday that he downloaded and distributed songs using file sharing software, and that he lied about it, there wasn't a question of whether or not Joel Tenenbaum would be found guilty. In fact, the judge even said that the question wasn't even at issue. The only thing the jury had to work out was how much the damages would be, and they didn't take long at all, awarding $22,500 per song, or a total of $675,000. While a lot less than what the Jammie Thomas jury awarded, it's still a hefty chunk of change.
I've already expressed my distaste for how this trial was handled by Nesson and "Team Tenenbaum," but honestly, if he was going to just admit that he did it, it's unbelievable that he didn't just settle earlier when he had the chance. The only reason to go through with this is if the entire purpose is to create a later constitutional challenge on the statutory rates -- which many assume was Nesson's plan all along. However, if that's the case, is this really a good test case for that? Gleefully ignoring the law isn't the sort of thing that I think many judges/justices will find endearing. If this case does move up the appeals chain, one would hope that a better team of folks will handle Tenenbaum's appeal, and focus on the real legal issues. Of course, even before the appeal, it appears that Judge Gertner is planning to review whether or not the amount appears to be unconstitutional. It seems that particular ruling will be a lot more important than what the jury had to say.
So, I had said I was going to try to avoid talking about the Tenenbaum file-sharing trial until it was over or unless something major happened, but reading through the reports of the first day it's hard not to declare it to be a train wreck in motion. So far, it appears that Charlie Nesson's argument is that "everybody's doing it!" While I obviously don't know the jury and don't know what else (if anything) Nesson has up his sleeve, that doesn't seem like the sort of argument that's all that convincing. In the meantime, I'm going to do something that I almost never do, and actually agree with entertainment industry lawyer Ben Sheffner (who regularly goes out of his way to misrepresent what I write here) and say that it's unconscionable that Nesson/Tenenbaum don't have an economic expert to testify on the "damages" caused by Tenenbaum. It's not like the idea hasn't been brought up before. Hell, we here had a lengthy discussion on exactly that back in March.
There are numerous economic experts out there who could clearly point out that there's no causal evidence that file sharing does any damage at all. There may be a correlation with a decline in CD sales, but not with any other aspect of the music industry -- and recent research is showing that the overall industry is growing. Even some of the music industry's own research is showing the overall industry is growing -- it's just that spending has shifted. It would have certainly been possible to make a strong case that file sharing alone doesn't cause any significant damage to the industry. They could have shown the recent economic studies, along with evidence of many, many, many artists who have embraced file sharing and used better business models to take that attention to make more money than they had in the past. At that point, they could make the case that it's not piracy that's causing harm to the plaintiffs, but their failure to adapt and embrace better business models. And, from that, show that Tenenbaum's actions didn't cause any direct harm.
But Nesson went on a wild goose chase pursuing "fair use" -- an argument that never really made much sense, and did so in a way that annoyed the judge and pretty much everyone associated with the case. He also screwed up getting the witnesses lined up for the case, only requesting that the author of one of those recent studies be allowed to testify long-past the deadline to do so. And, of course, with fair use being knocked out before the case started, and without any experts to present on damages, and a (so far) defense of "everyone's doing it," you have a recipe for disaster. Nesson seems much more focused on putting the whole RIAA strategy on trial, and seemed to forget that there were specific legal questions that had to be dealt with in this case. As with Jammie Thomas, I think that Tenenbaum is a bad case to go to trial, and I dread the results. At this point, the "best" result may be that they flub the case so badly that super high damages are awarded, and you end up with a repeat of the bad PR that came out following the Jammie Thomas trial (though, things are so twisted so far, I wouldn't be surprised if the RIAA themselves to do their best to convince the jury to keep the award low).
A bunch of folks sent in variations on the story about Microsoft losing a patent infringement lawsuit to the tune of $200 million to a small Toronto firm (the ruling also came right on the heals of another ruling against Microsoft in a patent case, for $388 million). Since both rulings will certainly be appealed, it seemed a bit early to pay too much attention, but Joe Mullin has dug into the details of the $200 million ruling, and it's fairly startling. The patent in question is for separating the manipulation of content from the architecture of the document, which the company, named i4i argues, covers basic XML editing. It's quite troubling that doing something as simple as adding an XML editor should infringe on a patent, but what's even more troubling is that the court somehow ruled that such an editor was worth $98 in the copies of Microsoft Word where it was used. An XML editor. $98. And people say patent awards aren't out of sync with reality?