We didn't think that the Supreme Court would grant cert to hear the appeal in Jammie Thomas' case and now it's been confirmed. As we've said for a while, neither Jammie Thomas's case nor Joel Tenenbaum's case,were ideal cases to take to trial, and both people mounted questionable defenses, which massively harmed their credibility. There are serious issues that could have and should have been covered in these kinds of cases, including the Constitutionality of certain levels of statutory damages. However, the way they went about this case made sure that it was doomed from the start. And, unfortunately, now it's just more bad precedent out there.

This shouldn't be seen as much of a surprise at all, given that the Obama administration previously supported the $1.5 million verdict against Jammie Thomas-Rasset for sharing a mere 24 songs. However, now that an appeals court has reverted back to the original $220,000 ruling (procedural reasons...), and Thomas-Rasset has filed to ask the Supreme Court to hear the case, the Obama administration is back again, saying that there is nothing wrong with $220,000 for 24 songs. The argument is basically what you'd expect. In short: Congress set the statutory rates, the record labels asked for statutory damages, and thus nothing in that range should be considered too high.

The administration does have a point that there is not a real controversy between different circuit courts on the issue at play here, and thus there may not be a need for the Supreme Court to get involved. After the appeals court ruling, we predicted that the Supreme Court would refuse to hear this case, and that still seems likely. That doesn't mean that there aren't problems with the government's analysis. Its focus on using a Supreme Court ruling from a century ago ("Williams") which covered an obscure issue not directly relevant, still seems problematic to me -- but not so problematic that the Supreme Court is likely to weigh in.

Statutory damages are a massive problem with copyright law today. They are way out of proportion with any actual harm, and thus do raise considerable questions, that might amount to interesting Constitutional challenges. That doesn't mean that this case was the right case (in fact, it has many problems). Even so, it's a bit disappointing to see the Obama administration weigh in at all on the issue, giving a de facto thumbs up to massive and ridiculous statutory damages. The basic conclusion of "Congress decides, and that's good enough" is a real problem:

That public interest cannot be realized if the inherent difficulty of proving actual damages leaves the copyright holder without an effective remedy for infringement or precludes an effective means of deterring further copyright violations. The statute reflects a legislative determination of the range of assessments necessary to vindicate those public interests, see 17 U.S.C. 504(c), and Congress’s judgment as to the appropriate amounts is entitled to deference.

If the administration was interested in true leadership in fixing the problems of the copyright system, it would not condone such clearly ridiculous awards. Doing so merely confirms that it remains focused on helping out its friends in legacy industries, rather than reflecting what is actually best for the public.

This is hardly a surprise, but similar to the Joel Tenenbaum case, Jammie Thomas-Rasset (the other person sued for copyright infringement for using a file sharing system), has lost again. The appeals court (8th Circuit) has ruled that $9,250 per song infringed is perfectly reasonable and that the judge in the case, Michael Davis, erred in calling for a new trial after the initial jury verdict (the first of three). There were a number of procedural issues here, and it's worth pointing out that Thomas-Rasset herself more or less asked the court to bring back this first verdict and focus on the Constitutionality of the damages amount. So, the whole mess with the three separate district court trials sort of gets swept under the rug. However, the court simply isn't buying Thomas-Rasset's claim that the statutory damages are unconstitutionally punitive and a violation of due process. Basically, it says that the fact that statutory damages are completely out of whack with actual damages doesn't matter, because the point of statutory damages is that they're disconnected from actual damages on purpose (because, in theory, they're put in place because actual damages are difficult to assess).

Given that, the court then takes the statutory range (basically $750 to $150,000 -- upper limit is $30,000 if not willful) and basically says, "well, $9,250 is at the low end of the range, so it's fine."

We conclude that an award of $9,250 per each of twenty-four works is not “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” .... Congress, exercising its “wide latitude of discretion,”... set a statutory damages range for willful copyright infringement of $750 to $150,000 per infringed work.... The award here is toward the lower end of this broad range. As in Williams, “the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to [federal law]” support the constitutionality of the award.

Because of this, it argues that crazy copyright statutory damages somehow automatically "motivate the creative activity."

Congress’s protection of copyrights is not a “special private benefit,” but is meant to achieve an important public interest: “to motivate the creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired.” ... 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 fifty percent 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

The court then accepts as fact (a) these highly dubious claims that the record labels are in trouble and it's all due to copyright infringement online and (b) that such awards actually act as a deterrent. The truth is both of these statements are factually incorrect. The record labels are in trouble because they failed to adapt to a changing market. And awards of many thousands of dollars for infringing on a single song don't act as a deterrent at all. They just seem so far away from any sense of reality that they actually make people respect copyright even less.

I've long been a believer that the RIAA and the labels sued Tenenbaum and Thomas-Rasset for just a couple dozen songs, but then kept making the point that they were really sharing over a thousand to defend the ridiculously large awards. If that's the case, then they should have sued over all of the songs -- because you can't defend against that which you weren't sued over. In this appeal, Thomas-Rasset more or less tried to use a variation on that argument to prove the insanity of the $9,250 number, pointing out that if she had been sued over 1,000 songs, then she would have owed $9.25 million, which just seems obviously ridiculous. Unfortunately, the court makes a weird statement to avoid that logic:

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.”

Is that really true, though? The court seems to be saying that it's only the total amount that matters, and not the amount per violation. But that makes no sense. Since the question is whether it's "disproportioned to the offense" then, um, the offense itself is important. Yet, here the court is arguing "24 songs or 1,000 songs, doesn't matter -- just the total amount matters."

The court also said that Judge Davis shouldn't have ordered a mistrial, as he did over faulty jury instructions in that original jury trial. The issue was over mistaken jury instructions, concerning whether or not "making available" is infringement. The RIAA was hoping that the court would also confirm their highly questionable theory that merely "making available" (i.e., putting something in a shared folder) is infringement itself, rather than the view of many that you have to show something that actually violates one of the rights under the Copyright Act (distribution, reproduction, etc.). Making available is not one of those rights, but the RIAA and copyright maximalists like to pretend it is, and they were hoping the court here would say it was. Instead, the court punts on the issue, saying that because it can handle the main issues at hand without having to deal with the making available question, they'll skip it, thank you very much:

But because the verdicts returned by the second and third juries are sufficient to justify these remedies, it is unnecessary for this court to consider the merits of the district court’s order granting a new trial after the first verdict. 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.

Thomas-Rasset's attorneys have made it clear they plan to appeal, though there's no guarantee that the case will go anywhere. It appears unlikely that there will be any sort of circuit split between this case and the Tenenbaum case, as both seem to be heading in similar directions (though somewhat different paths). And, as I've said before, both of these cases were the wrong ones to fight for a precedent on. In both cases, you have clear examples of "bad actors" -- who not only infringed, but knew they were infringing -- and who then took steps that make it easy to portray them as bad actors in court, whether it was trying to blame others or outright lying to the court. Both Thomas-Rasset and Tenenbaum should have settled their cases long ago. There are important Constitutional questions about statutory damages for copyright, but these two make bad cases and they're making it easy for the courts to put in place dangerous precedents that guarantee that copyright law gets no respect from the public, and that damages are wholly outside the realm of reasonable.

In the latest round of the fight over how much Jammie Thomas-Rasset should pay for sharing 24 songs online, we have the federal government weighing in to say that $1.5 million for those 24 songs is perfectly reasonable and Constitutional. Must help that the White House Solicitor General was previously a litigator for the RIAA in the case, huh (though, he did not write the filing)?

If you don't recall, there are statutory rates for copyright infringement, which are ridiculously high, and it seems reasonable to question if those awards, which seem totally disproportionate to any "damages," could be seen as excessive under the Constitution.

The district court judge, Michael Davis, clearly felt so. Ditto Judge Nancy Gertner in the Joel Tenenbaum case. However, the government apparently is going to argue that the statutory rate is the statutory rate and we must respect that. The argument is basically the same behind the implementation for statutory rates in the first place. To paraphrase: "man, it's freaking hard to have to show actual damages (since there might not be any) and thus we shouldn't have to do that -- but should just be able to use these crazy high numbers." This argument seems silly frankly. It's basically saying that even if you could look at damages, you should never have to. That's a big part of the problem. It leads to cases like this where people are heavily pressured to settle just to avoid the risk of crazy high statutory damages.

But where the government's argument goes off the rails, is the idea that when it comes to statutory damages, there's never a due process question over whether the rates are excessive. That makes no sense, but it's the argument being made:

Contrary to defendant’s contentions, the Due Process Clause does not require that the statutory damage award be proportional to the actual harm defendant has caused the plaintiff. Defendant attempts to derive this rule from BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996). But as the district court held, Williams, not Gore, establishes the applicable framework for determining whether an award of statutory damages under the Copyright Act comports with due process.

Gore is inapposite. It imposes limitations on a jury’s authority to award punitive damages in circumstances where the legislature has not constrained the jury’s discretion. It thus requires that the jury award not be grossly disproportionate to the plaintiff’s injury or defendant’s misconduct. Absent such limitations, the Gore Court reasoned, defendants could not have fair, constitutionally sufficient notice of the magnitude of potential sanctions.

The Gore framework, however, does not apply to a statutory regime in which Congress has specified in advance the range of appropriate damages. In that circumstance, the statute itself supplies the constitutionally required notice deemed missing in Gore. Moreover, unlike jury awards of punitive damages, an award of statutory damages is based on legislative judgments that must be accorded deference by the reviewing court. Williams, not Gore, sets forth the appropriate standards for conducting such review.

To summarize this argument, it's that Congress can do whatever the hell it wants in setting statutory rates, and no one can ever question if those rates are "excessive." Effectively, it's saying that Congress doesn't have to obey the Constitution. That makes no sense. And yes, it relies on this Supreme Court ruling from 1919, which is a pretty narrow ruling, concerning conditions under which you could measure such regulatory fines against the due process clause. However, this argument really tries to make that case do a hell of a lot more than it was designed to do -- while also trying to pretend that a whole series of other cases involving excessive fines as they relate to due process don't matter.

Either way, the end result is that the administration is effectively saying that a $1.5 million award for sharing 24 songs isn't just perfectly legal and reasonable, but that it's what Congress intended. All it really does is reiterate just how out of touch the White House is to reality.

I guess it's fitting that this happens in early February. Slashdot points us to the news that, as was widely expected, the record labels have opted for a third trial of Jammie Thomas-Rasset, rather than accept the reduced award of $2,250 per song, as set by the judge. Not surprisingly, the labels are doing this because they disagree with the precedent of a judge changing the jury award, and the new trial is limited solely to the damages question. But, honestly, the whole thing is a bit weird. If the judge can reduce the older jury award, and a new jury sets a higher rate, can the judge just reduce it again, and we go through this entire process for the fourth time? The Slashdot post, written by Ray Beckermann claims that the labels "could only win a verdict that is equal to, or less than, $54,000," in the new trial, but I'm not sure why he says that. Is it because the judge would reduce it again? This is not at all clear.

Still, the actual filing from the RIAA's lawyers has some interesting claims (pdf):

While Plaintiffs do not believe that either verdict was improper under the law, or that the second verdict should be remitted, they would have considered accepting a remittitur simply so that this case could finally come to an end. However, any remittitur must otherwise be consistent with the law and be guided by what actual juries have awarded under similar circumstances. Unfortunately, Plaintiffs find it impossible to accept a remittitur that could be read to set a new standard for statutory damages -- essentially capping those damages at three times the minimum statutory amount of $750 (or $2,250) for any "noncommercial individuals who illegally download and upload music." (Id. at 2, 25.) This far-reaching determination is contrary to the law and creates a statutory scheme that Congress did not intend or enact.

It's a bit of a stretch to claim that this would be a cap on "any" unauthorized noncommercial file distribution. I would imagine that any court still has the right to take into account the specific circumstances to make sure the award is proportionate to the rights being violated. The labels' lawyers are stretching what the judge said here.

Indeed, Congress has spoken on this very topic. Congress deliberately and purposefully established a range of statutory damages that applies without regard to the commercial motivation of the defendant.

I find this statement funny, because they then cite what Congress said way back in 1999. Fair enough, Congress (which basically just took RIAA talking points and put them into the Congressional record) did make those comments -- but these are the same entertainment industry lawyers who supported a "secondary liability" or inducement standard in the Grokster case, even though Congress had specifically rejected an attempt to put an inducement standard into the law. And when confronted, how does the RIAA explain that? Well, they say "the situation changed." Ah, so it's okay to have the courts change copyright law when the situation changes in one direction, but not the other?

What the judge was doing here was recognizing that the amount the jury awarded was clearly out of proportion to the actual infringement -- just as the courts in Grokster supposedly recognized that an inducement standard made sense in shutting down third parties (something I disagree with, but it's how the court felt). It seems that the RIAA and its lawyers have a massive double standard here.

A rule that the maximum permissible award in cases involving so-called "noncommercial" infringers is three times minimum statutory damages also ignores the harm caused by such infringers. From an economic perspective, individuals who give away copyrighted works illegally can cause as much harm as those who sell those works illegally, particularly when the so-called "non-commercial" infringer uses a P2P service. The notion that an infringer who does not make a profit should automatically be entitled to better treatment than an infringer who does make a profit is found nowhere in the law. The "not for profit" infringer is hardly entitled to special protection, which is why Congress conferred no such protection.

Again, Congress also conferred no such thing as an inducement liability, but the courts -- at the urging of the RIAA -- conferred exactly that via the courts. Why such a double standard?

The Court's cap would set a new ceiling such that no copyright owner could effectively enforce their rights unless they could and did sue on numerous works. No copyright owner would be motivated to enforce its rights where it could only sue on a handful of works because the potential recovery would be too limited. Congress set a wide range of statutory damages for copyright cases precisely because plaintiffs need to be incentivized to bring appropriate cases to enforce their rights -- even those who own a small number of copyrights or those who only have a limited number of works infringed. Conversely, the Court's artificially depressed cap compels parties with a large number of copyrights at stake to sue on all of them, rather than a more modest number. This serves only to increase the discovery and trial burdens on parties and courts. Yet the Court's inflexible "three times" cap would invariably penalize plaintiffs with a small number of works at issue, and would force those with a lot of works to add to their complaints unnecessarily.

Woe is the RIAA. If the awards for unauthorized sharing of a $1 song that might help promote their artists and help them make more money (if only the RIAA were to adapt to a changing market place) might "only" be 2,250 times the market price of the song? Cry me a river. And, even more ridiculous is the claim that this is some undue burden on the RIAA that it might have to actually sue over all of the songs someone distributed in an unauthorized manner, rather than just selecting a handful as it does now. This is a major issue. Technically, the RIAA has been able to just pick a couple dozen songs and sue over those, knowing that the totally disproportionate statutory damages will "cover" the rest. But does that seem right to anyone? The idea that rather than proving the actual harm done by the actual distribution, the RIAA is allowed to just pick a "sampling" and without proof get back many times the price without even presenting any actual evidence of the wider damage or the wider distribution of more files?

It seems perfectly reasonable to expect the RIAA should have to actually include what they claim was infringed, rather than being able to just pick a handful, knowing that the totally out of proportion statutory damages will "cover" the rest.

In fact, the paragraph above is effectively the RIAA admitting that it knows the statutory damages are out of proportion, but it believes it's fair because the RIAA is too cheap and too lazy to actually sue people for what it claims they infringed on.

Talk about a sense of entitlement.

Still, as we've said for a while now, this is a really bad case all around. It's pretty clear that Thomas-Rassett was involved in widespread infringement, and then lied about it. If people are going to challenge ridiculous statutory rates and other aspects of copyright law, this is really bad case to do that (ditto for the Tenenbaum case). This is one where it seems like she really might have been better off settling early and moving on. And the oddity of the judge reducing the jury award just makes this whole case into something of a circus...

After the judge in the Jammie Thomas-Rasset case decided to reduce the amount awarded to the record labels by the jury, we had hoped that both sides would figure out a way to just end this lawsuit. However, it looks like that's not happening. As we noted, the RIAA was extremely reluctant to accept the new, greatly reduced, award, not because of the amount, but because they're afraid to set precedent that a judge can lower the award in chosen by a jury using statutory damages in a copyright case. So, instead, the RIAA tried to offer Jammie a deal: pay $25,000 (donated to a musician's charity) and ask the judge to vacate the reduction in the award, and the case would be settled. This isn't surprising. The RIAA would just like the case to be over, but doesn't want to set the precedent, so they ask Thomass-Rasset to pay less, but the "trade" is to get the decision deleted. Thomas-Rasset quickly rejected the offer, and now it seems likely that the RIAA will reject the reduced amount and everyone will go back to trial over just the damage amount. In an interesting bit of spin, Thomas-Rasset's lawyers are claiming that this shows that the RIAA just wants to use this case as a "bogeyman" in order "to scare people into doing what they want," rather than as an attempt to actually recover any real damages.