Statutory damages in copyright law: a remedy in need of reform.

• Author: Samuelson, Pamela
• Position: Boundaries of Intellectual Property Symposium

TABLE OF CONTENTS INTRODUCTION I. THE EVOLUTION OF STATUTORY DAMAGES IN U.S. COPYRIGHT LAW A. Statutory Damages Under the 1909 Act B. Statutory Damages Under the 1976 Act 1. Respects in Which Congress Limited Statutory Damages 2. Respects in Which Congress Broadened Statutory Damages II. STATUTORY DAMAGES AWARDS IN COPYRIGHT CASES SHOULD BE CONSISTENT WITH DUE PROCESS PRINCIPLES A. The Supreme Court's Due Process Jurisprudence Limits Punitive Damage Awards B. Some Copyright Statutory Damage Awards Are Consistent with Congress's Intent and Due Process Principles C. Some Copyright Statutory Damage Awards Are Inconsistent with Congressional Intent and Due Process Principles D. Punitive Statutory Damage Awards Are Subject to Due Process Limits III. PROPOSALS FOR REFORM A. Considering Statutory Damages in the Context of Other Copyright Remedies B. Reform Within the Current Statutory Framework 1. What Courts Should Do 2. What Courts Should Not Do C. Is There a Need for Legislative Reform? CONCLUSION INTRODUCTION

The United States is an outlier in the global copyright community in giving plaintiffs in copyright cases the ability to elect, at any time before final judgment, to receive an award of statutory damages, which can be granted in any amount between $750 and $150,000 per infringed work. (1) U.S. copyright law provides scant guidance about where in that range awards should be made, other than to say that the award should be in an amount the court "considers just," (2) and that the upper end of the spectrum--from $30,000 to $150,000 per infringed work--is reserved for "willful" infringers. (3) Although Congress intended this designation to apply only in "exceptional cases," (4) courts have interpreted willfulness so broadly that those who merely should have known their conduct was infringing are often treated as willful infringers. (5)

One might have expected courts to develop a jurisprudence to guide them in accomplishing the largely compensatory goal that has historically underlain the U.S. statutory damage remedy (6) or to formulate meaningful criteria for awarding enhanced damages in willful infringement cases. Unfortunately, this has not yet happened. Awards of statutory damages are frequently arbitrary, inconsistent, unprincipled, and sometimes grossly excessive. (7)

Consider a few examples. In UMG Recordings, Inc. v. MP3.com, Inc., a trial court held that the defendant had willfully infringed copyrights by developing a database of music "ripped" from CDs the firm had purchased, after which the judge announced his intent to award statutory damages of $25,000 per infringed CD. (8) Approximately 4,700 CDs were at issue in the case, for a potential total award of over $118 million--despite the absence of any evidence of actual harm to the plaintiffs or profits to the defendant. (9) In another case, Elvin Feltner was initially held liable as a willful infringer for his station's unauthorized broadcast of television programs for which a court awarded the copyright owner statutory damages of $20,000 per work, for a total award of $8.8 million. (10) On appeal, Feltner argued that he had a right to a jury trial on the issue of statutory damages, and the Supreme Court agreed with him. (11) On remand, Feltner got his jury trial, but the jury handed down an even larger statutory damage award of $72,000 per work for exactly the same acts of infringement, resulting in a total award of over $31 million. (12) In a recent peer-to-peer (p2p) filesharing case, Capitol Records v. Thomas-Rasset, a jury awarded $80,000 per infringed song against an individual file-sharer, for a total award of over $1.92 million, (13) despite the trial judge's recognition that actual damages were approximately $50. (14)

In the modern world in which the average person in her day-today life interacts with many copyrighted works in a way that may implicate copyright law, the dangers posed by the lack of meaningful constraints on statutory damage awards are acute. (15) Even a defendant who presents a plausible fair use defense at trial may find itself subject to large statutory damage awards. (16) Statutory damage awards are particularly likely to be grossly excessive when compared with actual damages in class action suits, or secondary liability cases such as those against technology developers, where the number of works potentially infringed is likely to be large. (17) In such cases, the potential chilling effect on individuals and technology providers alike is significant. (18)

Part I reviews the historical purposes of statutory damages for copyright infringement and demonstrates that Congress intended for statutory damages to be mainly compensatory in nature. Abjuring the prior law's "per sheet penalty" remedy for infringement that had melded together penal, deterrent, and compensatory functions, (19) Congress in the Copyright Act of 1909 separated these functions by creating a new criminal provision to punish infringements that were both willful and for profit, and by developing a nonpenal statutory damage regime to provide compensation when damages were difficult to prove and a range within which awards could be made to deter infringement. (20) In 1976, Congress made anew the unfortunate mistake of melding together compensatory and penal functions in the tripartite structure it established for statutory damage awards under the Copyright Act of 1976: very modest damages for the exceptional cases of innocent infringement, a rather broad range of damages for ordinary infringement, and enhanced levels of damages for the exceptional cases of willful infringement. This tripartite structure has not been respected in the case law. The application of statutory damages has too often strayed from the largely compensatory impulse underlying statutory damages for the first two categories, and has focused too heavily on deterrence and punishment by holding many ordinary infringements to be willful, which has resulted in many awards that are punitive in effect and often in intent.

Part II explains the implications of the Supreme Court's jurisprudence dealing with due process limits on punitive damage awards for statutory damage awards in copyright cases. (21) This Part gives numerous examples of cases in which copyright statutory damage awards are consistent with principles of due process; yet, there are also many cases in which such awards are inconsistent with the tripartite structure of the statutory damage regime and/or with due process principles.

Part III shows that it is possible, working within the current legal framework, to develop guidelines to ensure that statutory damage awards are properly tailored to achieving the remedy's goals. Drawing upon cases in which statutory damage awards have been consistent with the tripartite structure of [section] 504(c) and the Supreme Court's due process jurisprudence, Part III articulates principles upon which a sound jurisprudence for copyright statutory damage awards could be built. This Part also considers whether legislative reform of U.S. statutory damage rules might be desirable.

1. THE EVOLUTION OF STATUTORY DAMAGES IN U.S. COPYRIGHT LAW

   Statutory damages in U.S. copyright law have historically been intended to ensure that copyright owners could obtain at least some measure of compensation when it was difficult to prove how much damage they had suffered as a result of the defendants' infringements. (22) Although Congress made some effort to cabin statutory damage awards to avoid excessiveness in the Copyright Act of 1976, the presence of the enhanced damage provision available for willful infringements has led to an increasing number of awards that are not only punitive in effect, but punitive in intent. This trend is inconsistent with sound copyright policy and with Congress's intent in adopting this provision.

   1. Statutory Damages Under the 1909 Act

      Some historical context is useful to understand the purposes of the statutory damage regime established in the 1909 Act. (23) During the late eighteenth and throughout the nineteenth centuries, U.S. law allowed copyright owners to be awarded a statutorily set penalty of 50 cents, later increased to $1, per infringing sheet found in the defendant's possession. (24) For several decades, the per sheet penalty was the only monetary remedy that could be obtained from common law courts, although later amendments generally enabled copyright owners to recover actual damages in common law courts, (25) or if the suit was brought in equity, an accounting of the defendant's profits along with injunctive relief. (26)

      The legislative history of the Copyright Act of 1909 is replete with expressions of dissatisfaction with the per sheet remedy. (27) This dissatisfaction was due in part to the penal character of this remedy which caused courts to construe it narrowly, (28) and in part to the rigidity of rules about which remedies for infringement were available at law or in equity. (29)

      Perhaps the most important remedial reform introduced in the 1909 Act was the new law's authorization for one civil lawsuit to be brought in which actual damages and the defendant's profits (or the "in lieu" damages to be discussed shortly) could be awarded, as well as forfeiture of infringing copies and an injunction against future infringements.

      A second important reform was the elimination of the per sheet penalty, whose previously penal functions were now served by a criminal provision for willful infringements for profit, (30) and whose compensatory and deterrent functions were taken on by the availability of monetary relief for actual damages (for example, lost license fees) and defendant's profits attributable to infringement. (31)

      A third important reform was the creation of a new generalized regime of statutory damages, available "in lieu" of actual damages and profits, which could overcome the severe difficulties of proof of damages and profits about which...