Record Labels Only Get 1 Bite at LimeWire Apple

In May of last year, Judge Kimba Wood granted the record labels’ motion for summary judgment against LimeWire for secondary copyright infringement, to wit LimeWire had induced millions of people to illegally share billions of copyrighted sound recordings.  The case then entered the damages phase and things really got interesting.

The fights have thus far centered around the interpretation of §504(c) of the Copyright Act and the parameters for calculating an award of statutory damages.

The relevant portions of §504(c) Statutory Damages are highlighted below —

(1) … the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.

First, the record labels argued that they were entitled to an award of statutory damages for each single infringed, whether that single also appeared as part of a “compilation” (i.e., CD).  Next, the record labels argued that they were entitled to an award of statutory damages for each work infringed by each direct infringer (in addition to LimeWire).  To put numbers to the arguments, the record labels argued that they were entitled to 10 awards of statutory damages for each CD containing 10 songs (instead of 1) and were entitled to multiply those 10 awards by 1,000,000+ for each user of LimeWire that directly infringed the record label’s copyright by making an unauthorized copy (rather than just 1 award for LimeWire and all of LimeWire’s users).  Unsurprisingly, LimeWire adopted contrary positions.

The practical effect of these differences were summed up by Judge Wood in her recent decision rejecting the record labels interpretation of §504(c) of the Copyright Act as follows: “If Plaintiffs were able to pursue a statutory damage theory predicated on the number of direct infringers per work, Defendants’ damages could reach into the trillions [of dollars]. … The absurdity of this result is one of the factors that has motivated other courts to reject Plaintiffs’ damages theory.”

Judge Wood cites a number of cases supporting her conclusion, including McClatchey
v. Associated Press, No. 3:05-cv-145, 2007 WL 1630261 (W.D. Pa. June 4, 2007) and Bouchat v. Champion Prods., Inc., 327 F. Supp. 2d 537, 552 (D. Md. 2003), aff’d on other grounds, 506 F.3d 315, 332 (4th Cir. 2007).  These cases also involve massive downstream (or secondary) copyright infringement induced by the defendant.  The courts in both cited cases use the same “absurdity of the result” rationale in rejecting the plaintiff’s request that statutory damages be calculated on a per work – per direct infringer basis.

Interestingly, this case mirrors in some respect the file sharing jury verdicts.  While both lines of cases recognize that the purpose of statutory damages in copyright cases is both to (1) to afford copyright owners an easy means of establishing an amount of damages when direct evidence may be difficult or impossible to produce and (2) to deter infringement, the “absurdity” of the result leads the judge to rule in a way most favorable to the infringer, rather than the infringed.  In other words, the specter of billions of dollars in damages wasn’t enough to stop the developers of LimeWire from developing its P2P client enabling millions of users to infringe thousands of copyrights resulting in billions in individual infringements of plaintiffs’ copyrighted works.  Maybe the specter of TRILLIONS of dollars in damages would have (though I doubt it).  This is the same (faulty) logic that Judges Davis and Gertner applied in Capital Records v. Thomas, 06-1497 (D. Minn) and Sony BMG Music Entertainment v. Tennenbaum, 07-11446 (D. Mass.), respectively; i.e., that the jury award was higher than required to deter infringement despite the overwhelming evidence that infringement hasn’t decreased subsequent to the original jury awards.

The briefs and opinion are below.

Plaintiff’s Motion re Singles v. Compilations
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Defendant’s Response
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Plaintiff’s Motion re Multiple Awards
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Judge Wood’s Opinion
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