Category Archives: Illegal File Sharing

Minnesota Judge Finds $1.5mm Jury Award Unconstitutional in File-Sharing Case

For the third time, Chief Judge Davis of the District of Minnesota federal court has reduced a jury’s award of statutory damages against Jammie Thomas-Rasset.  In October, 2007 the first jury awarded plaintiff record label Capital Records $222,000 based on Thomas-Rasset’s illegal sharing of 24 songs ($9,250 / song).  Judge Davis awarded a new trial because he believed he had given improper jury instructions.

In June, 2009, a second jury awarded $1,920,000 for illegally sharing the same 24 songs ($80,000 / song).  Judge Davis remitted the jury’s award down to $2,250 / song (or $54,000), but Capital Records rejected the remittitur and a third trial was held on the issue of damages.

Finally, in November, 2010, a third jury awarded $1,500,000 ($62,500 / song).  This time, realizing remittitur was not a viable option to ending the litigation, Judge Davis has held that the jury’s award violates Thomas-Rasset’s constitutional due process rights.  Specifically, Judge Davis held that “an award of $1.5 million for stealing and distributing 24 songs for personal use is appalling. Such an award is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable. In this particular case, involving a first-time willful, consumer infringer of limited means who committed illegal song file-sharing for her own personal use, an award of $2,250 per song, for a total award of $54,000, is the maximum award consistent with due process.”

Judge Davis wisely avoids the faulty logic of Judge Gertner’s similar due process analysis in Sony BMG Music Entertainment v. Tenenbaum, 721 F. Supp.2d 85 (D. Mass. 2010).  In reducing the jury’s award of $675,000 ($22,500 for each of the 30 songs at issue) to $2,250, Judge Gertner based her award on Judge Davis’ remitted award in Thomas-Rasset v.2.  She analyzed the constitutionality of the jury’s verdict under the Supreme Court’s BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996) (“Gore”) standard, which provides a three factor test to determine whether an award of punitive damages is constitutional.  The myriad flaws in her decision are for another post.

Judge Davis wisely adopts the Supreme Court’s standard in St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67 (1919) (“Williams”), in which the Court established a three factor test to determine the constitutionality of statutory damages.  What is fascinating about Judge Davis’ opinion is that it appears that the jury’s verdict satisfies each of the Williams factors, and yet he still finds the award unconstitutional.

For example, the first factor is the public interest.  Here, Judge Davis concludes “There is a significant public interest in vindicating copyright.”  The second factor is the opportunities to commit the offense.  Here again, Judge Davis concludes “It is clear that there are ‘numberless opportunities for committing the offense’ of illegally downloading and distributing sound recordings online.”  Judge Davis continues, “The third Williams factor [is] ‘the need for securing uniform adherence to established passenger rates.’ The need for deterrence also exists in this case.”  So, all three Williams factors point towards plaintiff Capital Records.

Judge Davis, however, begins the final section of his opinion by stating:

“To protect the public’s interest in enforceable copyrights, to attempt to compensate Plaintiffs, and to deter future copyright infringement, Thomas-Rasset must pay a statutory damages award. Plaintiffs have pointed out that Thomas-Rasset acted willfully, failed to take responsibility, and contributed to the great harm to the recording industry inflicted by online piracy in general. These facts can sustain the jury’s conclusion that a substantial penalty is warranted. However, they cannot justify a $1.5 million verdict in this case.”

In other words, Judge Davis’ entire constitutional due process analysis appears to boil down to, “I personally think this is too high an award.”  There is no further legal support to his position.  In fact, later in the opinion he states “The Court accords deference to the jury’s verdict. Yet an award of $1.5 million for stealing and distributing 24 songs for personal use is appalling. Such an award against an individual consumer, of limited means, acting with no attempt to profit, is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”

But the jury’s verdict is quite clearly not obviously unreasonable.  As noted above, the three juries in this case awarded damages of $9,250, $80,000, and $62,500 per song.  The jury in Tenenbaum awarded $22,500 per song.  While that range is pretty wide, the juries have awarded between 4 and 35 times as much as both Judge Davis and Judge Gertner find “obviously unreasonable.”

Congress created the statutory damages scheme of the Copyright Act to allow juries to determine awards within a range, which all three juries did in the Thomas-Rasset case.  I’m confident that the 8th Circuit will reverse the inevitable appeal.

Judge Davis’ opinion is below:
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Will Foreign Streams Escape Infringement Claims When Delivered to US?

That is the subject of a new paper by Tom Bell that will appear in an upcoming  edition of Southwestern Law School’s Journal of International Law, entitled “Pirates in the Family Room: How Performances from Abroad, to U.S. Consumers, Might Evade Copyright Law.”  The paper can be accessed here.  In it, Prof. Bell argues that the coming age of unauthorized on-demand streams of songs — as opposed to the illegal downloading of songs through P2P networks — poses some significant problems for content owners’ attempt to thwart piracy.  Fundamentally, the recipient of these unauthorized streams (i.e., individual consumers in the U.S.) are probably exempt under § 110(4), the so-called “personal use” exception.   Because no copy has been made on his/her hard drive, content owners won’t have an unauthorized reproduction or distribution claim against the consumer who merely listens to a song being streamed from abroad.  Anti-piracy initiatives will have to be directed to the host countries and the ISPs to shut down access to the websites.

Tough Sledding for the Porn Litigator

Porn litigator John Steele is getting a LOT of push back from Judge Baker in the Central District of Illinois.  Unlike Judge Howell in the D.C. District who recently denied Time Warner Cable’s motion to quash a subpoena issued in a similar John Doe copyright infringement case (see post here for details), Judge Baker is having none of Steele’s attempts to get discovery prior to a Rule 26(f) conference.  This puts Steele between the proverbial rock and hard place.  Steele can’t get a 26(f) conference until he has a named adversary.  He can’t get a named adversary until he gets responses to his subpoenas from the ISPs identifying the names associated with the IP addresses he has.  And he can’t get responses to his subpoenas until Judge Baker grants his motion for expedited discovery.

Judge Baker notes that IP addresses are bad proxies for identifying actual infringers, citing a recent MSNBC news story about someone who was caught up in a federal anti-child porn case based on the IP address associated with the downloading of child porn.  It turned out that this person’s neighbor had used an unsecured WiFi network to download the offending porn, which should be good enough reason to lock down your home network.

His Honor’s order is below:
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Statutory Damages Go to the Dogs (and Cats) Part Deux: Albums as Compilations and Statutory Damages

In what can only be the universe trying to get me to write more about statutory damages, today I read Judge Wood’s most recent decision in the Limewire case and discovered an interesting article by Wyatt Glynn entitled “Musical Albums as “Compositions”: A Limitation on Damages or a Trojan Horse Set to Ambush Termination Rights?”  The former decision deals with the record labels’ motion seeking entitlement to statutory damages for each individual sound recording infringed by users of Limewire’s file sharing protocol, even if those sound recordings appeared as part of a compilation.  The latter article considers the recent case of Bryant v. Media Rights Prods., Inc., 603 F.3d 135, 141 (2d Cir. 2010) and the potential impact of that decision, which found that the plaintiffs were only entitled to one award of statutory damages because the sound recordings had been issued as albums and were, therefore, “compilations” under the Copyright Act, on terminations of transfer.

In finding that the record labels were entitled to individual awards of statutory damages for each sound recording infringed, Judge Wood distinguished her Limewire case from Bryant by noting that the plaintiffs in Bryant had only issued their recordings as a compilation; i.e., the individual sound recordings had never been issued by the plaintiffs as “singles” but only as a CD.  Only later, when those digital albums were made available on iTunes, were the individual sound recordings available as “singles.”

The calculation of damages in the Limewire case is going to require a MIT math wiz to calculate.  Here is how Judge Wood described the statutory damages available to the record label plaintiffs:

For albums that contain sound recordings that are available only as part of the album, and
sound recordings that are also available as individual tracks, the Court provides the following example for purposes of illustration. Let us assume that Plaintiffs issued (1) an album containing songs A, B, C, and D, and that Plaintiffs also made available (2) songs A and B as individual tracks, but (3) made available songs C and D only as part of the album as a whole. Let us also assume that songs A, B, C, and D were infringed on the LimeWire system during that time period. Plaintiffs would be able to recover three statutory damage awards: one award for song A, one award for song B, and one award for the compilation (of which C and D are a part).

The concern of the author of the article is whether the Second Circuit’s holding in Bryant that albums are “compilations” under § 101 of the the Copyright Act might impact recording artists ability to terminate their copyright transfers under § 203 of the Copyright Act.  For the uninitiated, § 203 provides that an author who has transferred the rights to her copyrighted work may, after 35 years, terminate the assignment of the copyright notwithstanding any agreement to the contrary.  This being the Copyright Act, there is, of course, an exception; there is no right to terminate a transfer for a “work made for hire.”  As the author discusses, whether the “album” as currently constituted today fits the statutory definition of a “compilation” is hotly contested; e.g., if a song is issued first as a single and then as a part of a digital album, is that a “compilation”?  If they are compilations, then record companies can rest easy in the knowledge that they will own the copyrights in those sound recordings until they expire.  If they are not compilations, then record companies face a mass exodus of famous (and very profitable) back catalog in the coming years.

An interesting application of this issue can be found in Arista Records LLC v. Launch Media, Inc. where the Second Circuit held in a case of first impression that the Launchcast personalized Internet radio service was not an “interactive” service under the Copyright Act.  Because the Second Circuit determined that Launch as non-interactive–and, therefore, not infringing–the Court never considered whether the record label plaintiffs were entitled to damages based on individual sound recordings or only on a per-compilation basis.  The Launch brief to the Second Circuit, however, contains a nice encapsulation of how this issue plays itself out in interesting ways. According to their brief (around page 51):

During the trial, plaintiffs stipulated as follows: (1) every copyright at issue
was a single registration for “an album consisting of multiple tracks”; (2) for all
but 11 of the 835 copyrights at issue, the copyright registration was denominated
as a “work made for hire”; (3) for every copyright at issue “the recording artist
whose recordings are the subject of the Certificates were not employees of the
copyright claimants.” … These facts, taken together, lead to the
inescapable conclusion that the registrations at issue were, in fact, for
compilations.

Judge Wood’s Limewire decision is here:
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Wyatt Glynn’s article is available by clicking here.

Launch Media’s Second Circuit brief is here:
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Illegal (Movie) File Sharers Beware! We Will Find Out Who You Are!

If you thought it would be hard to fill all those hours you spent reading / complaining about / championing the RIAA’s litigation efforts against illegal file shares, your prayers have been answered.  Over the last year a number of “innovative” lawyers have taken to representing movie producers and distributors in similar actions, with a surprising number involving porn; e.g., Illinois lawyer John Steele who represents Arizona porn producer CP Productions, West Virginia lawyer Ken Ford, the lawyer behind the Adult Copyright Company, and Texas lawyer Evan Stone, who in addition to suing on behalf of gay porn creator Lucas Entertainment is filing suits on behalf of anime producer FUNimation.  The main difference between the RIAA’s strategy and these new suits is volume, volume, volume.  These enterprising plaintiffs have sued more defendants in 2010 alone that the RIAA did during its entire campaign.

Whatever you may think of these massive John Doe suits from an ethical, moral or business model viewpoint, these suits have not been without their share of real legal problems. A critical legal issue in many (all?) of these cases has been the Internet Service Providers’ motions to quash the pre-discovery subpoenas served by the plaintiffs to obtain the identity of the users associated with the IP addresses alleged to have been engaged in the illegal file sharing.

While other judges have been less receptive to these plaintiffs, Judge Beryl Howell of the District Court for the District of Columbia recently denied Time Warner Cable’s motion to quash and ordered TWC to produce the identities of the individuals associated with more than 5,500 IP addresses.

By way of background, the plaintiffs in these three consolidated cases allege that the John Doe defendants each used the BitTorrent file-sharing protocol to illegally download copies of the plaintiffs’ copyrighted movies.  According to the plaintiffs’ BitTorrent is unique (compared to, e.g., Napster) in that it “makes every downloader also an uploader of the illegally transferred file(s). This means that every “node” or peer user who has a copy of the infringing copyrighted material on a torrent network must necessarily also be a source of download for that infringing file.”  [Legally speaking, the illegal copying of the plaintiffs’ works by these John Doe defendants arise out of the same transaction, occurrence, or series of transactions or occurrences, which Judge Howell found met the standard for permissive joinder under FRCP 20(a)(2)(A).]  The plaintiffs hired Guardaley Limited, an anti-piracy firm, to identify the users that were illegally sharing the plaintiffs’ motion pictures, and then provided the plaintiffs with the alleged infringers’ IP addresses, as well as the date and time the alleged infringement activity occurred.  The plaintiffs then filed suit against the John Doe defendants and moved for pre-Rule 26(f) discovery in the form of subpoenas compelling ISPs to identify the individuals associated with those IP addresses.

Most of the commentary about the Judge’s denial of TWC’s motion to quash has centered around this passage:

“If the Court were to consider severance at this juncture, plaintiffs would face significant obstacles in their efforts to protect their copyrights from illegal file-sharers and this would only needlessly delay their cases. The plaintiffs would be forced to file 5,583 separate lawsuits, in which they would then move to issue separate subpoenas to ISPs for each defendant’s identifying information. Plaintiffs would additionally be forced to pay the Court separate filing fees in each of these cases, which would further limit their ability to protect their legal rights. This would certainly not be in the “interests of convenience and judicial economy,” or “secure a just, speedy, and inexpensive determination of the action.” Lane v. Tschetter, No. 05-1414, 2007 WL 2007493, at *7 (D.D.C. July 10, 2007) (declining to sever defendants where “parties joined for the time being promotes more efficient case management and discovery” and no party prejudiced by joinder).”

Commentators have focused on that fact that Judge Howell appears to be more concerned with the (economic) efficiencies of the plaintiffs rather than the interests of the unnamed John Doe defendants.   (For example, amicus in the case argued the unnamed defendants have a First Amendment interest in anonymous Internet speech.)

To me, the more interesting quote from the opinion is the following, dealing with TWC’s complaint that it would be too burdensome to respond to so many IP look-up requests: “The overbreadth that Time Warner complains of is due to the large number of Time Warner’s customers allegedly engaging in infringing activities and prompting the plaintiffs’ need for their identifying information. This, however, does not render the subpoenas overbroad in terms of the information requested about each defendant.”  The not-so-subtle jab at TWC reminds me of the comments of Paul McGuinness, U2’s manager, when he criticized ISPs for having profited off of their customers illegally sharing music (and increasingly now video).  It is hard to feel sorry for TWC when TWC creates and profits from the environment that enables this massive file sharing to occur.

Since this ruling and publicity that has followed it, it has been revealed that Judge Howell used to lobby for the RIAA, this implication being she was biased.  Reading her opinion, I think she had some sympathy for the plaintiffs, but her argument that it is judicially economical to identify all of the defendants in one suit and then allow those named defendants to object to joinder and/or personal jurisdiction makes some sense to me.

The documents are below.

TWC’s Motion to Quash
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EFF Amicus in Support of TWC
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Plaintiffs’ Response to EFF
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Opinion
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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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Illegal File Sharing Is Good! Who Knew???

The record industry has been telling us that illegal file sharing is responsible for the decline in music sales.  Now comes a report from a couple of economists from the London School of Economics that concludes the

“Decline in the sales of physical copies of recorded music cannot be attributed solely to file-sharing, but should be explained by a combination of factors such as changing patterns in music consumption, decreasing disposable household incomes for leisure products and increasing sales of digital content through online platforms.”

So there, record industry!  The decline in recorded music sales from over $26 billion in 2000 to under $16 billion last year cannot be attributed “solely” to the millions of people illegally sharing billions of your songs over the same period.  Its also because people are spending more of their “music money” on live performances (tell that to Live Nation).  Oh, and people are poorer.

None of this bodes well for the music business in recapturing the Halcyon Days of the CD boom.  But maybe the CD boom was an aberration…

Anyway, the report is below:
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