Huge Copyright Awards are Constitutional – Capitol Records v. Thomas-Rasset

Jammie Thomas-Rasset was accused by various record companies of using the file sharing program KaZaA to commit copyright infringement.  During the trial Thomas-Rasset claimed she had never heard of the file-sharing program KaZaA.  The record companies, however, put on evidence that showed Thomas-Rasset replaced the hard drive in her computer after being notified of the copyright infringement claims.  A jury found Thomas-Rasset guilty of willfully infringing copyrights of twenty-four songs.  The jury awarded damages of $222,000.

Several months later the court sua sponte raised the issue of an incorrect jury instruction.  the judge decided that the jury instructions incorrectly stated that “the Copyright Act forbids making sound recordings available for distribution on a peer-to-peer network, regardless of whether there is proof of ‘actual distribution’.”  A new trial was granted.

After the second trial, a second jury found Thomas-Rasset guilty of copyright infringement and awarded damages of $1,920,000.  The judge changed the award to $54,000 on the grounds that the jury award was “shocking.”  The record companies declined the remitted damage award and a new trial was ordered just on damages.  The third jury award damages of $1,500,000.  The judge again reduced the award to $54,000 finding that the $1.5M award violated the Due Process Clause of the Fifth Amendment.

The record companies appealed the judge’s reduced award to the United States Court of Appeals for the Eighth Circuit and requested that the original jury award of $222,000 be reinstated.  Specifically the record companies wanted a ruling that the court erred by holding that an individual does not infringe a copyright by making a copyrighted work available to the public without authorization.

Thomas-Rasset cross-appealed that any award of statutory damages was unconstitutional. In particular, Thomas-Rasset requested that the first damage award of $222,000 be reinstated, but then requested that the appeals court find that amount unconstitutional.

The Eight Circuit, however, refused to address the issues raised by the record companies — namely, is making a copyrighted work “available” a violation of the Copyright Act.  Instead, the appeals court found that the trial court should have enjoined Thomas-Rasset from making copyrighted works available to the public and that statutory damages of $222,000 were constitutional.

For the reasons set forth below, we conclude that when the district court entered judgment after the verdict in the third trial, the court should have enjoined Thomas-Rasset from making copyrighted works available to the public, whether or not that conduct by itself violates rights under the Copyright Act. We also conclude that statutory damages of at least $222,000 were constitutional, and that the district court erred in holding that the Due Process Clause allowed statutory damages of only $54,000. We therefore will vacate the district court’s judgment and remand with directions to enter a judgment that includes those remedies. The question whether the district court correctly granted a new trial after the first verdict is moot.

Regarding the extent of the injunction, the appeals court found that it was error for the district court judge not to issue an order that prevented Thomas-Rasset from making sound recording available for distribution.

After the third trial, the district court entered an injunction that prohibits Thomas-Rasset from “using the Internet or any online media distribution system to reproduce (i.e., download) any of Plaintiffs’ Recordings, or to distribute (i.e., upload) any of Plaintiff’s Recordings.” The recording companies urged the district court to amend the judgment to enjoin Thomas-Rasset from making any of their sound recordings available for distribution to the public through an online media distribution system. The district court declined to do so on the ground that the Copyright Act does not provide an exclusive right to making recordings available. The court further reasoned that the injunction as granted was adequate to address the concerns of the companies.
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We conclude that the district court’s ruling was based on an error of law.
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The recording companies rightly point out that once Thomas-Rasset makes copyrighted works available on an online media distribution system, she has completed all of the steps necessary for her to engage in the same distribution that the court did enjoin. The record also demonstrates the practical difficulties of detecting actual transfer of recordings to third parties even when a party has made large numbers of recordings available for distribution online. The narrower injunction granted by the district court thus could be difficult to enforce.

For these reasons, we conclude that the district court erred after the third trial by concluding that the broader injunction requested by the companies was impermissible as a matter of law. An injunction against making recordings available was lawful and appropriate under the circumstances, even accepting the district court’s interpretation of the Copyright Act.

Regarding damages, the court found that the statutory damages of $9,250 for each song did not violate the Due Process Clause.

The Supreme Court long ago declared that damages awarded pursuant to a statute violate due process only if they are “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67 (1919). Under this standard, Congress possesses a “wide latitude of discretion” in setting statutory damages. Id. at 66. Williams is still good law, and the district court was correct to apply it.
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Applying the Williams standard, 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.” 251 U.S. at 67. Congress, exercising its “wide latitude of discretion,” id. at 66, set a statutory damages range for willful copyright infringement of $750 to $150,000 per infringed work. 17 U.S.C. § 504(c). 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. Id. at 67.

While the court in dicta indicated that a hypothetical multi-million dollar award for non-commercial copyright infringement might be unconstitutional, such was not the case before the court.  And so the Eighth Circuit vacated the district court’s judgment and reinstated the original damages award of $222,000 along with an expanded injunction that prevents Thomas-Rasset from making any of the record company’s songs available for distribution to the public.