A Primer on the Most Notorious File-Sharing Case

Late Friday (July 22, 2011), the judge overseeing the Jammie Thomas-Rassett case again reduced a jury’s judgment against her to $2,250 per song, this time down from $62,500 a song, for 24 songs.  This is the second time he has done so (and the third trial), and in theory, he could do so again and again, ad infinitum.  A copy of his order is available here.

Several years ago, the RIAA adopted a strategy of directly suing the users of file-sharing software who used the software to download and distribute copyrighted music over the internet.  The way this software typically works is that you create a public folder, which you fill with song files, that other users of the system can access and from which they can download copies of the song files.  Most of the accused users settled with the RIAA, reportedly for a few thousand dollars each, but a few fought all the way to trial, arguing variously that file-sharing wasn’t technically a copyright violation, that they couldn’t be linked to the downloads in question, or (less plausibly) that it was a fair use.

One of these stubborn defendants was Thomas-Rassett, a single mother of modest means living in Duluth, Minnesota.  She was accused of infringing the copyright in 24 songs by making the songs available in her shared folder–which was said to contain many more songs than that.

There have now been three trials of Thomas-Rassett.  In the first trial, the jury found her liable in the amount of $222,000, or $9,250 per song.  The judge, however, had second thoughts about a crucial jury instruction that had to do with the tricky question of whether merely making files available was the same thing as distributing the songs.  One of the ways to infringe copyright is to distribute copies of the work (you need not have actually made the copies yourself), and the RIAA thought it should be enough to prove that Thomas-Rasset had the songs in her shared folder with the obvious intent to allow others to copy them.  Thomas-Rasset thought the RIAA should have to prove actual access to each song (i.e., that a third party actually at least attempted to download the song), which is difficult, but not impossible, to do.  Courts have split on this issue.

The judge ruled mostly in Thomas-Rasset’s favor on this issue, but he later became dissatisfied with the way the jury instruction was worded.  If the jury instruction is so wrong that it probably affected the jury’s decision, the proper thing to do is to order a new trial.  You can’t unring the bell or guess how the jury would have ruled with the correct jury instruction.  So, the court ordered a new trial.

In the second trial, the RIAA’s lawyers managed to overcome the new jury instruction with some improved evidence, and the jury found Thomas-Rassett liable for$1.92 million, or $80,000 per song.  The judge thought this amount was too high and wanted it reduced.  This brought up two different legal problems.

First, judges can’t just reduce jury awards.  All they can do is order a new trial.  What they do, in effect, is offer the plaintiff a deal.  If you accept the lower amount I’m suggesting, I won’t order a new trial.  This is called remittitur.  Most plaintiffs take the money.

The second problem is whether the judge even has the right to order a new trial in this situation.  In the usual remittitur case, the judge decides that there isn’t sufficient evidence to support the jury’s award.  Normally, you’re trying to prove “actual damages,” and to do this, you need to provide evidence of what that amount should be.  It can be simple.  For example, if a breach of contract (say, by a buyer) forced you to sell 1,000,000 units for one cent less than the contract price, a jury can easily figure out that you were damaged by $10,000.  It can be complex.  If a breach of contract (say, by a supplier) hurt your ability to sell your product for three months, you might need an expert to explain to the jury how much in sales you were likely to have made during that period, based on your past performance, how the market was performing overall, and economic conditions.

But the judgment against Thomas-Rassett wasn’t for actual damages.  It was statutory damages–a penalty provided by the Copyright Act that takes the place of actual damages.  These days, juries may choose an amount anywhere between $750 and $30,000 per work (e.g., per song), and up to $150,000 if the infringement was found to be “willful.”  Various reasons are given for this scheme, the most prominent of which (1) to spare copyright holders the burden of having to prove actual damages, which can be nearly impossible in copyright cases; and (2) to deter copyright infringement with large penalties much higher than the cost of a legitimate purchase or license of the copyrighted work.  Many copyrighted products are inexpensive–as song might cost only $.99–so if all an infringer had to do was pay what he should have paid in the first place, there isn’t much to deter him from infringing, when you consider the difficulty of finding and suing the small-time infringer.*

*  Copyright holders would analogize this to punishing a thief by only requiring him to return or pay for the stolen goods.  Obviously, some punishment above and beyond this is necessary.  Why the “theft” metaphor for copyright infringement is often overstated, this particular analogy seems apt.

It is, therefore, not clear that a judge can simply reweigh the evidence used to support the jury’s award because evidence might not really come into it.  The way the statute is written, juries would seem to have tremendous discretion in setting the award, so long as it is between $750 and $30,000 (or $150,000 in case of willfulness), and is “just.”*  Yes, we know the reasons given for the statutory-damages scheme, but those reasons are not actually in the statute.  It could be that, if a jury thinks its award is “just,” then it is just, and the judge shouldn’t interfere with that.

*  Why the jury thought its $80,000-per-song award was “just” is a different question.  For comparison’s sake, the award is about what you’d expect for a serious injury–and that’s just for 24 songs.  Thomas-Rasset had many more.  Had the RIAA been able to prove actual access to all of all of these songs (or if it has prevailed on the “mere availability” argument), the award might have been in the $10 or $20 million range!  The jury was composed of 12 Thomas-Rasset’s neighbors–people who understood how much a year of groceries cost, and how much $80,000 is to an ordinary person–but that did not make them merciful.

In the first remittitur order, the judge ruled that he could, indeed, reweigh the evidence, if the award were “monstrous and shocking.”  He did so, and reduced the award from $80,000 per song to $2,250 per song.  What’s interesting is that, in the second remittitur order, he seems to have changed his mind.  He arrives at exactly the same result–$2,250 per song–but he adds a crucial step.  He first decides that the award is unconstitutionally excessive–and then he reweighs the evidence.

There is, in fact, a Constitutional right not to be subjected to excessive civil penalties and punitive damages–damages awarded by a jury, above and beyond actual damages, for the sole purpose of punishing the wrongdoer.  In the context of statutory damages, there are two competing standards that might apply.  One standard is highly deferential to the jury and requires only that the penalty not be “severe and oppressive” (whatever that means).  The other standard is less deferential and requires that there be some reasonable relationship between the award and the actual damages suffered by the plaintiff.  For obvious reasons, copyright holders (like the RIAA’s members) prefer the former standard, the accused infringers, the latter.  In the second remittitur order, the judge used the more deferential “severe and oppressive” standard, and still found cause to reduce the award.*

*  By contrast, the court in the other high-profile file-sharing case, against Joel Tenenbaum, ruled that the less-deferential standard applied.  Here in the Sixth Circuit, the leading decision appears to be Zomba Enterprises, Inc. v. Panorama Records, Inc., 491 F. 3d 574 (6th Cir. 2007), which applied the more deferential standard.

After the first remittitur, the RIAA could have just taken the money and be done.  It was more than Thomas-Rassett could afford.  To an ordinary consumer, $54,000 is worth about two new automobiles or several used ones, and would be far more than you’d need to make a down payment on a nice home.  It is several years’ worth of groceries for a family.  But the RIAA was concerned that a judgment in the smaller amount would set the wrong tone for other file-sharing cases* and would blunt the deterrent effect.**  What the RIAA would have preferred was a quiet settlement, so there would be no influential judgment issued by a federal judge.  The RIAA in fact offered to settle at this point for $25,000, to be donated to charity, but Thomas-Rasset rejected the offer.  The RIAA then chose to rejected remittitur and endure a third trial.

Strictly speaking, it didn’t set precedent.  A decision by a trial court has no binding power on another trial court, even one in the same judicial district.  Having said that, they can have a good deal of influence, so the RIAA’s fears weren’t entirely unjustified.

**  One can certainly question the RIAA’s wisdom on this.  It seems to me that, once the award is enough to ruin you, any additional amounts have no further deterrent effect.  And do we really need to threaten complete financial ruin to deter illegal file-sharing?  The threat of punishment only gets you so far.

The third trial was easier than the first two because liability had already been established.  All the jury needed to decide was the amount of the statutory damages.  Once again, the jury returned with a huge judgment:  $1.5 million, or $62,500 per song.

Now, once again, the judge has decided (for largely the same reasons as before) that this is excessive.  He is again offering remittitur to the RIAA at $2,250 per song.  It is unknown what the RIAA’s game plan is now.  If the RIAA still feels the same away about deterrence, it will reject the remittitur again, and there will be a fourth trial.*  So long as the jury continues to make huge awards, this could continue indefinitely.

The RIAA does not have an automatic right to a new trial, because an order for a new trial isn’t a final order.  It is to be hoped that the Eighth Circuit will eventually allow an interlocutory appeal–but even then, it might affirm the lower court, which would put the parties right back where they started.

Editorial comment:  I’m concerned that really huge awards like this ultimately hurt copyright holders generally.  Faced with absolutely ruining an otherwise good person, courts with any modicum of sympathy for the defendant will be encouraged to find ways to let the defendant off the hook, usually through the malleable doctrine of fair use (not available in Thomas-Rasset’s case, at least not with a straight face), which ends up weakening everyone’s copyrights.  To the extent we agree that copyright protection is socially beneficial, then we are the poorer when copyrights are harder to enforce.  (It would also have the effect of making fair use even less predictable.)  I see this as analogous to the erosion of our Fourth Amendment rights against unreasonable government searches and seizures, where courts‘ reluctance to set obvious criminals free (on a “technicality,” as it is sometimes described) results in less Fourth Amendment protection for everyone.

Thanks for reading!