But Should Juries Have This Much Discretion?

Last time we celebrated the finality* of the music industry’s case against Jammie Thomas-Rasset. The parties, for different reasons, decided to stop insisting on remittitur, let the judge rule on the constitutionality of the $1.5 million award (for 24 songs), and appeal that ruling. The judge duly found the award unconstitutional, reduced it to $54,000, and both sides appealed. (Here’s the result.)

* Unless the U.S. Supreme Court decides to get involved. That’d be something.

The music industry didn’t care about the amount—any amount was, as practical matter, uncollectable—but cared deeply about a previous ruling by the trial court that dispensed the industry’s beloved “making available” theory of distribution. Since that ruling scotched an earlier $222,000 judgment*, the music industry sought only that amount on appeal, in effect turning back the clock. Thomas-Rasset, who cared deeply about the constitutional issue and didn’t have much to lose, out-maneuvered** the music industry by not disputing liability, which put all the focus on the constitutionality issue and took the “making available” theory off the table.

* Which was replaced by a $1.92 million verdict, then again by the $1.5 million verdict.

** I’m being a bit hard on the music industry. The maneuver was smart, and getting a ruling on the “making available” theory was more important than money, especially since Thomas-Rasset was judgment-proof (i.e., not very rich). It’s just that the maneuver was easily counteracted by someone who also didn’t care about the amount of damages, for the same reason.

So, advantage Thomas-Rasset, right? Except that the music industry—and, indeed, all rights holders—also cared very deeply about constitutionality of the damages, and they had a good set of lawyers on the case, and the Eight Circuit has a reputation as a cautious and somewhat predictable court, so it was a good place for such an argument, from the music industry’s point of view.

Bottom line: on this issue, Thomas-Rasset lost, and rights holders won.

Thomas-Rasset wanted to put the whole statutory-damages scheme on trial, by comparing statutory damages to punitive damages. Remember, the Copyright Act merely gives a range of damages that the jury can choose from: $750 to $30,000 per work infringed (not per infringement), with the upper end increasing to $150,000 if the jury finds willful infringement (as it did in Thomas-Rasset’s case). Little guidance beyond that range is given. These damages are in place of actual damages and require no proof of harm by the rights holder. They’re an option because actual damages are often hard to prove in copyright cases, and are often too small to really dissuade infringers.

Punitive damages are amounts awarded by juries plaintiffs above and beyond the amount necessary to make the plaintiff all better. They are to punish the wrongdoer for especially callous, malicious or fraudulent acts. One rationale for punitive damages is that compensatory damages are often so small compared to the size of the wrongdoer (think of a big, awful corporation) that they’ll just be seen as cost of doing business, so we need these additional damages to really get their attention.

So statutory damages and punitive damages have some overlap, but some major differences. Both are meant to dissuade bad behavior by people who would otherwise see an award of actual damages as an acceptable risk. At the same time, punitive damages are only for especially bad behavior, while statutory damages replace actual damages and not require any special finding (though, again, they increase if there’s a finding willfulness). Punitive damages are an exercise of court authority, while statutory damages are authorized by act of Congress.

Gored by the Wrong Bull

The difference is important because punitive damages are subject to some constitutional limitations. To understand why, we have to go back several years to a hilarious case out of Alabama involving a hail-storm and some BMW cars, Gore v. BMW. A guy bought a car, wasn’t told about some minor hail damage, and sued. He was awarded $4000 for the damage to the car (which seems high, but still), and $4 million in punitive damages (later reduced to $2 million). The idea was to punish the big foreign car manufacturer* for EVERY damaged car, not just the guy’s.**

* This is before BMW [Edit: around the same time as a certain other German car manufacturer] actually built a plant in Alabama, and Alabama started arresting senior BMW [Edit: Mercedes. Sorry wrong German company] officers for not being able to show their papers. [Edit: Sorry, the irony isn’t quite as perfect as I had imagined. Mercedes’ Alabama factory is surprisingly old, dating to 1993. Gore’s hailstorm happened only a few years before that.]

** So, what if your car was one of the other ones that were damaged by the hail storm? Do you also get to recover for every one else’s damage?

This went up to the U.S. Supreme Court, which was confronted with two really unpalatable options. On the one hand, there was the utterly ridiculous punitive award, which went against any common-sensical view of justice. You just can’t let this one slide. On the other hand, the Constitution doesn’t have much to say about punitive damages. To the contrary, it says that a state’s courts should be able to administer the state’s own laws in its own way, without interference from the federal government—which includes the U.S. Supreme Court.

So, justice (and rationality) or the Constitution? We love them both. In the end, in a 5–4 decision, the Supreme Court held there was a due process right not to be subject to absurd, stupid punitive damage awards.

Thomas-Rasset reached for this case to argue that $9250 per song was unconstitutional. She was a single mom; she didn’t have nearly that much money; you didn’t need that much to punish her for “stealing” songs that cost about $1 a piece.

Problem: the $9250 per song wasn’t punitive damages, per se. It was statutory damages. They’re not completely the same, but are they similar enough for Gore v. BMW to apply?

The Eighth Circuit said no. It said that punitive damages were different because you, as the defendant, had no idea how high they might go. When BMW was sued in the Alabama case, it didn’t know if the jury would return a punitive award of $1, $1 million or $1 billion. By contrast, Thomas-Rasset know she was potentially on the hook for $750 to $30,000, maybe (as it turned out) up to $150,000 per work infringed—it says so in the statute.

Further, both punitive damages and statutory damages are designed to deter unlawful conduct,* serving that public good by encouraging private action. Again, though, punitive damages are different because they’re imposed by courts, on a case-by-case basis. Courts are liable to get carried away by the facts of a particular case. Congress, by contrast**, is a deliberative body, so it’s entitled to a lot more deference. Also, copyright is intrinsically a law for the public’s benefit, since it encourages creativity that the public craves.***

* Part of the disconnect here is that a lot of reasonable people think that what Thomas-Rasset did wasn’t all that bad, and Congress has no business helping out private parties like the music industry in this way. Alas, Congress disagrees.

** The cynical might say that Congress is liable to be carried away by special interest groups and note that rights holders a lot more organized in Washington than consumers.

*** How much it does so is open for debate, but Congress doesn’t need to prove that it’s right, only that it thought about the issue and has a rational basis for what it passes. If you don’t believe me, you are welcome to read Eldred v. Ashcroft and Golan v. Holder.

This deference is not unlimited, but it’s a lot higher than what we give courts on punitive damages. There’s a VERY old Supreme Court decision,* still good law, pretty much directly on point. It held that statutory damages are unconstitutional if they are “so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable.”

* For the record, the trial court did not apply Gore v. BMW, but applied this older Supreme Court opinion, and still decided $222,000 was “obviously unreasonable.” The Eight Circuit rejected the trial court’s reasoning: “If an award near the bottom of the statutory range is unconstitutional as applied to her infringement of twenty-four works, then it would be the rare case of noncommercial infringement to which the statute could be applied.” I’m not sure I follow.

Thomas-Rasset argued that, since songs are worth only about a buck, $9250 per song was “wholly disproportionate to the offense.” The Eighth Circuit said that she was looking at it wrong. You don’t value “the offense” by the value of the work infringed, but by the wrongness of the act. It’s “stealing” that matters, not the value of what was “stolen.”*

The logic can get kind of circular. How do we know how bad the offense is? Why Congress tells us, because Congress represents us and therefore determines how we value certain actions. But at the same time, it’s Congress that we’re trying to reign in. This is one reason why Congress gets so much deference.

Thomas-Rasset also argued that, had ALL of her songs been used in the calculation, she would have been liable for millions upon millions of dollars—surely, that would violate the constitution? The Court waves away this argument by saying that it’s the total amount of the statutory award, not the amount per work that matters; besides, when confronted with that many songs may have decreased the amount per song.

A Case for Greater Judicial Oversight of Statutory-Damage Awards

The Eight Circuit’s opinion is blessedly sober and sensible, but I can’t bring myself to agree with it completely. The range of damages for copyright infringement is so great that the “notice” isn’t much better than with punitive damages. For a regular citizen, there’s a huge difference between $54,000 (which is still A LOT) and $222,000 (which is more than a lot of people are worth).

Further, there needs to be some judicial oversight of statutory awards, or at least much better guidance to juries, so that statutory awards are applied more consistently. A cornerstone of our jurisprudence is that like defendants are treated alike. Consider: in the same case, on the same facts, three juries made awards of $222,000, $1.92 million and $1.5 million. The difference? Thomas-Rasset testified more in the second trial (and clearly irritated the jury), and the third trial was on damages only. Yes, people shouldn’t be irritating or lie under oath (as the jury clearly thought), but is $1.7 million (the difference between the first two verdicts) an appropriate amount to punish her for that?

Finally, the court’s treatment of Thomas-Rasset’s “what if?” argument is disingenuous. The statute requires juries to treat statutory damages on a work-by-work basis—NOT as an overall award. It would be strange indeed if the award per work infringed was REDUCED when the overall wrong was WORSE. If Thomas-Rasset’s wrongful act was worth $9250 per song for 24 songs, it should be worth $9250 for 1000 songs. Yet, the court is suggesting the possibility that the value should be reduced the more Thomas-Rasset was found to have infringed.*

* Is this a tacit criticism by the court of the “making available” theory of distribution? Is the court saying: if all Thomas-Rasset did was make 1000 songs available, the overall award would be the same, but if all 1000 songs were actually proven to have been downloaded, then watch out!

Finally, and most important, it’s simply not just. Thomas-Rasset apparently does not come off very well on the stand. And even if her performance on the stand is somehow reflective of her personally, is she so bad as to be completely ruined for her actions? Google can laugh off a $150,000 per work judgment*, but you and I can’t. The award should be proportional not only to the harm (and not the “offense,” whatever that means) but to the net worth of the wrongdoer.

* As Google more or less did in the Oracle case.

Ironically, those are factors in most state’s laws for punitive damages. Had Congress drafted the statute better, it would have included factors for the jury to consider to help keep the awards just. Since Congress didn’t, it’s up to the courts—the last line of defense against injustice.

Oh, well. It’s not as though the music industry is going to collect much if any of this judgment, and it’s not as though Thomas-Rasset is going to learn some huge life lesson. When you lose everything over something like illegal downloading, I don’t think the lesson you learn is: “just say no to illegal downloading.” You just feel like “the system” took a huge dump on you and the world is an essentially unjust and absurd place. And maybe it is, but that doesn’t mean we should acquiesce in it.

With that deep and happy thought, thanks for reading!

Rick Sanders

Rick is an intellectual-property litigator. He handles lawsuits, arbitrations, emergency injunctions and temporary restraining orders, opposition and cancellation proceedings, uniform dispute resolution proceedings (UDRPs), pre-litigation counseling, litigation avoidance, and other disputes, relating to copyrights, trademarks, trade secrets, domain names, technology and intellectual-property licenses, and various privacy rights. He has taught Copyright Law at Vanderbilt University Law School. He co-founded Aaron | Sanders with Tara Aaron-Stelluto in 2011.