How Many Licks? One, Two-hoo, *Crunch*, Three

Er, how many trials does it take to get to the center of a file-sharing case, where the plaintiffs have a point to prove and the defendant has nothing left to lose? Three, apparently (because no one can get there without biting). The Eighth Circuit Court of Appeals has made sure that there will be no more foolishness (opinion here).

I really did say that the music industries’ lawsuit against Jammie Thomas-Rasset could, in theory, last forever. A judge with a sense of humor could have issued remittitur after remittitur, and the music industry could have rejected it over and over, and new trials on damages could have been had again and again, and still no final order would exist to be appealed.

Fortunately for all involved, three trials are enough. As the trial court pointed out in its opinion, you can have as many trials as you like, but all you’re doing is skirting the constitutional question of how high statutory damages* can get in copyright cases. So, with what I take to be the tacit approval of all the parties, the judge ruled on the constitutional issue, instead of offering remittitur to the music industry. And the trial court ruled that $1.5 million was too much. In fact, the most the music industry could get for the infringement of the 24 song files was $54,000 (or $2250 per work).

* Remember, the Copyright Act grants penalty-like damages, known as statutory damages, to the copyright holder (if certain requirements have been met), in lieu of actual damages and without the need to prove any damages. These damages range from $750 to $30,000 per work infringed (not per infringement) and can be increased up to $150,000 per work if the jury finds the infringement was willful. The jury sets these damages.

Both sides appealed. Thomas-Rasset argued that no statutory damages should be awarded, since the minimum amount of $750 was still too high. Strategically, this is known in the biz as “overreaching,” since it asked the judge to throw out the entire scheme of statutory damages. The music industry appealed, too, but it did not … well, it’s hard to explain what the music business was trying to accomplish without re-hashing the case. So here goes:

Just Keep Fouling Them Off, Maybe You’ll Get Lucky

Thomas-Rasset was accused of distributing 24 songs through the old KaZaA peer-to-peer file-sharing network—out of hundreds that she had actually made available. There were then three trials. In the first trial, Thomas-Rasset testified she had no idea what KaZaA was and that was a complete coincidence that she replaced her hard drive right after she got the demand letter from the music industry. The jury found her liable for $222,000 ($9250 per song) anyway. The trial court decided it had made a mistake in a certain very crucial jury instruction—a jury instruction that certainly favored the music industry over Thomas-Rasset (more on this later)—and made everyone do it over again.

So they did, only this time, Thomas-Rasset got some young-gun lawyers and decided to embellish her testimony a bit. She now testified that she had no idea about KaZaA, that it was coincidence about the hard drive, AND that someone else—her children and/or ex-boyfriend—was responsible. The judge got the jury instructions the way he wanted them, and the jury responded to all this by finding Thomas-Rasset liable for $1.92 million ($80,000 per song)—over 8 ½ times the previous award.

The court’s conscience was shocked by this award, and the judge ordered remittitur* in the amount of $54,000, or $2250 per song. He based this amount on triple the minimum statutory damage of $750 per song. The music industry declined remittitur, even though it was unlikely to collect very much from Thomas-Rasset. As a practical matter, there wasn’t much difference between an award of $54,000 and $1.92 million, since either amount would probably drive Thomas-Rasset into bankruptcy.

* Remember, with remittitur, the plaintiff gets to choose to accept the lower amount or have a new trial on damages. Plaintiffs usually take the money, but the music industry thought greater stakes were involved.

So, there is a third trial, but thankfully just on damages. Damages trials tend to go badly for the defendants, since liability has already been established. Any doubt about liability doesn’t factor into the judgment. It’s not supposed to, but be real: if you were 60% certain someone was liable, you’d probably award less money, than if you were 100% certain, everything else being equal. Well, now, the jury goes into deliberations assuming 100% liability. So, while Thomas-Rasset couldn’t hurt her own case by testifying very much, the jury wasn’t going to be kind. And they weren’t: $1.5 million ($62,500 per song).

At this point, the judge had had enough. He ruled the award was unconstitutional, reduced it to $54,000, and left it for the parties to appeal. Then it got weird.

Wait, What Happened to the $1.5 Million?

Perhaps you heard that the music industry won the appeal and was awarded $222,000? Now go back and re-read the last few paragraphs. Wasn’t the award being appealed $1.5 million? Did the music industry decide that $1.5 million was too much and they would only ask for $222,000?

Of course not. The $222,000 comes from very first judgment, the one the judge wiped out because he changed his mind about the jury instruction. Coincidence? Surely not! The key is the jury instruction: it originally said that it was a violation of the music industry’s distribution right if Thomas-Rasset merely made her song files available for other KaZaA users to download, regardless of whether the music industry could prove actual access.

This is known as the “making available” theory. The music industry wasn’t suing for illicit copying of the song files, but for the illicit distribution of the song files.* The distribution right would seem to require actual distribution, but the music industry has been arguing that, in the digital context, at least, the right to be expanded to making the work available to the public (perhaps with some kind of expectation** that they will be accessed and downloaded?).

* Again, I’m not completely convinced that you can distribute digital content over the internet, since it doesn’t involve the physical movement of physical goods.

** The introduction of a knowledge requirement would be weird for direct infringement. Without it, though, you’d make some pretty undeserving people liable. What if your iPhone, with a selection of songs you bought, caught onto an unsecured WiFi network? Whoops, you just made all of those song files publicly available. I presume the music industry doesn’t want to go so far.

The “making available” theory of distribution has become something of an obsession of the music industry. It’s not so much that they want greater damages. If the music industry succeeded on the “making available” theory with Thomas-Rasset, and if Thomas-Rasset really had about 1000 infringing songs on her KaZaA account, and if the jury consistently awarded $62,500 per song (that’s a lot of if’s), then Thomas-Rasset might have been liable for $62.5 million.* For an ordinary consumer the difference between $222,000 and $62.5 million is pretty meaningless—either way, you’re ruined.

* Seriously, you could negligently cause someone’s death and not be liable for this much. The figure would be $9.25 million under the first verdict.

What the music industry wanted just want to make it easier to prove damages. Proving actual access of an account is pretty hard, but proving availability is dead simple.* Unfortunately for the industry, district courts have generally (but not always) rejected the theory. It hasn’t been decided by an appellate court.

* The way to solve this is to amend the Copyright Act to add a new exclusive right: making available digital copies for download or transfer. If the RIAA and MPAA could convince Congress to introduce SOPA and PIPA without being first vetted by anybody who knew anything about how the Internet worked, can it not convince Congress to make some common-sense, minor (but important) changes to the Copyright Act?

This explains why only 24 songs of Thomas-Rasset’s much larger collection of song files were at issue. They were the only 24 that the music industry could prove had been downloaded. It also explains why the music industry wanted the $222,000 verdict more than the $1.5 million or even the $1.92 one (hey, $420,000 is nothing to sneeze at!). It wanted to force the appellate court to rule on the “making available” theory. They argued that the $222,000 should be reinstated because the old jury instruction was right after all, and the trial court never should have thrown out the first verdict.

Smart, right? I mean they pay those lawyers lots of money, so they should come up with terrific out-of-the-box solutions like this, right? By contrast, Thomas-Rasset’s current lawyers have mainly been good at throwing gasoline on fires.*

* Of course, if you’re whole house is burning down anyway, what the heck, you know?

Except that it was pretty easy to defeat this maneuver. Thomas-Rasset simply acquiesced to liability and to the $222,000 verdict, and just challenged its constitutionality of the amount. Since the “making available” theory went to liability, there was no longer anything for the appellate court to rule on, except the contitutionality issue—which is the issue Thomas-Rasset wanted the court to rule on.

Too bad her lawyers didn’t have any success, either, but at least they weren’t procedurally out-maneuvered.

I’ll explain why they failed, why their failure is a tactical victory for copyright holders, next time.

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.