The Executive Summary Version

I’m going to take another crack at my last post—and at my next post*—so reading this is actually a form of time travel. And travel into a parallel universe in which I’ve already written the next post (which will never be written in this universe). I’m setting it forth as an executive-summary bullet points.**

* Thereby rendering it superfluous.

** But seriously, the last post was meant to be sort of dense and thoughtful, but even so, it could be boiled down. And while I was at it, I boiled down the next post, so next time, we’ll cut right to the chase.

  • When you successfully enforce your copyright in a lawsuit, and the jury finds the infringement was willful, you have the option of asking the jury to grant money damages between $750 and $150,000. This award is in place of actual damages, and there are no guidelines for the jury to follow.
  • In Thomas-Rasset, the jury awarded the rights holders $9250 per song in statutory damages, but the trial court held this award violated due process because it was too high relative to the actual harm. Following an old Supreme Court opinion known as Williams, the trial court reduced the award to $2250, but its only explanation for choosing that particular amount was that it was triple the minimum amount.
  • In Williams, the Supreme Court held that an Arkansas statute regulating the fares that railways could charge passengers and fining violators $50–$300 did not violate due process, even though the plaintiffs were overcharged by only 66 cents.
  • Although the Court held that a penalty prescribed by statute can sometimes violate due process, it used what we would today recognize as a “rational basis” standard. (The giveaway is the huge amount of discretion the Court gave the legislature.) Statutes almost never fail the “rational basis” standard.
  • In Williams, the Court specifically held that you were NOT supposed to consider the relationship between the prescribed penalty and the actual harm.
  • On appeal in her case, Thomas-Rasset argued that another, more recent Supreme Court opinion, Gore, should be applied. Gore held that awards of punitive damages could violate due process if they are, among other things, too high relative to the actual damages.
  • Punitive damages are similar to, but have significant differences from, statutory damages. Both seek to punish especially bad acts, and both deter the commission of bad acts that are difficult to detect, and both seek to make bad acts economically unfeasible for the bad actor.
  • However, punitive damages are in addition to actual damages, while statutory damages also cover actual damages. Under the Copyright Act, proof of actual harm is not required to be entitled to statutory damages—you get them automatically if you prove infringement. (The question is: how much?)
  • The Eighth Circuit followed Williams instead of Gore because Williams was on point: Williams dealt with statutory penalties, just like those in the Copyright Act, while Gore dealt with punitive damages. Also, Gore’s methodology simply didn’t work very well with statutory damages.
  • The Eighth Circuit, however, held that the trial court misunderstood or misapplied Williams and that it should NOT have reduced the jury’s award.
  • After taking a closer look at Williams, I’ve decided that the Eighth Circuit also misunderstood and misapplied Williams. The problem was that Williams was about whether the penalty set forth in the statute was too high. The question posed in Thomas-Rasset, however, was whether a particular award was too high.
  • In other words, Williams went to the legislature’s power to prescribe a certain penalty. But Thomas-Rasset is going to a court’s power to choose a particular penalty.
  • This difference is not trivial. Williams just tells you whether a prescribed penalty violates due process. It almost never will. If your analysis stops there, and the prescribed penalty is expressed as a range, then ANY jury award within that range will be OK, even if it is objectively insane.
  • Where the statute affords the court little or no discretion setting a penalty, there’s no problem because the only question is whether the penalty prescribed by statute is constitutional or not.*
  • However, if there is enough discretion, i.e., if the range is wide enough, it is possible for a range to be OK but a specific award to be insane. The Copyright Act is a good example of that.
  • The range of penalties provided under the Copyright Act is actually pretty wide, especially for willful infringement: $750 to $150,000, which is a difference of $149,250. When multiple works are involved, this spread can get really huge. Ten works, for example, increases the spread to almost $1.5 million.
  • Applying Williams to this range, it seems that a minimum of $750 is not unconstitutionally too high. Even if the work in question has no commercial value at all—e.g., my children’s finger-paintings, which I adore but no one’s going to pay money for—it’s not insane for you to receive $750 for an infringement of the work.
  • Similarly, the $150,000 upper limit isn’t insane, either. If Google were to infringe the copyright in the APIs of a super-popular computer language, like Java, $150,000 hardly seems to be enough, really.
  • So the range of penalties set forth in the Copyright Act does not violate due process.
  • However, a specific award within that range could violate due process, depending on the circumstances. If a jury awarded $150,000 for the willful infringement of my children’s finger-paintings, even I would have to agree that something is out of whack.
  • But Williams does not equip a court for determining (1) when a specific award is out of whack (i.e., violates due process) and, if it is, (2) how to determine the constitutionally maximum amount.
  • Ironically, the Supreme Court decision about how to address due-process issues with specific awards is … Gore, the same decision that the Eighth Circuit rejected in favor of Williams.
  • Gore’s holding that a specific award of punitive damages can sometimes violate due process was predicated on the idea of “fair notice.” An important principle of justice is that we all have some notion of the consequences for breaking a particular law. The problem with punitive damages, according to Gore, is that there punitive damages are sometimes surprisingly and unpredictably high.
  • It is sometimes said that statutory damages don’t have this problem because they are expressed as a range. You know that willful infringement might subject you to a penalty of up to $150,000.
  • The problem is that you also know it might be only $750, and you really don’t know how or why a jury will pick a higher or lower number in the range. If you’re dealing with multiple works, you’re really not any better off than the defendant in Gore in terms of notice.
  • Also, punitive damages in some ways offer more fair notice than statutory damages because juries are instructed to follow certain guidelines in setting punitive damages. You can at least look at the factors and decide which ones cut against you and which ones cut for you.
  • Nevertheless, the Eighth Circuit was right not to follow Gore because it also is a bad fit because punitive damages really are different from statutory damages.
  • Thus the problem: Williams is great for statutory damages, but not great for specific awards. Gore is great for specific awards but terrible for statutory damages.
  • So, what I propose is a way to solve this problem. And the way to solve this problem is to stop thinking about it in Constitutional terms.

And that’s what we’ll tackle next time. Thanks for reading!

As a theoretical matter, don’t you think giving courts discretion makes a prescribed penalty less likely to violate due process because we can always point to the low end of the range and say, in response to an unreasonably high award: it’s the court’s fault, not the legislature’s?

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.