September 13, 2012 | By Michael Barclay and Mitch Stoltz

Appeals Court Upholds $9,250 Per Song Penalty in Filesharing Case, Says Constitution Doesn't Limit Penalties

The damages provisions of copyright law - up to $150,000 per infringed work without any proof of harm - are crazy. And according to the federal appeals court in Minnesota, the Constitution does not restore sanity. This week, the U.S. Court of Appeals for the Eighth Circuit upheld the original jury verdict against Jammie Thomas-Rasset: a $222,000 penalty for sharing 24 songs on a peer-to-peer network. That's $9,250 per song (for songs that sell for about a dollar at retail). Frighteningly, the court suggested that statutory damages awarded by a judge or jury don't need to have ANY connection to the harm actually suffered by a copyright owner.

The case of Capitol Records v. Thomas-Rasset has a long, convoluted history, including three different jury verdicts: one for $220,000, another for a staggering $1,920,000, and still another for $1.5 million. Last year, a federal judge reduced the last award to $54,000, calling the jury's verdict "so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable." The record companies did not agree, and appealed the judge's ruling to the Eighth Circuit. EFF filed an amicus brief, arguing along with Ms. Thomas-Rasset that copyright damages should be predictable and proportionate to the harm.

The court rejected the argument that statutory damages violate the Due Process Clause of the Constitution. In similar areas - like punitive damages in tort cases - the Supreme Court has said that grossly large jury verdicts can be unconstitutional. The Supreme Court told lower courts to focus on three factors: how reprehensible the defendant's conduct was, the harm actually suffered by the plaintiff, and the damages awarded in similar cases.1 Damage awards that are far higher than needed to compensate the plaintiff, punish the defendant, and deter future violations can violate the Constitution.

The Eighth Circuit said that this standard doesn't apply to copyright cases, despite the obvious parallels to personal injury law. The court said that because the law confines copyright damages to a range, people are on notice of what they might be liable for, and can adjust their behavior accordingly. In other words, anyone wanting to create a new product or service that touches copyrighted works needs to be prepared to pay millions or billions in damages if a court case goes against them. To say the least, this will discourage innovation and investment.

Worse yet, the court said that although the law "allows courts and juries to calibrate the award based on the nature of the violation," it doesn't require that statutory damages be proportional to any actual harm suffered by the copyright owner. The 24 songs Ms. Thomas-Rasset copied were worth far less than $220,000 to the record company plaintiffs. Since this case is one of only two music-sharing cases against individuals to reach trial, out of the thousands filed by the record labels, the labels obviously wanted to set a powerful example to deter others from sharing music. The Supreme Court has ruled that the Constitution limits how far judges and juries can go in using a single civil defendant as a cautionary example. The Eighth Circuit seems to be saying that when the subject is copyright infringement, the Constitution's usual protections for civil defendants don't apply.

The court's decision could have been worse. The record companies tried to get a ruling that simply making a song available for download on a peer-to-peer network without authorization is a copyright violation, even if no one downloads. The district judge disagreed, and the Eighth Circuit left that question open, although it did rule that Ms. Thomas-Rasset could be ordered not to make the record companies' songs available for downloading.

Although it's only binding in several states, yesterday's decision is disappointing. We hope that other courts of appeals don't exempt copyright law from the Constitution's protection against arbitrary and shockingly large civil penalties, and that Congress reconsiders the size of those penalties soon.

  • 1. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 418 (2003); BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574-75 (1996).

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