United States Patent and Trademark Office – Madison
Auditorium
Live webcast available at:
https://new.livestream.com/uspto/copyright
The Appropriate Calibration of Statutory Damages: Individual
File Sharers and Secondary Liability
Moderator: Darren Pogoda, Attorney‐Advisor for
Copyright, Office of Policy and International Affairs, USPTO
Panelists:
David Sohn, Center for Democracy & Technology
[sorry, missed this because I went to the wrong building!]
Steven Tepp, Sentinel Worldwide
Statutory damages are old as copyright itself, contemplated
by TRIPS, necessary because actual damages are often conjectural/difficult to
prove; deters for-profit businesses from encouraging widespread infringement
(note how that last rationale is slipped in despite being very new)! Digital age makes statutory damages more
important than ever: drive thriving marketplace by giving copyright owners a
measure of security a measure of security against misappropriation. The more
rampant piracy becomes, harder it is for legitimate actors to compete. (Michael Carrier’s empirical
work tells a different story.)
Sandra Aistars, Copyright Alliance
Challenges exist for effective enforcement for all types of
creators, and in ensuring that the public understands and respects the law.
Overly politicized enforcement/unscrupulous attorneys have created PR
problem. Need to find common ground.
Tendency is to look at big corporations, but copyright exists for all sizes of
creators—need to understand effects on small businesses and individual authors.
Statutory damages are often the only legal recourse for an individual or small
business to address infringement—their availability is threshold for individual
deciding whether or not to pursue a claim, given the costs of bringing action
in federal court. Members can’t obtain legal assistance where statutory damages
are not an option. Deterrence and compensation
are important, as well as difficult nature of proving value of copyright/loss
caused by infringement, where work is uploaded and available to the entire
internet. Where only direct loss
provable is license fee, that is an invitation to infringe without
consequence. (Interesting that this is
the general tort regime.) Profits can
also be inadequate because profits may be too small, or too hard to calculate
in terms of attribution to the infringement.
Broad range of damages is justified, flexibly applied.
Beyond these, any statutory damages scheme needs to preserve
creators’ right to say no. Merely compensating lost license revenue is little
more than compulsory license. Need to
resort to statutory damages isn’t because they’ve suffered no actual damages
but is because harm to creator/community is broader than what can be proven and
may also include noneconomic damages where the infringement is unusual in some
way.
Prof. Peter Menell, University of California at Berkeley
School of Law
Simplistic views of history: to say that statutory damages
are well established misses a lot of context.
Current system derives from ASCAP/BMI’s problems decades ago, and we now
live in a completely different era. Congress wasn’t thinking in 1999 about the
enforcement problems that were going to arise a year later. Panel is focused too narrowly: this issue is
nested within a larger section about keeping rights meaningful. Any solution must be multifaceted. The issue
we’re trying to solve is enforcement,
and that needs to be viewed holistically. Statutory damages are only a means.
In the internet age, we want a copyright system that garners
public approval. That’s been lost, and statutory damages played a significant
role in their disproportion. We ought to
be concerned. Judges are seeing very peculiar cases—selected based on
incentives created, and statutory damages thus bring bizarre and unfortunate
cases, inundating the courts. Porn litigation.
We ought to care about the harm being done.
We ought to channel consumers into authorized markets. That’s
the longterm goal for most players in the system. Statutory damages was thought
to be successful, but last decade showed it didn’t work for recording industry,
which backed away.
To what extent is this system promoting tech and creative
advances? Statutory damages aren’t helping. Distinguish between noncommercial
and smaller players and big commercial players; think about orphan works which
has solvable problems; then the large-scale enforcement problems—even there,
the system is out of whack. Aggregating $150,000 across hundreds and thousands
produces obscene numbers; we can think about how to scale statutory damages.
Markham Erickson, Internet Association
Statutory damages need to be thought of in the context of
primary and secondary liability. While statutory damages are old, secondary
liability is completely judge-made. In
other parts of the law, the auto industry isn’t held liable for consumers
speeding, even though they know those cars will be so used. Increasingly we’re seeing more litigation
around primary infringement—Cablevision,
DishHopper, Aereo—that would traditionally have been secondary cases. Because of the scale, nascent tech can’t come
to market because the threat of damages is so out of proportion. It’s hard for counsel to talk publicly about
clients who’ve been suppressed. Key question: deterrence of what? Legitimate
noninfringing uses; good faith, objectively reasonable belief in noninfringing
use. Reasonable minds will always differ at the margins, and the statute should
encourage litigation to clarify matters, as produced Grokster and Betamax.
Q: How do we conduct cost benefit analysis, if statutory
damages are indeed chilling innovation? How do we measure this?
Tepp: Doesn’t accept the premise. We have a multitude of very successful online
services (… that various entities have tried to sue out of existence). Other
side: to what extent do statutory damages deter piracy and allow licensed
services to move forward with confidence they won’t be undercut. Legit services
are most vulnerable to piracy because they pay for their content. The system is working well.
Erickson: certainly we want to encourage licensed services
and take down clearly infringing services. But there are gray areas: services that
are operating in good faith are exposed to statutory damage regime out of
whack. Look at cloud locker services:
there is no possible way that every piece of content can be licensed. As long
as users are allowed to upload, Amazon’s not in a position to determine whether
they are infringing. Our companies want to allow users to store their content
and space-shift it. Google and Amazon
have taken the risk, but they’re big companies that can tolerate litigation.
Tepp’s view is not practical.
Aistars: Legitimate cloud businesses like Amazon can be
compared to business models employing functions more clearly intended to drive
infringing content, like Megaupload.
That’s where you see cases being brought, not against staple articles of
commerce.
Sohn: takes the issue to be more calibration than existence
of statutory damages. Can we minimize costs by focusing statutory damages more
appropriately on real bad actors while imposing less risk on entities
navigating uncertain copyright regime?
Hard area to quantify, because deterrence is a hard thing to prove
(though Michael Carrier did try!). But it’s also very hard to prove what
infringement has been deterred. Can’t have it both ways: assume that statutory
damages deter infringement, then say deterrence of legit activity has to be
proved. When asking what behavior has
been deterred, apply same standard.
Menell: most investments are best thought of ex ante. Many entrepreneurs don’t want to run these
risks, and we don’t want them to have to—we want them to be able to make better
guesses. Cloud services: a decade ago,
Michael Robertson tried to introduce a cloud service! Resulted in one of the
poster child statutory damage awards, in which the record company took over. And
now we accept the same result! In an ideal system, we don’t get this damage
because people can make informed judgments. We can’t make informed judgments
with long drawn out cases and unpredictable juries. Make it easier to assess
risks before we get into bringing in lawyers.
Erickson: uncertainty is part of law—if we lurch too far to
delineating what’s ok, you do tend to lock in innovation in unhelpful ways. One
appropriate measure to allow courts to work as they should: scale down insane
awards. Company that thinks it has a lawful service but knows it might well be
sued can test that without destroying the company.
Menell: doesn’t disagree with that premise. We’ve found
ourself here just by the peculiarities of our constitution: SCt decided that juries
decide, and that creates uncertainty. Moving towards a system where beyond a
certain range you have to prove some measure of damages would be good—we have
sentencing guidelines in other areas—other ways to better correlate to actual
damages. Statutory damages is in part about combating underenforcement, but in
these big scenarios we don’t have underenforcement—someone is going to go after
Aereo, which is not a small nightclub/bar which was the target of statutory
damages. Think about risk settings
distinctly.
Tepp: we’re being told that there’s so much uncertainty that
we can’t have statutory damages, but also being told to embrace uncertainty,
which I took as a reference to fair use. That’s your prerogative, but let’s not
import policy debates over scope of exclusive rights into discussion of
statutory damages, only available to adjudicated infringers. (This is the worst argument I’ve heard today,
though the day is young. Does he counsel
his clients not to worry about the potential damage awards when considering a
litigation or pre-litigation approach?
No, let’s not make this personal: this is a disingenuous argument
because legal analysis does not work this way.
Of course damages and substance interact, and among other things they
interact on willingness to litigate out what the actual boundaries of the
exclusive rights are.) Range of
statutory damages is intentionally wide. Nothing but anecdotal evidence of
outsized statutory damages awards. There
are checks on awards: timely registration requirement.
Q: requiring statutory damages to more closely track actual
harm in some cases. Natural counter is: how could Congress/guidelines reconcile
that with fact that a lot of aboveboard copyright owners face significant
obstacles identifying infringers and providing evidence of harm for something
like P2P filesharing. Would identifying actual harm be possible/fair/strain on
judicial resources? Wouldn’t it be hard
to prove ownership, registration, etc. of thousands of works in a sharer’s
library, instead of a sampling as we saw in Jammie Thomas?
Sohn: There are a variety of ways to do it. One could
imagine a regime where higher damages require a showing that there are
substantial damages, even without proving them specifically. Distinguish probably harmless infringement
from infringement that is probably causing a bunch of harm. Could be a presumption of minimum range without
a threshold showing of harm. Point would be to have a middle ground, without
full on proof of damages we believe too difficult to show.
Aistars: courts are already serving that function. Only
cases where there truly is some greater societal harm see the larger damages
awards; even default judgments against filesharing users tend to be on the
lower end. Need to look at wide variety of creators relying on statutory
damages and their deterrent effect, not just the business models of music and
movies; need to look at newspapers, photographers. New proof is completely
unmanageable for small business and overlooks noneconomic damages that
individuals and small businesses often pursue infringement claims for. They
have no track record of licensing; there may be no directly provable profits;
photographer whose work was used without permission by clothing designer in
large department store.
Menell: on the music side, if we started afresh we wouldn’t
build a system built around massive statutory damages. We have experience that
doesn’t work. Small claims, parking ticket style system would be much
better. Recalcitrants could get ramped
up. Using fed courts to resolve disputes:
already much more than most of these works are worth. We need some other
system. But not for the P2P network itself, which can scale.
Samuelson: fewer than 14% of WIPO countries have statutory
damages, most being post-Soviet states; the statutory damage states have many
limits, such as Canada’s cap on noncommercial infringement damages and judicial
discretion to reduce statutory damages to meet a just award; many countries don’t
allow per infringed work which is particularly important in the secondary
liability context (Google Books, statutory damages exposure in the
billions). Other countries have 2x/3x
guidelines. There are a number of things to look at for limitations that make
them more just. Not arguing for repeal, but more limits.
Tom Sinder (sp?): Korea didn’t have statutory damages, and
that didn’t deter infringement. 4 jury
trials of individual filesharers, in which plaintiffs introduced reasonable royalty
evidence: what would the license fee have been to do what D did, which was the
whole economic value of the copryight—that means the award was
compensatory. (No it doesn’t! No one thinks that Thomas’s making available
worked like American Idol’s official website’s making available. There was no chance she’d distribute on that
scale.) Do you think these awards were excessive?
Sohn: yes.
Sinder: but what if it’s compensatory—what you’d have had to
pay?
Sohn: for individual behavior, you want the amount to
reflect the damages. The real focus we
should have is on tricky questions of copryight law—it’s a problem to have a
regime that suggests that if they make a wrong interpretation the consequences
are $100,000.
Tepp: we are naturally more sympathetic to a single mother,
but she can impose just as much harm on the copyright owner for millions of
people to download—the harm may be just that great. (Hm, I hadn’t noticed these songs losing
their economic value entirely.)
Q: Themes like lessening risk—maybe have discussions on
secondary liability and orphan works then revisit statutory damages. If we fixed those, what would be left?
Erickson: that would be helpful, but primary infringement is
a growing issue too.
Menell: enforcement can be thought of up front.
Aistars: along with enforcement, there’s room for public
enforcement to reduce harm to individuals and small businesses—small claims
process. Voluntary stakeholder process
including necessary players making enforcement less burdensome for all players
(all!) whether we represent small creators or internet innovators likewise
burdened by enforcement challenges. (I can’t think who’s left out of that
either/or.)
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