United States: Highlights Of Congressional Hearings On Copyright Remedies: Statutory Damages, Small Claims And Felonious Streaming

Last Updated: August 22 2014
Article by David A. Kluft

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On July 24, 2014, the Judiciary Committee of the United States House of Representatives, through its Subcommittee on Courts, Intellectual Property and the Internet, held hearings on the subject of copyright remedies. Most of the discussion focused on the efficacy of statutory damages, which provide for awards between $750 and $30,000 per infringed work (with adjustments up to $150,000 per work for willful infringement). There was also discussion of the Copyright Office's recent proposal for a small claims tribunal.  The proposed tribunal would enable individual copyright holders to seek a remedy for small-dollar-value infringements without bringing a copyright infringement action in federal court, which Representative John Conyers (D-Mich.) asserted can cost an average of $350,000.

Following is our summary of highlights from the witness testimony:

David Bitkower, Acting Deputy Assistant Attorney General, US Dept. of Justice

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Acting Deputy Bitkower discussed the efforts of the Department of Justice to develop and maintain copyright enforcement programs to meet the challenges of the digital age. In particular, he called attention to the Department's efforts with regard to the "Mega Conspiracy" case, in which defendants associated with the Megaupload websites are currently facing extradition to the Eastern District of Virginia to face charges of criminal copyright infringement, fraud and money laundering.  Mr. Bitkower's written testimony contains other examples of recent enforcement efforts.

Bitkower reported that internet streaming is becoming the preferred method for pirates to distribute unauthorized material online. However, because streaming has been held to be a "public performance" rather than a distribution or a reproduction, it is criminally punishable only as a misdemeanor and not as a felony. Bitkower asked that Congress amend the criminal provisions of the Copyright Act to clarify that illegal streaming can give rise to a felony prosecution. He also recommended increased funding to allow the Department to send specialized prosecutors to other countries to combat global IP piracy.

Steven M. Tepp, CEO of Sentinel Worldwide

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Mr. Tepp, a former Copyright Office lawyer, provided oral and written testimony addressing the history of the relief available to copyright holders, including injunctive relief, actual damages, impoundment of infringing goods, statutory damages and attorneys' fees.  He testified that this array of remedies has three goals: compensation, deterrence and, in egregious cases, punishment.

Tepp's testimony before the Committee focused on his support for the current statutory damages regime, which he described as working reasonably well.  According to Tepp, statutory damages have always been an important part of copyright law, because actual damages are often difficult to prove. State copyright laws provided for statutory damages even before a similar provision was incorporated into the Copyright Act of 1790, which set statutory damages at 50 cents per infringing copy. Over time, Congress revised this amount to adjust for inflation and provide different statutory amounts for different types of work. In 1895, Congress introduced the concept of a statutory damages range (at the time between $100 and $10,000 per infringing copy for certain types of work).  In 1976, Congress established the current statutory damages structure, which provides for a range of $750 to $150,000 per infringed work (not per infringing copy as in prior laws).

Representative Blake Farenthold (R-TX) questioned whether the statutory damages concept was out of date, in that it originated at a time when large-scale infringement was possible only for commercial interests and people with substantial resources (e.g., access to a printing press).  Today, Rep. Farenthold asserted, any ordinary person can make many copies of many works for private use, and some of these people are being held liable for $1.5 million in damages just for downloading a few songs. Tepp responded that the few such cases resulting in high damage awards can be explained by other factors, such as the defendant's destruction of evidence or lying on the stand.

Matt Schruers, Vice President of Law and Policy, Computer & Communications Industry Association

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Mr. Schruersargued that the current statutory damages regime is "too much of a good thing" because it requires no proof of any injury and because the amounts are often disproportionate to the harm.  Schruers asserted that the risk of statutory damages discourages investment in technological innovation and incentivizes copyright trolls. He cited Veoh as one company that, although it was eventually found not to have committed infringement, was nevertheless driven into bankruptcy by legal expenses and the threat of claims against individual investors.  Schruers also argued that disproportionate statutory damages awards threaten the credibility of copyright law.  Schruers gave the example of a student who illegally downloads a song that would have cost $1 on iTunes; even the minimum penalty of $750 is seven hundred and fifty times the actual damages involved, which seems unfair to many people.

In his oral and written testimony, Schruers offered several proposals to address these concerns, including reassessment of the statutory damages range (he cited proposals such as a $250-$3,000 range for file sharing, and a statutory limit of $10 per work for non-commercial infringement). Schruers also recommended providing judges with more options for downward adjustment of damages in cases of non-willful infringement, and limiting statutory damages for secondary infringers by capping the number of per work awards that can be aggregated in a single case.

[Author's Note: The concept of "concurrent damages," another recent proposal for statutory damages reform, was not mentioned by any of the panelists.  More information on that proposal is available here.]

Sherwin Siy, Vice President for Legal Affairs, Public Knowledge

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Mr. Siy echoed Mr. Schruers' comments, and argued that disproportionate statutory damages awards chill free speech, discourage fair use, encourage trolls, and are much higher than they need to be for their purported deterrent purpose (because "an amount I can't afford is still an amount I can't afford whether it's in the thousands or millions").

In his oral and written testimony, Siy suggested several ideas for reform, including limitations on statutory damages for non-commercial uses, and caps on damages in certain cases involving large numbers of works. Siy also supports legislating additional guidelines for application of statutory damages, including some consideration of the actual harm involved.

Nancy Wolff, Partner, Cowan, DeBaets, Abrahams & Sheppard LLP

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Ms. Wolff testified on behalf of a number of visual arts trade associations. According to Wolff, internet users increasingly are taking advantage of the "right click license," i.e., they are simply copying and pasting material with no license at all. In this environment, statutory damages are a critical deterrent, and are often the only leverage a copyright owner has in seeking to settle an infringement claim.  In her written testimony, Wolff also recommended making the registration process easier for multiple works, so that more artists have access to the statutory damages remedy (for which pre-infringement registration is a prerequisite).

Wolff (like most if not all of the panelists and Committee members) supported the Copyright Office's proposal to establish a small claims tribunal.  She stated that the federal court venue is too expensive to be of much use to most copyright holders, particularly individual artists.  Infringers know this, which is why demand letters and other extra-judicial attempts at settlement are frequently ignored by infringers. Although the Copyright Office's proposal would make the small claims tribunal completely voluntary, Wolff recommended adding an incentive for participation, such as the possibility of additional damages in court against defendants who refuse the tribunal.

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