United States: The Department Of Commerce Internet Policy Task Force White Paper On Remixes, First Sale, And Statutory Damages

In January 2016, the U.S. Department of Commerce's Internet Policy Task Force issued its "White Paper on Remixes, First Sale, and Statutory Damages." Spearheaded by the U.S. Patent and Trademark Office and the National Telecommunications and Information Administration, the Task Force received public comments on and examined key topics in copyright law, including the application of statutory damages in the context of individual file-sharers and secondary liability for large-scale online infringement. This article focuses on the Task Force's analysis of statutory damages under the Copyright Act and its recommendations for amending the statute.

Criticisms of the Current Regime for Statutory Damages

The Task Force highlights several concerns about the current statutory damages framework in § 504(c) of the Copyright Act. These include: the potential "chilling effect" that the prospect of a massive damages award has on innovations and new technologies, especially for Internet service providers, technology companies, and others that face secondary liability for the directly infringing acts of their customers and users; copyright "trolls" who leverage the threat of maximum statutory damages per work to coerce settlements from individuals they accuse of file-sharing; copyright plaintiffs who use statutory damages to obtain windfall profits; and inconsistencies in the application of statutory damages, leading to disparate and unpredictable awards in similar cases. And although service providers do not control the number of works individual users may directly infringe, they are nonetheless still held liable for damages on a per-work basis. In cases where tens of thousands of works are at issue, even a minimum of $750 per work leads to a massive award that is disproportionate to the service provider's conduct.

Section 504(c) also lacks specificity. Unlike other federal laws, which provide specific factors to guide a statutory damages award (i.e., the Truth in Lending Act, 15 U.S.C. § 1640(a)), the Copyright Act offers no statutory factors or guidelines for courts and juries to consider in reaching a statutory damages award.

The Task Force's Recommendations for Amending the Copyright Act

The Task Force recommends three amendments to statutory damages provisions of the Copyright Act, noting that "effective enforcement tools" against online piracy must be reconciled with "excessive and inconsistent awards" that chill innovation and incentivize litigation abuse.

The first recommendation is to amend § 504 to add nine specific, non-exclusive factors that courts and juries must consider in determining a statutory damages award:

  1. The plaintiff's revenues lost and the difficulty of proving damages;
  2. The defendant's expenses saved, profits reaped, and other benefits from the infringement;
  3. The need to deter future infringements;
  4. The defendant's financial situation;
  5. The value or nature of the work infringed;
  6. The circumstances, duration, and scope of the infringement, including whether it was commercial in nature;
  7. In cases involving infringement of multiple works, whether the total sum of damages, taking into account the number of works infringed and the number of awards made, is commensurate with the overall harm caused by the infringement;
  8. The defendant's state of mind, including whether the defendant was a willful or innocent infringer;
  9. In the case of willful infringement, whether it is appropriate to punish the defendant and if so, the amount of damages that would result in an appropriate punishment.

Drawn from model jury instructions and case law, the Task Force does not intend these factors to be exclusive, allowing consideration of other factors relevant to a particular case.

Second, the Task Force recommends an amendment to the notice provisions of the Copyright Act, embodied in §§ 401 (d) and 402 (d). Under the current statute, the presence of a notice of copyright protection prevents a defendant from asserting an innocent infringement defense. The proposed amendment would permit an infringer to still assert the innocent infringer "defense," making the appearance of a copyright notice relevant, but not a bar to, an innocent infringement defense.

The third and final recommendation is arguably the most important. In cases involving non-willful secondary liability by "online services" involving large numbers of infringed works, courts should have discretion to fashion an award other than through a strict "per-work multiplier" calculation. In other words, courts would not be bound to the minimum statutory per-work amounts. As the Task Force notes, the "per-work multiplier" makes less sense where secondary liability is concerned, because there is an attenuated connection between the service provider's actions and the direct infringement by customers and users. Without this change, "[w]hen a court must multiply this minimum by a very large number of copyrighted works, it may not be possible to avoid an excessive outcome."

Benefits of the Task Force's Recommendations: Taking Facts into Account

The recommendations are an improvement over the current statute, providing guidance, specificity, and greater predictability. The statutory damage factors help tie awards to the "facts on the ground." The first, fifth, and seventh factors codify the rule recognized by several courts that statutory damages should bear a relationship to actual damages plaintiff suffered. New Line Cinema Corp. v. Russ Berrie & Co., 161 F. Supp. 2d 293 (S.D.N.Y. 2001) ("New Line's statutory damages should be commensurate with the actual damages incurred"); Dae Han Video Prod., Inc. v. Chun, No. 1:89-01470, 1990 WL 265976 (E.D. Va., June 18, 1990) ("When awarded, statutory damages should bear some relation to the actual damages suffered."); Bait Prods. Pty Ltd. v. Murray, No. 8:13-CV-0169-T-33AEP, 2013 WL 4506408 (M.D. Fla. Aug. 23, 2013) ("'Statutory damages are not intended to provide a plaintiff with a windfall recovery'; they should bear some relationship to the actual damages suffered."). This prevents windfalls for copyright plaintiffs, and provides an incentive for parties to use civil discovery tools to calculate actual harm. And a claim that damages are difficult or impossible to demonstrate is less likely to go unchallenged.

The sixth factor also ties awards to the "facts on the ground" by making the circumstances, duration, and scope of the infringements relevant considerations. For instance, "when the infringed work is of minimal commercial value, a lower award may be appropriate." And where a large number of works are at issue, courts can take a "holistic" approach and adjust awards for each work so that the overall award is commensurate to harm, rather than engage in a mechanical exercise of multiplying a random amount by the number of works at issue. This will nudge courts and juries to consider the value of works at issue and to recognize that works should not be treated the same as a default.

Finally, permitting courts in their discretion to depart from the per-work calculus in cases of non-willful infringement is a crucial, common sense amendment. While courts would still retain discretion to revert to the "per-work multiplier" approach, this change could in some instances help prevent the exorbitant awards that otherwise would inevitably result.

Drawbacks of the Task Force's Recommendations

A step in the right direction, the recommendations nonetheless may promote confusion and inconsistency. The addition of certain mandatory factors suggests that other factors are less important. Missing from the proposed statutory factors is consideration of a plaintiff's own conduct. Courts have held that the "conduct of the parties," including that of the plaintiff, is a relevant consideration in crafting an award. Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120 (2d Cir. 1989) (holding that a court may take into account the attitude and conduct of the parties, and finding that district court did not abuse its discretion in awarding low amount of statutory damages where plaintiff's own conduct was "vexatious [and] oppressive."); Bryant v. Media Right Prods., Inc., 603 F.3d 135 (2d Cir. 2010) (courts should consider the conduct and attitude of the parties in determining the amount of statutory damages to award for copyright infringement); Oppenheimer v. Holt, No. 1:14-CV-000208-MR, 2015 WL 2062189 (W.D.N.C. May 4, 2015) (same). Consideration of plaintiff or its agent's own conduct would help to address abusive tactics by copyright trolls. Also missing from the proposed statutory factors is consideration of a plaintiff's failure to mitigate its actual damages. Though this factor may be limited to assertion of a failure to mitigate defense, some courts have held this is a relevant consideration, even where a plaintiff seeks statutory damages. See, e.g., Malibu Media, LLC v. Julien, No. 1:12-CV-01730-TWP, 2013 WL 5274262 (S.D. Ind. Sept. 17, 2013) ("current law allows the court to consider actual damages [in making determination of statutory damages], and failure to mitigate is relevant in considering actual damages... "); Malibu Media, LLC v. Guastaferro, No. 1:14-CV-1544, 2015 WL 4603065 (E.D. Va. July 28, 2015) ("Although typically only applied to claims for actual damages, the defense may be relevant to claim requesting statutory damages because 'one purpose of statutory damages is to approximate actual damages that are difficult to prove.'").

Additionally, the first factor references the "difficulty of proving damages," but there is no mention of whether plaintiff has the burden of proof, what steps, if any, a plaintiff must take to meet this burden, or the consequences of failing to do so. Moreover, the fourth factor concerning a defendant's financial situation is vague and open-ended. Though intended to address the reality that the amount needed to deter an infringer depends on the circumstances, such as whether the infringer is an individual or a corporation, the factor as phrased does not make this clear. Indeed, profitable corporations may unfairly become the target of higher awards simply because the company is seen as profitable and able to afford paying large awards.

The amendment allowing courts to depart from the "per-work multiplier" calculus also has limited benefit in the secondary liability context, because it would not apply in cases of willful infringement. But even where the infringement is willful, the acts of the service provider are likely to be so attenuated from and not related to the number of works infringed, and calculation of damages on a per-work basis may nonetheless remain overkill.

Finally, the Task Force does not address litigation abuse by copyright trolls, and rejects recalibrating the range of damages available in the case of awards against individual defendants. Such a step could address the use of threats of maximum statutory damages by trolls to extract settlements from unwitting consumers. Instead, the Task Force notes that "courts are well-positioned" to evaluate abusive enforcement activities. But this misses the point; indeed, the issue is that copyright trolls use threats to extract settlements outside the purview of the court.

Conclusion

The Task Force's recommendations for amending the statutory damages provision of the Copyright Act are a mixed bag. While a step in the right direction because they offer greater clarity and recognize the different nature of secondary liability, there are some serious drawbacks and glaring omissions in the proposed amendments. If the Copyright Act is to be amended, it should be done in a comprehensive manner and should dispel as much confusion and inconsistency as possible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
25 Sep 2018, Conference, California, United States

We're excited to introduce Women's IP Strategy, a 2-day conference that tackles both the IP, legal as well as broader career development obstacles, risks and rewards for women lawyers working in male-dominant industries.

2 Oct 2018, Webinar, California, United States

This CLE webinar will offer suggestions to litigators to help them comply with the new GDPR during e-discovery.

10 Oct 2018, Webinar, California, United States

For the past years, 3D printing has significantly revolutionized the business industry as it provides innovations and improvement to pre-existing processes.

Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions