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Before I go on to discuss the events of last Friday's Section 104 roundtable, I wanted to lay out some of the background for those who might not have been following the PRO IP Act closely. Those who have been, and are looking for an update on the meeting, should go straight here.
Background on Copyright Damages
Some of the discussion may look hopelessly technical, but it's not too bad with some background: Section 104 proposes to change a part of copyright law that deals with statutory damages. In copyright infringement cases, a plaintiff has two major options for recovering money from a defendant—actual damages or statutory damages. Actual damages would give the plaintiff back what he has lost from the defendant's infringement, plus any profits the infringer made from the infringement. However, plaintiffs can also choose to regain statutory damages for each work infringed, to the tune of between $750 and $30,000. If the infringement is found to be "willful," then that statutory damages award could be as high as $150,000 per work.
There's a few things to note about how this statutory damages number is calculated. First, the plaintiff doesn't have to show that the amount is equal to how much money they've lost. In fact, the plaintiff doesn't really have to show that they've suffered any monetary harm at all. If you're wondering how Jammie Thomas can be liable for $9,250 for a song that costs 99 cents on iTunes, this basically the reason why.
Another thing to note is that the damages are calculated per work infringed. That means if a file-sharer downloads 10 tracks, he's liable for at least $7,500, and up to $1.5 million in statutory damages. Those numbers don't change, even if he's only made one copy of each, or ten thousand. So the statutory damages figure is multiplied by the number of infinrged works, not the total number of infringements or copies made.
But there's a small twist to that, and that brings us to the subject (if not the point) of last Friday's meeting. If the works infringed are part of a compilation or a derivative work, it's just counted as one infringed work when you're making this statutory damages calculation. So if I photocopy a magazine, my potential liability for statutory damages "only" ranges from $750 to $150,000, instead of those amounts multiplied by the dozens of articles, photographs, and other separate works within the magazine that each has its own separate copyright. The same is true for tracks on an album: if I burn a copy of a CD, statutory damages are measured against my copying that one CD, not each individual track on it. For derivative works, that means that if I copy a section from a fourth edition of a book that includes a series of edits and changes made in each of the previous editions, I'm liable only for copying that fourth edition, not it and the three editions that preceded it. The part of the law that allows this is the last sentence in Section 504 (c)(1) of Title 17 of the US Code:
For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.
That one sentence is the topic of Section 104 of the PRO IP Act, and Section 104 was the topic of Friday's roundtable.
Section 104 of the proposed Act would rewrite that last sentence to read:
A copyright owner is entitled to recover statutory damages for each copyrighted work sued upon that is found to be infringed. The court may make either one or multiple awards of statutory damages with respect to infringement of a compilation, or of works that were lawfully included in a compilation, or a derivative work and any preexisting works upon which it is based. In making a decision on the awarding of such damages, the court may consider any facts it finds relevant relating to the infringed works and the infringing conduct, including whether the infringed works are distinct works having independent economic value.
Put simply, a court would be allowed to make those multiplications of statutory damages. This is despite the fact that statutory damages can already be quite large in proportion to the damage caused; the wide range of statutory damage values can easily encompass the proportional harm of multiple infringements of a work; and that actual damages are always an option if the harm done to plaintiffs outstrips the $150,000 cap.
So this provision seems to be a solution in search of a problem. Now, there's no shortage of problems in the copyright field, for creators, users, and innovators, but 104 doesn't really seem to solve any of the pressing ones.
For instance, proponents have said that the current provision unnecessarily reduces damages, and so reduces the incentive for plaintiffs to sue, given the expense of litigation. Yet the high costs of litigation aren't reserved only for infringements of compilations. Reforms targeted at the awarding of attorney's fees in infringement cases, or even a more overarching approach to litigation reform, would seem to be far better fits in these cases.
Meanwhile, Section 104 threatens to make the problems of high statutory damages even worse, further unbalancing copyright law.