Roundtable on Copyright Damages: “What are we doing here?”
Roundtable on Copyright Damages: “What are we doing here?”
Roundtable on Copyright Damages: “What are we doing here?”

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    “What are we doing here?” Associate Register of Copyrights David Carson raised that very question several hours into the day-long meeting, arranged to discuss Section 104 of the PRO IP Act. To be honest, it was a question I’d been asking myself ever since the roundtable had been announced at last month's hearing on the bill.

    My problem with the provision then was that no one present at the hearing was particularly keen on it—neither the Department of Justice nor the Chamber of Commerce were pushing it particularly hard. Nor was it really clear that this provision did much good to improve the state of copyright law. It has been fairly clear that this is something that the RIAA wants—it would allow them to recover a much larger sum in statutory damages. For instance, if a 10-song album were infringed, the statutory damages would not range from $750 to $150,000, as they do today, but could be as high as $7500 to $1.5 million. (For a basic explanation and backgrounder on statutory damages and Section 104, see my last blog post.)

    So the RIAA wants larger litigation recoveries. But is there a real need for that? That's the question that we've been asking ourselves, and it's the question that David Carson put to the content companies that support the provision: “To proponents of this amendment: have there been any cases, since 1976, where plaintiffs have been inadequately compensated because of the operation of this rule?”

    And there really wasn't much of a response. There are cases they think went the wrong way, sure, but they just didn't have any examples of a situation where the operation of the current law resulted in an unjustly low statutory damages award.

    On the other hand, there were at least a couple of examples as to how the section prevented further damage. would have gone out of business far sooner had damages in its infringement case been calculated by song, rather than by album. Launchcast, which was sued because of a dispute about the operation of its music webcasting services, had to deal with a potential $200 million liability exposure, instead of $1.5 billion, and could make settlement and litigation decision accordingly.

    Moreover, the discussions at the roundtable were all taking place within the larger context of high statutory damages awards. Although the topics on the agenda were limited to very specific discussion of one part of section 504(c)(1), and further tailored to the proposed changes to it, it was hard to ignore the larger implications of statutory damages generally.
    This theme ran throughout the entire day's meeting, through each of the five designated topics: (1) the origins of the provision and its purpose; (2) the interpretation of the provision and whether it was clear; (3) practical experience in dealing with the provision; (4) whether the provision was meeting its intended goals; and (5) whether it should be amended, and if so, whether Section 104 of the PRO IP Act was the right way to do it.

    The first session was largely dominated by Jon Baumgarten of Proskauer Rose and Bill Patry of Google. Baumgarten, though appearing on his own behalf, has in the past represented the motion picture and content industries in a number of proceedings, and also worked at the Copyright Office. Patry, in addition to his current position at Google, has also worked at the Copyright Office and as copyright counsel to the House Judiciary Committee. In the larger-scale facts, there was no disagreement: the reason that 504(c)(1) allows one statutory damages recovery for each work was the result of a compromise in overhauling copyright law from the 1909 Act. In the 1909 Act, statutory damages were multiplied by the number of infringements committed, which could quickly lead to extremely large multipliers. In response, the Copyright Office proposed awarding only one lump sum of statutory damages for each case, regardless of the number of infringements and the number of works infringed. When the copyright bar objected to this plan as providing too small an amount of damages, the Copyright Office produced language looking much like today's statute, with damages calculated per work, but with the limitation on compilations and derivative works.

    The main dispute between Baumgarten and Patry seemed to focus on whether or not the decision made by Congress and the Copyright Office in creating 504(c)(1) was the result of a deliberate compromise, or political expediency. Baumgarten opined that the only reason that the provision existed as it was was that the drafting bodies had simply reached an impasse and went forward with a non-consensus agreement in order to deal with other parts of the complex legislation. To that end, he cited the fact that most of the discussion about the provision centered around derivative works, not compilations, and that one stakeholder's questions regarding compilations were left unaddressed by the legislative history. Patry countered that the reports and drafts following the discussion of compilations explicitly referred to the issue of compilations, and should be read as part of the legislative intent. The presence of the compilation issue in the sessions following its discussion before the Copyright Office certainly does suggest that its inclusion was no accident, and can't be dismissed as a legislative fluke.

    After that, discussion of the provision's interpretation centered around a number of interesting questions that have arisen about the provision from time to time, including the questions like: How do you define a compilation? What happens when a work is published on its own, and then later as a compilation? Does it matter if there are multiple authors within a single compilation, or if the owner of the copyright in the compilation? These questions were discussed at length, with frequent reference to the touchstone cases on the provision. Notably, though, there isn't a whole lot of definitive, authoritative law on some of these points because there's really only a handful of cases out there, mostly scattered about district courts. The question of whether the statute itself was clear wasn't definitively answered, either, since the existence of open questions about a particular law doesn't necessarily mean that it's vague. More to the point, the provision hasn't actually led to all that many open disputes, compared to other areas of the 1976 Copyright Act, in its 30 years of existence. If a lack of clarity was a reason to amend 504, it wasn't made clear why only the last sentence of 504(c)(1) was targeted, and why Section 104 was the solution that made it clearer. After all, both potential plaintiffs and defendants noted that the uncertainties of litigation results often result in pre-trial settlements. By leaving the result of a statutory damages award within an even larger possible range, Section 104's amendments only increase that uncertainty.

    It was in the discussion on practical experiences with the law that Carson pointedly asked what the effects had been on the parties at the table. No examples of damages unjustly reduced by Section 504(c)(1) were given.

    The debate then turned to the question of whether or not the statute met its intended goals. The panel began with Ed Klaris, of Conde Nast, representing the Magazine Publishers Association. The magazines' position on this issue is particularly pertinent, since they are both prime plaintiffs and prime defendants in cases regarding compilations. On the one hand, anyone copying a single magazine is almost certainly going to be copying dozens of articles and possibly hundreds of graphics and photographs, each with a potentially different author. You'd think, because of this, that magazines would have a great incentive to want to maximize damages. Yet magazines have also been on the other side of the table, such as in Greenberg v. National Geographic, where a photographer sued the magazine for publishing archived issues in CD-ROM format. The question of whether there was an implied right for the magazine to publish the photographs in digital format was at the time still an open one, and both sides had reason to believe they were right. Though National Geographic lost the case, Klaris said, the award was based upon 4 infringing articles, and not the 64 photographs at issue. With statutory damages set at $100,000 per article, Klaris said, the current law saved National Geographic from a $6.4 million award. If the intended goal of the provision was to prevent defendants from disproportionate damages, this seems ot be another pertinent example. Despite the fact that the magazines could easily profit from the amendments of Section 104, Klaris stated that their position was that current law was best for them, both as potential plaintiffs and defendants.

    After that exchange, Carson proceeded to ask several of the stakeholders to articulate how they thought that changes in technology affected this provision, or possibly rendered it obsolete. Most of the responses focused on the ease of copying and the large data storage capacities of modern digital technology—the same arguments that have been raised to support amendments to copyright law like the Digital Millennium Copyright Act and others. However, as Patry pointed out, new technology, while it changes a lot, doesn't change everything. None of these considerations seriously changes the landscape.

    In illustration of this, several of the bill proponents noted that more and more compilations were being issued by the movie and music industry, and more were being brought to market. But as Gigi and others pointed out, this undercuts their own argument. If content creators fear that the current law will encourage infringers to infringe whole compilations instead of single works, then you'd expect to see fewer compilations emerge in the years since 1976. Instead, as they themselves point, out, compilations are becoming more common—in fact, the trend seems to be towards a wider diversity of distribution channels, including new compilations alongside a la carte offerings. Nor is there any real evidence of these craft defendants who seek out compilations in order to minimize liability exposure—if digital technology has enabled more copyright infringement through the Groksters of this world, it's hard to imagine the average file-sharer taking the time to master the legal intricacies necessary to reduce his liability from a bankrupting few million dollars from an equally-bankrupting few billion.

    Throughout this whole discussion, of which I'm only recounting particular selections, talk ranged through a variety of recurring themes: the intent of the legislative compromise, the existence of large statutory damages, the fact that suing for infringement—and being sued for it—are expensive and uncertain processes. But in the end, the most pertinent question should be about section 104, since of all the possible changes people would like to make to Section 504(c)(1), or even to statutory damages generally, this is the only one actively being considered by Congress. The big question is: will Section 104 fix any of these problems? The clear answer seems to be no.

    No one is disputing that small creators have their copyrights infringed, too, and that litigation is expensive. But the changes made by Section 104 are narrow enough that they hardly seem likely to help the majority of creators navigate the complex and expensive waters of litigation.

    Nor would this multiplier act as a real deterrent to most copyright infringers. Those who believe they are not actually infringing copyright, and find themselves on the wrong side of a close court decision would not consider a relatively obscure provision on statutory damages and suddenly believe they are in the wrong. Nor would the casual file-sharer be any less unable to pay a multi-million dollar award, instead of one in the hundreds of thousands. And nowhere was there evidence of the “crafty defendant” who would choose to infringe based upon this perceived loophole.

    Meanwhile, the provision serves to threaten those who are often charged with infringement—technology innovators and technology users who in many cases, could face much higher liability, and even more legal uncertainty. Even with judicial discretion potentially mitigating large damages awards, pressure from high potential statutory damages will always affect settlement negotiations, possibly preventing new goods and services from ever reaching the market.

    Moreover, any question of proportionality has to take into account that currently, statutory damages need not be proportional to actual harm. And if a $150,000 cap per compilation of creative work doesn't adequately compensate for harm, plaintiffs can always choose to get actual damages and the infringer's profits instead.

    These arguments, as far as I can tell, remained standing at the end of the session. Despite the existence of active questions about Section 504(c)(1), none of the problems with it would be fixed by the proposed legislation at hand. Why were we there yesterday? Hopefully, the answer is that we were there to put to rest the notion that Section 104 is at all necessary or helpful.