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>>Are Statutory Damages Constitutional?

Are Statutory Damages Constitutional?

Prof. Doug Lichtman, UCLA School of Law
March 4, 2009

A few months ago, Harvard Law School Professor Charlie Nesson took Joel Tenenbaum as a client.  Tenenbaum was up until then just one of the thousands of individuals who had been sued by the music industry for uploading and downloading music online.  But with Nesson now involved, the case has become a public referendum – not only on the music industry’s practice of litigating against individuals, but also on the copyright rules that make the industry litigation work.

In a new audio podcast over at www.ipcolloquium.com, I present an hour-long in-depth look at Nesson’s arguments, focusing especially on his claim that copyright law’s statutory damages regime is unconstitutional – in part because in his view it is unpredictable, in part because in his view it results in damages awards that are disproportionate as compared to the actual harm suffered; and in part because statutory damages are in fact calibrated not just to compensate injured copyright holders but also to deter future infringement.

My guests on the show are Professor Nesson himself; Steven Marks, who is General Counsel for the Recording Industry Association of America; and three of the leading academic experts on punitive damages: Professor Cathy Sharkey from NYU, Professor Dan Markel from Florida State, and Professor Tom Colby from GW.  The full audio can be streamed or downloaded from http://www.ipcolloquium.com/Programs/5.html.

Although the show engages a wide range of issues, there end up being two primary questions:
First, can a civil case ever become so focused on punishment or deterrence that it crosses some constitutional line and as a result must be re-characterized as criminal?  That’s an important question not only because criminal cases have to be brought by the government, but also because criminal cases have to afford the accused certain heightened procedural protections.

Second, whether civil or criminal, what limitations does the due process clause impose on a statutory damages regime?  For instance, are there specific types of information that a court is not allowed to use when choosing a number from of the statutory range?  Or, conversely, are there specific facts that a plaintiff must prove before a statutory range is permissible?

The conversation ultimately leaves me disagreeing with Nesson at most turns.  Specifically, on the first question, I think it’s pretty clear that Professor Nesson is wrong to the extent he is trying to argue that these music industry cases cross the line from civil to criminal and, because of that, are unconstitutional.   The statutory damages regime in general, and the statutory damages regime as applied here, both seem to fall well within the range of cases where courts defer to the civil label as chosen by Congress.

That said, the Due Process clause of the Constitution does have some work to do with respect to statutory damages.  For one thing, after a damages award is chosen in any specific case, the court has an obligation to check that the resulting number is not excessive in light of the law’s legitimate interests in compensation, deterrence, and punishment.

I think Charlie and I likely agree on this principle in the abstract, but we then disagree on how to run the numbers – with Charlie’s analysis implausibly running somewhere in the pennies, and my own back-of-the-envelope analysis not only suggesting that actual harm is likely much higher, but also seeing room for a much bigger award that would meaningfully deter this sort of infringement.

The Due Process clause also has work to do when it comes to establishing what evidence can and maybe must be used when a court picks a number from within the statutory range. Considerations along these lines would seem to be things like the actual harm caused; the likelihood that this defendant might have avoided detection; and even the defendant’s own wealth, because that gives us a clue about what it would take to deter him.

This leaves me at odds with Nesson yet again – primarily because Nesson seems to think that the lack of a commercial purpose is somehow a Holy Grail in the analysis, yet I see the lack of a commercial purpose as just one among many relevant inputs.

Our differences aside, however, I think Charlie and I both sit here today uncomfortable with the reality on the ground – civil cases, brought against individuals, where the individuals are sympathetic in the sense that they are typically outgunned by the music industry’s lawyers, and, although it is no excuse, they are doing something that thousands upon thousands of their peers also do.

Indeed, I’ve been uncomfortable with that aspect of these cases for years now (see http://www.law.uchicago.edu/news/lichtman-kazaa.html), and that discomfort has long led me to prefer legal rules that would hold intermediaries like ISPs and universities accountable for the behavior of the relevant individuals.  Those entities would then be in a good position, and also have the right incentives, to influence individual behavior.

Again, you can listen to the full podcast here: http://www.ipcolloquium.com/Programs/5.html.  And, for attorneys who listen, don’t forget that you can earn free CLE credit by registering on the site.  All of our previous programs have been approved in New York, California, Illinois, Texas, and Washington.

By |2018-06-05T16:57:26+00:00March 4th, 2009|Intellectual Property Issues|Comments Off on Are Statutory Damages Constitutional?