Human Property

Are copyright damages limited in some instances?  One federal judge certainly thinks so.  On January 22, 2010, Judge Michael Davis for the District of Minnesota slashed a $1.9 million jury verdict against file-sharer Jammie Thomas-Rasset to $54,000. This amounted to an award of $2,250 per song.

Thomas-Rasset had originally been fined the $1.9 million on account of sharing 24 songs on the Kazaa network.

The RIAA had chosen to seek “statutory damages” against Thomas-Rasset.  Under the Copyright Act, a plaintiff can seek “statutory damages” instead of “actual damages.”  The minimum statutory award is $750, and the maximum is $30,000.

Since actual damages in this case would have been incredibly small (songs can be downloaded for about a buck from iTunes), the RIAA sought statutory damages, presumably to scare other file-sharers.

In explaining his decision, Judge Davis wrote that the price tag of $2,250 per song was a “reasonable limit” against a noncommercial individual and did not “veer into the realm of gross injustice.”  This represented three times the minimum statutory award of $750.

The Court further noted that Thomas-Rasset “was not a business acting for profit.  Instead she was an individual consumer illegally seeking free access to music for her own use.”  Any need for deterrence “cannot justify a $2 million verdict for stealing and illegally distributing 24 songs for the sole purpose of obtaining free music.”

Surprisingly, lawyers for Thomas-Rasset are seeking to overturn the verdict entirely.  They want a court to rule on whether or not the verdict is constitutional in the first place — a much more difficult task.  Judge Davis did not rule on this issue since he opted instead to reduce damages.

It might be better to leave well enough alone.  Challenging the constitutionality of the damage award seems like a noble task, but Judge Davis’s decision is also the first written opinion lowering a damage award for copyright infringement (and may have involved some questionable legal analysis as this blog points out).

It seems highly unlikely that the damage provisions of the Copyright Act would be thrown out by any federal judge.  Congress has express authority in the Constitution to regulate copyrights (the “Useful Arts” Clause).  And legitimate acts of Congress — including the setting of statutory damage awards — would likely be entitled to deference by a court.

An appeal seems rash and might set the way for very bad precedent the other way.  But who knows?  It seemed unlikely that Thomas-Rasset would get this far in the first place.  Maybe her legal team will be able to convince an appellate court that copyright infringement requires an actual showing of damages instead of an arbitrary Congressional estimate.

Are hundreds of thousands of dollars in damages or even permanent restriction of internet access appropriate responses to illegal online file-sharing?  What’s fair in these circumstances?

As we all start to do more things on the internet — and have access to much more creative content via the internet — these questions start to become very interesting.

To date, only two file-sharing cases have gone to trial and resulted in verdicts.  In both cases, the defendants were found liable for copyright infringement and were subject to up to millions of dollars in damages.

In the first file-sharing case, a Minnesota jury decided last summer that Jammie Thomas-Rasset was liable for $1.92 million for the infringement of 24 songs.  This amounts to $80,000 a song.

The nation’s second file sharing defendant, Joel Tannenbaum, is now asking his court for a retrial, or to reduce the $675,000 award related to the infringement of 30 songs.  This amounts to $22,500 a song.

It’s totally up to the jury to decide how much to award in damages.  The Copyright Act permits damage awards anywhere from $750 to $150,000 per infringement.  In instances of “innocent infringement,” damages can be reduced to $200, but even then, something has to be paid.  Copyright infringement is a strict liability offense.

In light of the fact that songs today can be downloaded for $1 off of iTunes, is an award of $80,000 per song for infringement reasonable?  The damage awards, on their face, would strike the casual observer as punitive, perhaps made for their deterrent effect as opposed to restitution for the infringement.

Unfortunately for these defendants, they face an uphill battle in getting a judge to reduce the verdicts.  The Copyright Act expressly permits damage awards to go into the hundreds of thousands of dollars, so it would be difficult to argue a deprivation of due process based on any lack of notice.  We’ve all seen those FBI warnings every time we rent a movie.

Then again, the Supreme Court has placed limits on punitive damage awards based on similar principles.  Even in cases where a company knew it was polluting a town’s water supply or knowingly manufacturing shoddy products, punitive damage awards are limited because due process demands some restriction on damages.   The Supreme Court has held that “few awards exceeding a single-digit ratio between punitive and compensatory damages…will satisfy due process.”  State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003).

Ultimately, the best recourse would be for Congress to modify the Copyright Act and reduce damages in cases of file-sharing so that the punishment can better fit the crime, so to speak.  But here, too, there are forces seeking even more draconian punishments, including the restriction of internet access for repeat offenders.  Such a law has just come into effect in France, and it may be only a matter of time before industry groups lobby for a similar measure in the United States.

Would Americans be okay with a law depriving people of internet access in instances where someone was repeatedly found liable for copyright infringement?  How comfortable are Americans with the idea that profit derived from creative works should trump the value associated with access to the internet?

Patents protect inventions, while copyrights protect creative works.   As India rushes onto the world stage, it seems clear that we are only a few years away from a real explosion in activity in India related to both.

The success of a movie like Slumdog Millionaire and its musical impresario A.R. Rahman hints at a growing interest in Indian music and culture in the West, that Indian companies will no doubt want to monetize.

In fact, they will probably care more about copyright protections in Western markets than in India itself — the Slumdog Millionaire soundtrack retails for a lot more in New York than in the Mumbai slum itself.

I would expect Indian cultural companies to start to really invest in copyright protections in the next five years as a way of capitalizing on growing interest in Indian music and movies in the US and Europe.

The same is true with patents.  With Indian companies like the Tata Group purchasing once powerful Western brands like Land Rover, it seems clear that Indian companies are now finally finding the confidence and capital to generate wealth alongside Western and Chinese competitors.  And to stay competitive, Indian companies will want robust patent portfolios.  A big patent book is a peacock feather —  a way of showing your intelligence and know-how in a globalized world.

India’s prospective growth rate for 2010 hovers at around 8 percent.  With Western markets continuing to look tepid, it’s just a matter of time before Indian companies make the leap and being monetizing their intellectual property in Western markets.  Expect for this to happen sooner rather than later.

Copyright law, both in the United States and around the world, may be set to change drastically in the next few years — at least if there is any truth to the rumors related to a new international treaty known as the Anti-Counterfeiting Trade Agreement (or “ACTA”).

The treaty is being negotiated between the United States, Canada and the European Union (among other countries).  It aims to put in place a single set of copyright rules and regulations binding on all signatories.

Little is known about the actual contents of ACTA, as all negotiations and documents have been veiled behind unusual levels of secrecy.

In fact, the negotiations are so secret, they have been declared “properly classified national security secrets” by the Obama Administration.   The Administration has used this classification to deny any requests for information or documents under the Freedom of Information Act.

The high levels of secrecy have led to rampant speculation about the contents of the treaty and how it would change current copyright laws.  In September 2008, leaked documents led to speculation that ACTA would:

Require Internet Service Providers to monitor all consumers’ Internet communications, terminate their customers’ Internet connections based on rights holders’ repeat allegation of copyright infringement, and divulge the identity of alleged copyright infringers possibly without judicial process, threatening Internet users’ due process and privacy rights; and potentially make ISPs liable for their end users’ alleged infringing activity.

Interfere with fair use of copyrighted materials.

Criminalize peer-to-peer file sharing.

Interfere with legitimate parallel trade in goods, including the resale of brand-name pharmaceutical products.

Impose liability on manufacturers of active pharmaceutical ingredients (APIs), if those APIs are used to make counterfeits — a liability system that may make API manufacturers reluctant to sell to legal generic drug makers, and thereby significantly damage the functioning of the legal generic pharmaceutical industry.

Improperly criminalize acts not done for commercial purpose and with no public health consequences; and Improperly divert public resources into enforcement of private rights.

A clearer picture of ACTA’s provisions came a few weeks back, when a second document (a European Commission summary paper) was again leaked.  Here are some key quotes and analysis:

Safe-harbours for liability regarding ISPs, based on Section 512 of the Digital Millennium Copyright Act (DMCA)2, including a preamble about the balance between the interests of internet service providers (ISPs) and right-holders. See also KORUS Chapter 18.10.30. According to US, the language proposed is somewhere in the “middle” between the WIPO internet treaties, KORUS and the DMCA, which probably means that it is more detailed than the first but not as specific as the latter

This confirms that ACTA is probably looking to impose a “notice-and-takedown” regime (similar to one contained in the Digital Millennium Copyright Act) on other countries that currently do not have one in place.  Under this type of system, an internet content provider is required to “take down” any allegedly infringing material after receiving “notice” from the copyright holder.

On the limitations from 3rd party liability: to benefit from safe-harbours, ISPs need to put in place policies to deter unauthorised storage and transmission of IP infringing content (ex: clauses in customers’ contracts allowing, inter alia, a graduated response). From what we understood, the US will not propose that authorities need to create such systems. Instead they require some self-regulation by ISPs.

Under current American law, ISPs are only required to put in place a sufficient notice-and-takedown system and in “appropriate circumstances,” terminate users who repeatedly or blatantly infringe copyright.  Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1109-1110 (9th Cir. 2007).

The important change appears to be the need for a “graduated response” to copyright infringement, as well as “self-regulation” by ISPs.  Will this require ISPs to monitor their networks?  Can your internet access be revoked based on mere allegations (but no proof) of copyright infringement?  These are key questions.

Here’s a section that relates to DVD copying (Blueray copying?) software:

Section 4: Will focus on technical protection measures (TPMs). Language inspired by US-Jordan Free-Trade Agreement (article 4.13)4, as well as by the WIPO Internet Treaties (articles 11 WCT and 18 WPPT):
- Parties to provide adequate civil and criminal remedies that are specific to
TPM infringements, i.e. treat these as separate offenses form “general”
copyright infringements.
- TPM infringements would be: (i) prohibition of circumvention of access
controls and; (ii) prohibition of manufacture and trafficking of circumventing
DRM devices.
- There will be exceptions to these prohibitions available to ACTA members.
- “Fair use” will not be circumscribed.
- There will be no obligation for hardware manufacturers to ensure
interoperability of TPMs.

The gist of all that legal-ese is that countries will be required to enact laws preventing the cracking of any technical measures designed to prevent infringement.  In the US, the Digital Millennium Copyright Act makes it illegal for anyone to crack anti-copy restrictions on DVDs, for example.  This has provided a schizophrenic legal regime where it remains technically legal to copy a DVD for some purposes (a personal copy of a DVD you already own) but illegal to crack any technical measures which prevent that DVD from being copied in the first place.  It looks like ACTA seeks to expand these restrictions to other countries.

In sum, what can be expected from ACTA?  At a high level, it appears that the proposed changes will have greater impacts in countries overseas, especially in countries that may not have the strict copyright laws of the United States.  In the United States itself, ACTA may impose greater surveillance obligations on ISPs to monitor their networks — the “graduated response” language.

At the end of the day, however, the devil will be in the details.  We should know more as more items get released…or leaked.

Is access to the internet a civil right?  Are we entitled to the internet merely on account of citizenship?

In the United States this might be akin to asking whether cable TV is a civil right.  It just seems like an odd question to ask.

But other countries have taken this question seriously, and in many instances have concluded that access to the internet is a basic right.

This past October, Finland became the first country to declare high speed internet access a legal right.  The Finnish law requires that by 2015, every Finn must have internet access equivalent to 100 mb per second.

In June, a top French court declared access to the internet a basic human right guaranteed by the Declaration of Human Rights.  As such, the French court held that it was impermissible for France to deny internet access to individuals who were merely accused (but not convicted) of online piracy.

Estonia, a small Baltic country that borders Russia, passed legislation close to 10 years ago declaring internet access as a fundamental human right.

Will the United States follow suit with these other countries?  Congress seems unlikely to pass any type of law law guaranteeing internet access; there just didn’t seem to be any pressure or reason to do so.  As in France, the issue would probably come up before a court.  Here are a few hypotheticals that might lead a court to consider this question:

• Illinois is currently pondering a law that would ban registered sex offenders from accessing “social-networking Web sites“.  Would such a ban be constitutional?  Can a state prohibit people from accessing information and websites online?  Would this be an illegal restraint on the First Amendment’s guarantees of freedom of expression, or freedom of association?  The First Amendment guarantees people the right to say what they want in public forums subject only to time, place and manner restrictions.  Is the internet a public forum?  Or is it akin to a private mall which can kick you out at any time?  Answering this question may require a technical analysis as to who “controls” the internet — is it a private or government function?

• In addition to First Amendment issues, are there potential legal issues on account of the Equal Protection Clause?  The Equal Protection Clause of the 14th Amendment (passed after the Civil War) provides that all Americans are entitled to equal protection of the law:  no single group can be unfairly singled out for exclusion from constitutional rights.  Would the Illinois law present a case of an unfair restriction of a group of people without any rational basis?  It may seem unlikely that the Supreme Court would protect sex offenders from exclusion, but just a few years ago the Supreme Court held that a Colorado law which deprived gay people of legal rights was grossly unconstitutional as it unfairly targeted a group of people from protection of the law (Romer v. Evans, 517 U.S. 620 (1996)).

• Let’s assume that the Illinois law passed constitutional muster.  Could Illinois take the next step and ban all internet access for registered sex offenders?  The same First Amendment and Equal Protection Clause issues would appear to present themselves once again, but with greater force.  Let’s further assume that a court would OK restrictions on sex offenders to access the internet — can a state then restrict internet access for other groups?  Could a state pass a law barring convicted terrorists from accessing the internet?  How about alleged terrorists?  Many states already restrict convicted felons from voting and possessing hand guns — deeply fundamental rights in America.  Even if internet access were a fundamental right, it would seem internet restrictions caused by convictions might pass constitutional muster.  Is this right?

• Here’s another hypothetical that may be a reality before long.  Suppose the RIAA is able to successfully lobby Congress to pass a “three-strikes” bill that requires internet providers to restrict internet access to individuals who have been caught pirating materials at least three times.  Would it be constitutional to restrict internet access across the board to convicted online pirates?  This was the issue before the French court in June, and it found that that the law as written was too broad because it deprived people of judicial review.  If a jury finds you guilty three times of online piracy, can you be banned from accessing the internet for good?

The development of electronic book readers like Amazon’s Kindle raises interesting questions about the future of books.

The portable nature of the book has been its greatest advantage as a tool.  You can hold onto a book for a long time and freely share it with someone else.  You can read it as many times as you’d like.  If what you’re reading is considered dangerous, you can hide it.  Books are small but possess a lot of power and influence.

The only restrictions imposed on book ownership are those placed by copyright laws.  These restrictions are relatively minor.  You have to purchase the book once, and you can’t make copies of it and sell it to someone else.  That’s about it.  You are even permitted to resell the book without any trouble, a concept known as “first-sale.”

Some companies are attempting to use technology as a way of changing the relationship to the book.  The current restrictions on the Kindle, for example, attempt to change that relationship.  Instead of purchasing a copy of the book, you are actually purchasing a license to view it on your Kindle.  You are not permitted to transfer downloaded copies of e-books to others, thus restricting the right of first sale.

In short, you’re not really buying a book — just the limited right to view its contents.  This is a lot of power for Amazon to maintain over book ownership, and it carries some disadvantages.  Amazon got into hot water about its behavior when it deleted copies of 1984 from hundreds of Kindles.  People were up in arms, even though Amazon had credited back the affected accounts.  Some line had been crossed by Amazon when it manipulated the data after selling it.

Google, as well, wants to change the relationship with the book.  Google has been scanning millions of pages into a large database which it hopes to make searchable to the public — a veritable digital library.  Despite the balking of other companies and even the government, Google seems set to make a deal with the Justice Department and other online competitors over its plan.  Google would prefer that we read books through some service.  It remains to be seen if people will want what Google plans to offer.

But there, too, relationships may be shifting.  If Google is planning a searchable library, will privacy become an issue?  Consider the provisions of the Patriot Act that permit the government to access library records of individuals through National Security Letters:  would Google’s library be subject to review by the US government for certain search terms?  Do you risk surveillance with Google’s digital library that would never be a concern by merely reading a copy of that book in the local library?

Companies should certainly innovate when it comes to books, but they need to consider the fact that old habits die hard.  The Kindle seems like a book, but Amazon made clear that it really wasn’t a book — at least in terms of what people are used to.  And if privacy ends up out the window with Google’s new digital library scheme, people may soon realize that the digital library is a lot less comfortable than the brick-and-mortar version.

Companies should thus be careful with how they package their products.  The common law may provide plaintiffs with avenues against companies that package their products with new, unfamiliar restrictions.  A jury may very well believe that the product known as the “book” carries certain privileges attached to it — ones that can’t be trampled on.

Maybe this is why Amazon settled a lawsuit stemming from the 1984 debacle for $150,000 for the two plaintiffs.  Those numbers can add up.