SONY BMG MUSIC ENTERTAINMENT v. TENENBAUM Nos. 10-1883, 10-1947, 10-2052.
660 F.3d 487 (2011)
SONY BMG MUSIC ENTERTAINMENT, et al., Plaintiffs, Appellants/Cross-Appellees, v. Joel TENENBAUM, Defendant, Appellee/Cross-Appellant.
United States Court of Appeals, First Circuit.
Heard April 4, 2011.
Paul D. Clement, with whom Jeffrey S. Bucholtz, Erin E. Murphy, King & Spalding, LLP, Timothy M. Reynolds, Eve G. Burton, Holme, Roberts & Owen, LLP, Matthew J. Oppenheim, and Jennifer L. Pariser were on brief, for plaintiffs-appellants.
Jeffrey Clair, with whom Tony West, Assistant Attorney General, Carmen Ortiz, United States Attorney, and Scott R. McIntosh were on brief, for the United States as plaintiff-appellant.
Charles R. Nesson and Jason Harrow for defendant-appellee.
Julie A. Ahrens, with whom Anthony T. Falzone, Stanford Law School Center for Internet & Society, Michael Barclay, Corynne McSherry, Electronic Frontier Foundation, Jason M. Schultz, Samuelson Law, Technology & Public Policy Clinic, were on brief for Electronic Frontier Foundation, amicus curiae.
Before LYNCH, Chief Judge, TORRUELLA and THOMPSON, Circuit Judges.
LYNCH, Chief Judge.
Plaintiffs, the recording companies Sony BMG Music Entertainment, Warner Brothers Records Inc., Arista Records LLC, Atlantic Recording Corporation, and UMG Recordings, Inc. (together, "Sony"), brought this action for statutory damages and injunctive relief under the Copyright Act, 17 U.S.C. § 101 et seq. Sony argued that the defendant, Joel Tenenbaum, willfully infringed the copyrights of thirty music recordings by using file-sharing software to download and distribute those recordings without authorization from the copyright owners.
The district court entered judgment against Tenenbaum as to liability. The jury found that Tenenbaum's infringement of the copyrights at issue was willful and awarded Sony statutory damages of $22,500 for each infringed recording, an award within the statutory range of $750 to $150,000 per infringement that Congress established for willful conduct. See 17 U.S.C. § 504(c).
Upon Tenenbaum's motion for a new trial or remittitur, the district court skipped over the question of remittitur and reached a constitutional issue. It reduced the damage award by a factor of ten, reasoning that the award was excessive in violation of Tenenbaum's due process rights. See Sony BMG Music Entm't v. Tenenbaum,
The parties have cross-appealed. Sony argues the district court erred, for a number of reasons, in reducing the jury's award of damages and seeks reinstatement of the full award. It defends the liability and willfulness determinations.
Tenenbaum challenges both liability and damages. He challenges the Copyright Act's constitutionality and the applicability of the Copyright Act and its statutory damages provision to his conduct. Tenenbaum also argues that the district court committed various errors that require a new trial, and that a further reduction of the damage award is required by the due process clause.
The United States, intervening to defend the constitutionality of the Copyright Act, argues that the district court erred in bypassing the question of common law remittitur to reach a constitutional issue.
We reject all of Tenenbaum's arguments and affirm the denial of Tenenbaum's motion for a new trial or remittitur based on claims of error as to the application of the Copyright Act and error as to the jury instructions. However, the court erred
A. District Court Proceedings
Sony brought this action against Tenenbaum in August 2007, seeking statutory damages and injunctive relief pursuant to the Copyright Act. Sony pursued copyright claims against Tenenbaum for only thirty copyrighted works, even though it presented evidence that Tenenbaum illegally downloaded and distributed thousands of copyrighted materials.
Sony's complaint elected to seek statutory, not actual damages, pursuant to 17 U.S.C. § 504(c). For each act of infringement, § 504(c) establishes an award range of $750 to $30,000 for non-willful infringements, and a range of $750 to $150,000 for willful infringements.
Tenenbaum filed several pre-trial motions, including a motion to dismiss Sony's complaint on the ground that the Copyright Act is unconstitutional.
A five-day jury trial was held from July 27 to July 31, 2009. Following the conclusion of testimony, the district court partially granted Sony's motion for judgment as a matter of law, holding that Sony owned the thirty copyrights at issue and that Tenenbaum infringed those copyrights through his downloading and distribution activities. The court left to the jury the questions of (1) whether Tenenbaum's infringement was willful and (2) the amount of statutory damages to be awarded. In instructing the jury, the court informed it of the statutory range Congress had established for willful and non-willful infringements and articulated a non-exhaustive list of factors it could consider in determining the damage award.
The jury found that Tenenbaum had willfully infringed each of Sony's thirty copyrighted works. The jury returned a damage award, within the statutory range, of $22,500 per infringement, which yielded a total award of $675,000.
Tenenbaum filed a post-trial motion seeking a new trial on various grounds
Regarding the size of the award, the court declined to decide the common law remittitur issue, based on its assumption that Sony would not agree to a reduction of the award and that remittitur would only necessitate a new trial on the issue of damages, and that even after a new trial the same issue of constitutional excessiveness would arise, so, in its view decision on the issue was inevitable. The court itself then found that the award violated due process, over objections that it utilized an impermissible standard, and reduced the award from $22,500 per infringement to $2,250 per infringement for a total award of $67,500.
B. Factual Background
We recite the underlying facts in the light most favorable to the jury's verdict. Analysis Grp., Inc. v. Cent. Fl. Invs., Inc.,
1. The Music Recording Industry and Peer-to-Peer Networks
Plaintiffs are several of the largest recording companies in the United States, and engage in discovering, developing, and marketing music recording artists and distributing the musical works those artists record. They hold exclusive rights to copy and distribute various music recordings under United States copyright law, including the thirty recordings at issue in this case, and their primary source of revenue is the sale of those recordings.
Plaintiffs only sell copies of their copyrighted recordings for profit. They never sell licenses to their copyrighted works that include rights to upload recordings to the internet for public consumption. The value of such a blanket license would be enormous, as the grant of such a license would deprive the companies of their source of income and profits and essentially drive them out of business.
In the late 1990s, copyrighted music recordings, including those held by the plaintiffs, began to appear on file-sharing software called "peer-to-peer networks" without the authorization of the copyright holders.
Peer-to-peer networks enable individuals both to make digital files stored on their own computers available to other network users and to download such files from the computers of others. Files shared between users of these networks do not pass through a central computer, but are instead exchanged directly from one user's computer to another. Through the use of these peer-to-peer networks, the unauthorized and illegal downloading and distribution of copyrighted materials—especially music recordings—became commonplace. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.,
The proliferation of these networks from 1999 onward and the piracy they enable has had a significant negative impact on the recording industry. Between 1999 and 2008, the recording industry as a whole suffered a fifty percent drop in both sales and revenues, a figure plaintiffs attribute to the rise of illegal downloading. This reduction in revenues has, in turn, diminished recording companies' capacities to pursue, develop and market new recording artists. It also affected the companies' employees. The loss in revenues has resulted in a significant loss of industry jobs. Sony BMG Music Entertainment and Warner Music Group, for example, each have suffered a fifty percent reduction in workforce since 2000.
Shortly after peer-to-peer networks first appeared, plaintiffs acknowledged the threat they posed to their industry and initiated a broad campaign to address the illegal infringement of copyrighted materials. They started educating the public that downloading and distributing copyrighted songs over peer-to-peer networks constituted illegal copyright infringement. Plaintiffs also brought legal actions as part of their campaign, and initially targeted the proprietors of peer-to-peer networks, not the individuals who actually used those networks to illegally procure and distribute copyrighted materials. See, e.g., id. at 940, 125 S.Ct. 2764 (holding network may be held liable for copyright infringement undertaken by third party network users where network promotes such infringements even if network has other, legal uses). Although these litigation efforts succeeded at shutting down particular networks, individual infringers continued to engage in illegal conduct by finding new peer-to-peer networks through which to download copyrighted songs.
Consequently, record companies began to identify and pursue legal actions against individual infringers. The industry identified Internet Protocol (IP) addresses of users known to be engaged in a high volume of downloading and distributing copyrighted materials, and initiated lawsuits against those users. See Atl. Recording Corp. v. Heslep, No. 06-CV-132, 2007 WL 1435395 at *1-3 (N.D.Tex. May 16, 2007) (detailing recording industry's litigation efforts). These suits began in 2002 and were widely-publicized.
2. Tenenbaum's Conduct
Tenenbaum was an early and enthusiastic user of peer-to-peer networks to obtain and distribute copyrighted music recordings. He began downloading and distributing copyrighted works without authorization in 1999. In that year, he installed the Napster peer-to-peer network on his desktop computer at his family's home in Providence, Rhode Island. He used Napster both to download digital versions of copyrighted music recordings from other network users and to distribute to other users digital versions of copyrighted music recordings already saved on his own computer.
Because it enabled copyright infringement, see A & M Records, Inc. v. Napster,
Tenenbaum continued to download and distribute copyrighted materials through at least 2007. During that time span he accessed a panoply of peer-to-peer networks for these illegal purposes from several computers. From 1999 until 2002, he primarily downloaded and distributed copyrighted works to and from his desktop computer at his family's home in Providence. He left home to attend Goucher College in Baltimore, Maryland, in 2002, at which point he began using a laptop to download and distribute copyrighted works. Following his graduation from Goucher in 2006, he began using a second laptop for these purposes in tandem with his other computers. Over the duration of Tenenbaum's conduct, he intentionally downloaded thousands of songs to his own computers from other network users. He also purposefully made thousands of songs available to other network users. He did this in the period after lawsuits were brought, and publicized, against individuals who downloaded and distributed music without authorization. At one point in time in 2004 alone, Tenenbaum had 1153 songs on his "shared-directory" on the Kazaa network.
Tenenbaum knew that his conduct, both his downloading and distribution, was illegal and received warnings the industry had started legal proceedings against individuals. He received several warnings regarding the potential liability his actions carried with them. While Tenenbaum was at Goucher College in 2002, his father, Dr. Arthur Tenenbaum, called him to warn him that his use of peer-to-peer networks to obtain and distribute music recordings was unlawful. Dr. Tenenbaum knew that his son was illegally downloading music because, prior to leaving for college, Tenenbaum had showed his father the array of songs that could be downloaded from the Kazaa network. After Dr. Tenenbaum became aware that lawsuits were being brought against individuals who used file-sharing programs to download and distribute music, he instructed Tenenbaum not to continue to engage in such conduct. Dr. Tenenbaum testified that, during their conversation, Tenenbaum did not appear
Tenenbaum also received direct warnings from Goucher College. Each year Tenenbaum received a Goucher student handbook warning that using the college's network to download and distribute copyrighted materials was illegal, but he did so anyway. The handbook also warned that illegally downloading and distributing music files could subject the copyright infringer to up to $150,000 of liability per infringement, alerting Tenenbaum to his potential exposure for violating the law. The Fall 2003 handbook issued to Tenenbaum at the start of his sophomore year cautioned:
Tenenbaum received handbooks containing similar language during each of his four years at Goucher, but was unfazed and continued.
Tenenbaum also knew the college took this seriously and had itself acted to stop this illegal activity. By the end of his undergraduate studies at Goucher, the school had implemented so many technological restrictions on its network—which he knew were designed to prevent illegal downloading of music files—that peer-to-peer programs "wouldn't work at all."
The Tenenbaums' internet service provider at home in Providence, Cox Communications, also warned against using the internet to illegally infringe copyrighted materials. In 2003, for example, the terms of service they offered to their customers prohibited customers from using the internet service "to post, copy, transmit or disseminate any content that infringes the patents, copyrights, trade secrets, trademarks or proprietary rights of any party." It further provided that "Cox assumes no responsibility, and you assume all risks regarding the determination of whether material is in the public domain or may otherwise be used by you for such purposes."
In a September 2005 letter, plaintiffs themselves informed Tenenbaum that he had been detected infringing copyrighted materials and notified him that his conduct was illegal. The letter stated: "We are writing in advance of filing suit against you in the event that you have an interest in resolving these claims."
The letter also instructed Tenenbaum to preserve any relevant evidence including "the entire library of recordings that you have made available for distribution as well as any recordings you have downloaded...."
The letter from Sony resulted in a conversation between Tenenbaum and his mother regarding his use of peer-to-peer networks. During that conversation, Tenenbaum claimed that it was "impossible... to know" who was responsible for the infringements referenced in Sony's letter.
Despite these warnings and his knowledge that he was and had been engaging in illegal activity which could subject him to liability of up to $150,000 per infringement, Tenenbaum continued the illegal downloading and distribution of copyrighted materials until at least 2007—a full two years after receiving the letter from Sony. He stopped his activity only after this lawsuit was filed against him.
Strong evidence established that Tenenbaum lied in the course of these legal proceedings in a number of ways. In his initial responses to Sony's discovery requests, Tenenbaum represented he "had no knowledge or recollection of online media distribution systems used or any dates" of such use. He also denied creating or using the "sublimeguy14@kazaa" account name that he had used to access various peer-to-peer networks, and he denied any knowledge of whether a peer-to-peer network had been installed on his computer.
At trial, however, Tenenbaum admitted that each of these statements he had made was false. He made numerous admissions in his testimony as to the scope of his conduct from 1999 until 2007. He admitted to installing peer-to-peer networks on his computer, including Kazaa, Limewire, Audio Galaxy, iMesh, and Morpheus, so that he could download and upload music with "the least amount of wasted effort." He admitted that he created the "sublimeguy14@kazaa" user account, downloaded songs from the networks using that account, and placed materials in shared folders on those networks so that other users could download the materials onto their own computers. On some occasions, he believed he was the first person to upload a particular music recording onto the network. He testified that he placed between 600 and 5,000 songs on the Goucher College peer-to-peer network for others to download. He further testified that he also copied illegally downloaded songs onto CDs and USB drives, both for personal use and to give to other individuals. He also explicitly admitted liability for downloading and distributing the thirty sound recordings at issue in the case.
Before the trial, Tenenbaum also attempted to shift responsibility for his conduct to other individuals by claiming they could have used his computer in order to illegally download and distribute the copyrighted works. These individuals included a foster child living in his family's home, burglars who had broken into the home,
Finally, when asked at trial about his efforts to attribute the blame for his actions to others, Tenenbaum admitted his own responsibility: "I used the computer, I uploaded, I downloaded music, this is what I did, that's how it is, I did it."
Tenenbaum's Challenges to the Constitutionality and Applicability of the Copyright Act
Tenenbaum presents three arguments that he is not subject to the Copyright Act. First, Tenenbaum argues that the Copyright Act is unconstitutional under Feltner v. Columbia Pictures Television, Inc.,
Second, Tenenbaum argues that Congress did not intend the Act to impose either liability or statutory damages where the copyright infringements at issue amount to what he calls "consumer copying."
Third, Tenenbaum argues that statutory damages are unavailable to Sony because, in his view, statutory damages, as a matter of Congressional intent, cannot be awarded absent a showing of actual harm, and he claims there was no harm.
We review such legal and constitutional questions de novo. United States v. S. Union Co.,
A. Constitutionality of the Copyright Act After Feltner
Tenenbaum did not clearly make the argument that Feltner renders 504(c) unconstitutional to the district court, and so it is waived. See Dillon v. Select Portfolio Servicing,
Even were the argument not waived, it is both wrong and foreclosed by our circuit precedent. In Segrets, Inc. v. Gillman Knitwear Co.,
Our sister circuits have likewise concluded that Feltner did not render § 504(c) unconstitutional. See, e.g., BMG Music v. Gonzalez,
This conclusion is also required by Supreme Court precedent. Where the Court has found a particular federal statute to deprive defendants of jury rights in violation of the Seventh Amendment,
B. The Copyright Act and "Consumer-Copier" and Publisher-Copier Copyright Infringement
Tenenbaum argues to us that Congress never intended for the Copyright Act to impose liability or statutory damages against what he calls "consumer copiers." That argument was not presented to the district court and is waived.
Even were the argument not waived, it must fail. We start with the inaccuracy of the labels that Tenenbaum's argument uses. Tenenbaum is not a "consumer-copier," a term he never clearly defines. He is not a consumer whose infringement was merely that he failed to pay for copies of music recordings which he downloaded for his own personal use. Rather, he widely and repeatedly copied works belonging to Sony and then illegally distributed those works to others, who also did not pay Sony. Further, he received, in turn, other copyrighted works for which he did not pay. Nor can Tenenbaum assert that his was merely a "non-commercial" use and distribution of copyrighted works as those terms are used elsewhere in the Act.
In addition to the factual inaccuracy of his labels, Tenenbaum's argument that the Copyright Act immunizes his conduct from liability is contradicted by the plain language of the statute. The Copyright Act does not make the distinctions he urges between "consumer" and "non-consumer" infringement of copyrighted materials by copying and distribution. Instead, the Act renders those, like Tenenbaum, who use or distribute a copyrighted work without authorization liable in copyright. Indeed, the Act does not use the term "consumer" at all, much less as a term excluded from the category of infringers. Rather, the statute refers to "anyone" as potential infringers. 17 U.S.C. § 501(a).
The Act explicitly grants owners of "works of authorship"
The Copyright Act contains no provision that could be interpreted as precluding a copyright owner from bringing an action against an infringer solely because the infringer was a consumer of the infringed products or acted with a so-called noncommercial purpose in his distribution of the works to others. Apart from the reality that the facts of record support neither characterization, 17 U.S.C. § 501(a) provides that "anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 122 ... is an infringer of the copyright." (Emphasis added). Further, under 17 U.S.C. § 501(b), "the legal or beneficial owner of an exclusive right under a copyright is entitled ... to institute an action for any infringement of that particular right committed while he or she is the owner of it." (Emphasis added). Had Congress intended to limit copyright actions against so-called "consumer infringers" as Tenenbaum hypothesizes, it easily could have done so. See Ali v. Fed. Bureau of Prisons, 552 U.S. 214, 227-28,
Moving from liability to damages, Tenenbaum's argument that statutory damages
Congress drew distinctions in the Copyright Act where it meant to do so. For example, it distinguished between willful and non-willful infringements, subjecting willful infringers to a higher cap on statutory damage awards. See 17 U.S.C. § 504(c).
Where Congress wanted the Act to draw distinctions based on the nature of the use it also did so explicitly, such as with the fair use defense. See 17 U.S.C. § 107 (providing for fair use limitation on owner's exclusive rights and identifying the "purpose and character of the use" including "whether such use is of a commercial nature or is for nonprofit educational purposes" as a factor to consider in determining applicability of fair use limitation).
Further, where Congress intended to create other exceptions for solely personal or non-commercial use, it did so expressly. In two amendments which do not apply here, it drew such distinctions: (1) the Sound Recording Act of 1971, Pub. L. No. 92-140, 85 Stat. 391, which fully extended federal copyright protections to sound recordings but exempted certain reproductions of sound recordings made for personal use, and (2) the Audio Home Recording Act of 1992 (AHRA), Pub. L. No. 102-563, 106 Stat. 4237, codified at 17 U.S.C. § 1001 et seq., which provided some exemptions in other situations from copyright liability for infringements "based on the noncommercial use by a consumer."
Because Congress has enumerated a set of express exceptions, rules of statutory interpretation instruct that Congress intended to make no other exceptions than those specified. See Tenn. Valley Auth. v. Hill,
Asking us to ignore the text and the plain meaning of the statute, Tenenbaum argues Congress was unaware that suits like this could be brought and so could not have intended the statute to apply here. The argument is wrong both on the law and on the facts.
Congress did contemplate that suits like this were within the Act. Congress last amended the Copyright Act in 1999 to increase the minimum and maximum awards available under § 504(c). See Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774. At the time, Congress specifically acknowledged that consumer-based, noncommercial use of copyrighted materials constituted actionable copyright infringement. Congress found that "copyright piracy of intellectual property flourishes, assisted in large part by today's world of advanced technologies," and cautioned that "the potential for this problem to worsen is great." H.R.Rep. No. 106-216, at 3 (1999), 1999 WL 446444, at *2. Indeed, the legislative history directly addresses this concern:
Even earlier, in 1997, Congress had explicitly amended the criminal component of
Congress made clear that it enacted the NET Act to "criminalize computer theft of copyrighted works, whether or not the defendant derives a direct financial benefit from the act(s) of misappropriation, thereby preventing such willful conduct from destroying businesses, especially small businesses, that depend on licensing agreements and royalties for survival." H.R. Rep. 105-339, at 5 (1997), 1997 WL 664424, at *5.
Tenenbaum's argument that we may ignore the plain language of the statute and Congressional intent because relatively few lawsuits were brought against those in his position also goes nowhere. Again, both the factual and legal contentions are wrong.
Even if we assume that copyright owners have historically chosen first to litigate against the providers of new technologies of reproduction and dissemination rather than the users of those new technologies, see Tussey, Technology Matters: The Courts, Media Neutrality, and New Technologies, 12 J. Intell. Prop. L. 427 (2005), that may best be explained by the owners using a cost-benefit analysis, and says nothing about Congressional intent. Historically, the costs of prosecuting infringement actions against individual users could be thought by owners to have exceeded the benefits. That the copyright owners have turned to litigation against individual infringers only underscores that the balance of the copyright holder's cost-benefit analysis has been altered as peer-to-peer networks and digital media become more prevalent.
In any event, the argument is legally irrelevant. The Supreme Court has expressly instructed that courts apply the Copyright Act to new technologies. In Sony Corp. of America v. Universal City Studios, Inc.,
The Supreme Court has made clear that it is particularly important for courts to take this tack when faced with novel Copyright Act issues. "[F]rom its beginning, the law of copyright has developed in response to significant changes in technology," and as "new developments have occurred in this country, it has been the Congress that has fashioned the new rules that new technology made necessary." Id. at 430-31, 104 S.Ct. 774. We reject Tenenbaum's invitation to usurp Congress's legislative authority and to disregard binding Supreme Court precedent.
C. Statutory Damages under 17 U.S.C. § 504 and Actual Harm
Tenenbaum next argues that the statutory damages provision is nonetheless inapplicable because, in his view, as a matter of law there can be no statutory damages where "harm caused by a particular defendant has not been proved." Again, he is wrong both as a matter of law and on the facts of record.
The district court properly rejected Tenenbaum's proffered interpretation of § 504. Section 504 clearly sets forth two alternative damage calculations a plaintiff can elect: actual damages and statutory damages. See 17 U.S.C. § 504(a) (providing that "an infringer of copyright is liable for either ... the copyright owner's actual damages and any additional profits of the infringer ... or statutory damages") (emphasis added).
Under § 504(b), a plaintiff may elect to receive "the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages."
Alternatively, under § 504(c), "the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work." (Emphasis added). The statute makes clear that statutory damages are an independent and alternative remedy that a plaintiff may elect "instead of actual damages."
Section 504's text reflects Congress's intent "to give the owner of a copyright some recompense for injury done him, in a case where the rules of law render difficult or impossible proof of damages or discovery of profits." Douglas v. Cunningham,
Tenenbaum's argument also rests on the faulty assertion that Sony did not offer evidence of the harm it suffered as a result of Tenenbaum's conduct. Tenenbaum downloaded the thirty copyrighted works at issue and distributed those works to innumerable network users. Sony presented extensive testimony regarding the loss in value of the copyrights at issue that resulted from Tenenbaum's conduct, and the harm of Tenenbaum's actions to itself and the recording industry, including reduced
Tenenbaum's Challenges to the Jury Instructions
Tenenbaum challenges the district court's jury instructions on several grounds, all but one of which were not preserved for appeal, and all of which fail.
We review preserved challenges to jury instructions de novo, and "look to the challenged instructions in relation to the charge as a whole, `asking whether the charge in its entirety—and in the context of the evidence—presented the relevant issues to the jury fairly and adequately.'" Kennedy v. Town of Billerica,
Absent adequate objections to the instructions, our review is for plain error, which requires that Tenenbaum show (1) that there was error, (2) that it was plain, (3) that it likely altered the outcome, and (4) that it was sufficiently fundamental to threaten the fairness, integrity or public reputation of the judicial proceedings. Gray v. Genlyte Grp., Inc.,
A. Tenenbaum's Preserved Challenge to the District Court's Instruction as to the Statutory Damage Range Under § 504(c)
Tenenbaum's only preserved instructional challenge is that the district court erred by instructing the jury about the range of statutory damages available to Sony under § 504(c).
Tenenbaum does not object to that portion of the instructions.
Tenenbaum argues that the statutory damage range should not have been disclosed to the jury and that the instructions presented the statutory damage range "unmoored from the overall statutory scheme and the context of other cases." Tenenbaum proposes that instead the district court should only have instructed the jury to return an award the jury deemed "just" and then the court should have adjusted the award to fall within the statutory range after the jury made its determination. This argument is, of course, at considerable tension with Tenenbaum's argument that damages within the statutory range are unconstitutional.
The instruction given as to the statutory damage range was an accurate statement of the law and clearly informed the jury of the range of damages it could award under § 504(c). As such there was no error. See United States v. Mardirosian,
It is commonplace for courts to explicitly instruct juries of the maximum and minimum statutory damage awards permitted under § 504(c). See, e.g., In re Frye, No. 08-1055, 2008 WL 8444822, at *3 (B.A.P. 9th Cir. Aug. 19, 2008) (noting jury awarded the statutory maximum under § 504(c)); Yurman Design, Inc. v. PAJ, Inc.,
There is no viable argument that the instruction violated Congressional intent. Where Congress has sought to prevent juries from knowing that their awards will be reduced to be within statutory caps, it has explicitly said so in the relevant statute. See, e.g., 42 U.S.C. § 1981a(c)(2) (providing that "the court shall not inform the jury of the limitations" on awards of damages in intentional employment discrimination cases under Title VII). There is no such prohibition here.
Tenenbaum nonetheless argues that because Congress initially enacted the statute on the understanding that judges, not juries, would award statutory damages, it
Moreover, after Feltner, had Congress wished to prevent juries from being informed of the bottom and top ranges of permissible statutory damages, it easily could have done so. Instead, Congress amended the statute after Feltner to expand the range of damages, and did so without placing any limitation as to how courts should instruct juries in such cases. See Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774.
The district court's instructions on the range of statutory damages were not erroneous, let alone prejudicial.
B. Tenenbaum's Remaining Challenges to the Jury Instructions
Tenenbaum raises a series of unpreserved additional objections to the jury instructions which we review for plain error.
1. The Unpreserved Challenge that the District Court Should Have First Determined then Instructed the Jury on the Court's Assessment of Constitutional Limits on the Award
Tenenbaum argues that the district court erred by only instructing the jury as to the statutory boundaries for the damages award and failing, sua sponte, to inform the jury of the constitutional boundaries for the award. Tenenbaum asked for no such instruction, and the argument is waived. Even had the argument not been waived, there was no error.
Inherent in his argument is the proposition that before a case goes to the jury, the trial court must make its own assessment of the constitutional limits on damages and so instruct the jury. That is exactly backwards. See St. Louis, I.M. & S. Ry. Co. v. Williams,
2. The Unpreserved Argument that the District Court Was Required to Instruct the Jury Not to Consider Injury Suffered by Other Recording Companies or Injuries Caused by Copyright Infringers Other Than Tenenbaum
The district court properly instructed the jury on Tenenbaum's conduct and the plaintiffs' harms the jury could consider in making its determination. It specifically listed the nature of Tenenbaum's infringement, Tenenbaum's purpose and intent, the "revenue lost by the plaintiff as a result of the infringement," the duration of the infringement, and the defendant's continuation of infringement after learning of the copyright claims.
Tenenbaum argues that the district court sua sponte should have provided additional
Tenenbaum purports to rely on language in Philip Morris USA v. Williams, 549 U.S. 346, 357,
Philip Morris does not help him, in any event. There was not a substantial risk of the jury's going astray. The court's entirely correct instruction foreclosed that risk. The jury was never urged to consider damages (1) caused by other copyright infringers or (2) suffered by other recording companies. Indeed, in his closing argument, Tenenbaum's counsel made clear that "it's what Joel did that is here in issue and [the question is] what's appropriate in response to what Joel did," and Sony's counsel likewise stated that applying damages for "what Joel did" was "exactly what we want you to do." The court's jury instructions as a whole focused exclusively on Tenenbaum's actions and the resulting harm to the plaintiffs.
3. The Unpreserved Argument that the District Court Was Sua Sponte Required to Additionally Instruct that Statutory Damages Could Not Be Awarded Unless They Were Related to Actual Damages
The district court did instruct the jury to issue an award within the statutory range that it deemed to be just, and highlighted a number of factors it could use for guidance. Tenenbaum argues that the district court erred by failing, sua sponte, to add an additional instruction that as a matter of law statutory damages cannot be awarded unless reasonably related to actual damages.
We join our sister circuits, who have rejected similar objections to jury instructions. See New Form, Inc. v. Tekila Films, Inc., 357 Fed.Appx. 10, 11-12 (9th Cir.2009) ("There is no required nexus between actual and statutory damages under 17 U.S.C. § 504(c)."); Superior Form Builders, Inc. v. Dan Chase Taxidermy Supply Co.,
4. The Unpreserved Argument that the District Court Erred in Instructing the Jury that Finding Willful Infringement Under § 504 Only Requires a Finding that a Defendant Knowingly Infringed Copyrighted Materials
Finally, Tenenbaum challenges the district court's instruction that "willful infringement" "means that a defendant had knowledge that his actions constituted copyright infringement or acted with reckless disregard for the copyright holder's rights." The argument is wrong and is based on a misreading of the statute.
Tenenbaum argues that, as used in § 504, a "willful infringement" must require more than a showing that the defendant had knowledge his actions constituted copyright infringement. He argues this must be so because non-willful infringement itself requires the defendant to have had such knowledge. As a result, merely requiring that an infringement be "knowing" to be "willful" would eliminate the distinction between non-willful and willful infringements that Congress sought to create in enacting § 504.
Tenenbaum's argument rests on the false premise that knowledge is an element of non-willful copyright infringement under the Copyright Act. To the contrary, the Act contains no requirement that a particular violation of copyright be knowing to constitute a non-willful infringement.
We join our sister circuits who have unanimously and routinely found that an infringement is willful under § 504 if it is "knowing." See, e.g., Bridgeport Music, Inc. v. UMG Recordings, Inc.,
The district court correctly instructed the jury. There was no error as to the finding of liability against Tenenbaum.
The District Court's Bypassing of Common Law Remittitur and Reducing the Award on Disputed Constitutional Grounds
After handling the trial with great skill, the district court committed reversible error when, after the jury awarded statutory damages, it bypassed the issue of common law remittitur, and instead resolved a disputed question of whether the jury's award of $22,500 per infringement violated due process, and decided itself to reduce the award. The court declined to adhere to the doctrine of constitutional avoidance on the ground that it felt resolution of a constitutional due process question was inevitable in the case before it. A decision on a constitutional due process question was not necessary, was not inevitable, had considerable impermissible consequences, and contravened the rule of constitutional avoidance. That rule had more than its usual import in this case because there were a number of difficult constitutional issues which should have been avoided but were engaged.
Facing the constitutional question of whether the award violated due process was not inevitable. The district court should first have considered the non-constitutional issue of remittitur, which may have obviated any constitutional due process issue and attendant issues. Had the court ordered remittitur of a particular amount, Sony would have then had a choice. It could have accepted the reduced award. Or, it could have rejected the remittitur, in which case a new trial would have ensued. See 11 Wright, Miller & Kane, Federal Practice and Procedure § 2815, at 160 (2d ed. 1995).
In reaching and deciding that due process constitutional question, the district court also unnecessarily decided several related constitutional issues. The court determined that the statutory damage award was effectively a punitive damage award for due process purposes and applied the factors set forth in BMW v. Gore,
The United States, concerned with defending the constitutionality of the Copyright Act and its statutory damage provision,
We agree with the position of the United States that the district court erred when it prematurely reached a constitutional question of whether the jury's award was excessive so as to violate due process. We reverse the reduction of the award, reinstate the original jury verdict and award, and remand for consideration of the common law remittitur question.
A. District Court Damages Proceedings
We provide a more detailed review of the relevant district court proceedings.
After the jury verdict awarding Sony $22,500 per infringement, Tenenbaum filed a motion for a new trial or remittitur pursuant to Federal Rule of Civil Procedure 59. Absent a grant of a new trial, he sought remittitur to the statutory minimum. Tenenbaum argued the court should use the standard that remittitur is appropriate where the result of the award is "grossly excessive, inordinate, shocking to the conscience of the court, or so high that it would be a denial of justice to permit it to stand." Correa v. Hosp. S.F.,
Sony opposed, arguing there was no factual basis for a remittitur given both the evidence and that the evidence had to be taken in the light most favorable to the prevailing party. See E. Mountain Platform Tennis, Inc. v. Sherwin-Williams Co.,
The United States took a different approach. It took no position on whether Tenenbaum had met the standard for remittitur (or a new trial). Rather, the United States stated that the canon of constitutional avoidance required the district court to first consider the question of common law remittitur, regardless of whether the award merited remittitur or not. If the court did address the constitutional question, the United States argued that the standard set forth in Williams was appropriate
At the hearing on Tenenbaum's motion, the court asked counsel for plaintiffs to hypothesize as to what his clients' position would be if the court were to order a reduction or remittitur of the award. Understandably, plaintiffs' counsel did not take a firm position; he said his clients would have to consider the amount and other factors but thought it unlikely such a remittitur would be acceptable. If there were a remittitur, then, he said, the court could not reach the due process question of an excessive award because to do so would deprive plaintiffs of their Seventh Amendment right to a jury trial. Plaintiffs also argued that on the evidence, there was no basis for remittitur.
At that hearing, the United States repeated its position that the court was required to decide the remittitur question first in order to avoid any constitutional issues and that if plaintiffs rejected remittitur, the remedy was a new trial; the court could not go on to decide a constitutional due process issue as to the award. If the court did decide a constitutional due process issue as to the excessiveness of the award, the government argued, it was required to apply Williams, which had not been overruled.
Rejecting the position of the United States, the court bypassed remittitur, reached a constitutional due process issue, and ruled the award excessive under Gore. It reduced the award from $675,000 to $67,500 and did not give plaintiffs the option of a new trial.
The court stated its reason for bypassing the decision on common law remittitur. It treated plaintiffs' statements at the hearing as foreclosing any possibility of plaintiffs accepting remittitur, regardless of what amount the court might set for the award and despite plaintiffs' stated and careful reservations on the point. See Tenenbaum, 721 F.Supp.2d at 88. From this, the court reasoned that a new trial was inevitable; it then assumed that a jury would inevitably award a damages sum which would lead Tenenbaum to again raise a constitutional excessiveness challenge, and that the court which heard the new trial would then have to consider those and other objections again.
B. The District Court Erred by Unnecessarily Reaching and Deciding the Question of Whether the Jury's Award Was Unconstitutionally Excessive
The principle of constitutional avoidance, rooted in Article III as well as in principles of judicial restraint, and in this case implicating the Due Process Clause and
It is bedrock that the "long-standing principle of judicial restraint requires that courts avoid reaching constitutional questions in advance of the necessity of deciding them." Lyng v. Nw. Indian Cemetery Protective Ass'n,
It was not necessary for the district court to reach the constitutional question of whether the jury's award of $22,500 per infringement was so excessive as to violate due process. If the district court had ordered remittitur, there would have been a number of possible outcomes that would have eliminated the constitutional due process issue altogether, or at the very least materially reshaped that issue.
The issue of whether the award violated due process and the Seventh Amendment issue would both have been eliminated if remittitur had been ordered and Sony had accepted the remitted award. Alternatively, if remittitur had been ordered but Sony had declined the remitted award, a new trial would have ensued. The jury could have issued an award that would not have led Tenenbaum to again seek a reduction on either common law remittitur or due process grounds.
Even if Sony had declined any remitted award given and opted for a new trial, even if a different jury issued a comparable award, and even if Tenenbaum once again moved to reduce the award on constitutional grounds, it was still premature for the court to reach the constitutional question before that process had been carried out. A new trial could have materially reshaped the nature of the constitutional issue by altering the amount of the award at issue or even the evidence on which to evaluate whether a particular award was excessive.
In this way, reaching the constitutional question before ordering remittitur not only contravened the doctrine of constitutional avoidance, it also led the court to address questions that had not yet been fully developed. Federal courts do not answer such hypothetical questions. See Aetna Life Ins. Co. v. Haworth,
In Williams, the Supreme Court considered a challenge to an Arkansas statute that subjected railroads to penalties of "not less than fifty dollars, nor more than three hundred dollars and costs of suit," for each offense of charging passengers fares that exceeded legal limits. See Williams, 251 U.S. at 64, 40 S.Ct. 71 (quoting Act April 4, 1887 (Laws 1887, p. 227; Kirby's Digest, 1904, § 6620); Act March 4, 1915 (Laws 1915, p. 365; Kirby & Castle's Digest, 1916, § 8094)) (internal quotation marks omitted). After the St. Louis, I.M. & S. Railroad collected a fare from two passengers of 66 cents more than the law allowed, the passengers brought suit pursuant to the statute. Id. at 63, 40 S.Ct. 71. Each passenger obtained a judgment of 75 dollars plus fees—an award, like the jury's award at issue here, well within the statutory range. Id. The railroad challenged the statutory award as unconstitutionally excessive under the Due Process Clause. Id.
The Court acknowledged that the Due Process Clause "places a limitation upon the power of the states to prescribe penalties for violations of their laws," but noted that "States still possess a wide latitude of discretion in the matter." Id. at 66, 40 S.Ct. 71. This is so, the court reasoned, because "the power of the State to impose fines and penalties for a violation of its statutory requirements is coeval with government; and the mode in which they shall be enforced, whether at the suit of a private party, or at the suit of the public, and what disposition shall be made of the amounts collected, are merely matters of legislative discretion." Id. (quoting Mo. Pac. Ry. Co. v. Humes,
Given the latitude conferred upon legislatures to impose statutory penalties, the Court rejected the railroad's due process argument. The Court articulated that a statutory damage award violates due process only "where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable." Id. at 66-67, 40 S.Ct. 71.
Gore and its progeny address the related but distinct issue of when a jury's punitive damage award is so excessive as to violate due process. See Gore, 517 U.S. at 574, 116 S.Ct. 1589. The Court, animated by the principle that due process requires that civil defendants receive fair notice of the severity of the penalties their conduct might subject them to, id., identified three factors to guide a court's consideration of whether a punitive damage award is so excessive as to deprive a defendant of due process: (1) the degree of reprehensibility of the defendant's conduct, id. at 575-80, 116 S.Ct. 1589, (2) the ratio of the punitive award to the actual or potential harm suffered by the plaintiff, id. at 580-83, 116 S.Ct. 1589, and (3) the disparity between the punitive award issued by the jury and the civil or criminal penalties authorized in comparable cases, id. at 583-85, 116 S.Ct. 1589.
In Copyright Act award cases, there are many questions regarding the relationship
We note that in Gore, the Supreme Court did not overrule Williams. See Rivers v. Roadway Express, Inc.,
Had the district court ordered remittitur and not reached the constitutional question, it would not have needed to consider these issues or determine the relevant standard for assessing the constitutionality of a Copyright Act statutory damage award.
A decision based on remittitur, under which a new trial must be granted if plaintiffs do not accept the remitted award, also would have avoided another complicated constitutional question, which we describe briefly.
That issue arises under the Seventh Amendment, and is whether a statutory damage award under the Copyright Act may be reduced without offering the plaintiffs a new trial.
The usual rule for a general damage award is that a court may not reduce a jury's verdict and effectively impose a remittitur without affording a plaintiff "the option of a new trial when it enter[s] judgment for the reduced damages." Hetzel v. Prince William Cnty.,
By contrast, there is law indicating that a punitive damage award may be reduced on due process grounds (without offering plaintiffs a new trial) without running afoul of the Seventh Amendment. The Supreme Court's punitive damages jurisprudence suggests as much, but the question has not been directly addressed by the Court. See State Farm Mut. Auto. Ins. Co. v. Campbell,
In bypassing remittitur and reducing the jury's award without offering Sony a new trial, the district court assumed that statutory damage awards should be treated largely as punitive, not compensatory, awards for Seventh Amendment purposes. But statutory damages, unlike punitive damages, have both a compensatory and punitive element. See 17 U.S.C. § 504(c); Feltner, 523 U.S. at 352, 118 S.Ct. 1279 ("[A]n award of statutory damages [under § 504(c)] may serve purposes traditionally associated with legal relief, such as compensation and punishment."); F.W. Woolworth Co., 344 U.S. at 233, 73 S.Ct. 222 ("The statutory rule, formulated after long experience, not merely compels restitution of profit and reparation for injury but also is designed to discourage wrongful conduct.").
Further, the Supreme Court's analysis of a different Seventh Amendment issue in Cooper Industries, Inc. v. Leatherman Tool Group, Inc.,
The point here is not for us to decide these issues, but merely to describe them to show the importance of adherence to the doctrine of constitutional avoidance. The courts of appeals are likewise bound by that doctrine, and we are required to apply it here.
This was a difficult and contentious case and the parties received a fair trial from an admirably patient and able district judge.
We affirm the finding of liability against Tenenbaum and in favor of plaintiffs. We affirm the injunctive relief. We have, inter alia, rejected Tenenbaum's arguments that the Copyright Act is unconstitutional under Feltner,
We vacate the district court's due process damages ruling and reverse the reduction of the jury's statutory damages award. We reinstate the jury's award of damages and remand for consideration of defendant's motion for common law remittitur based on excessiveness.
If, on remand, the court allows any reduction through remittitur, then plaintiffs must be given the choice of a new trial or acceptance of remittitur.
Costs are awarded to plaintiffs.
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