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SONY BMG MUSIC ENTERTAINMENT v. TENENBAUM
660 F.3d 487 (2011)
SONY BMG MUSIC ENTERTAINMENT, et al., Plaintiffs, Appellants/Cross-Appellees,
v.
Joel TENENBAUM, Defendant, Appellee/Cross-Appellant.
Nos. 10-1883, 10-1947, 10-2052.
United States Court of Appeals, First Circuit.
Decided September 16, 2011.
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.
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, 721 F.Supp.2d 85 (D.Mass. 2010). 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.
1. Tenenbaum argued that the statutory damages available under 17 U.S.C. § 504(c) are excessive so as to violate due process, and that the Copyright Act effectively creates an unconstitutional delegation of prosecutorial functions by creating a private right of action to enforce copyright protections. The second argument is not made on appeal.
2. He argued a new trial should be granted on the grounds that the court had erred in rejecting Tenenbaum's fair use defense; that the court erred in its evidentiary ruling to exclude portions of a November 2005 letter from Tenenbaum in which he offered to destroy any illegally downloaded files as part of settlement negotiations; that the court's jury instructions were improper, primarily because they informed the jury of the statutory range for damages; and that statutory damages should not be available to Sony because Sony never offered evidence that they suffered more than nominal damages.
3. A representative of Universal Music Group testified, "If the suggestion is that we could somehow give these [recordings] to people and tell them, do with them what you will, we lose complete control over our assets, we cannot make money off those assets, and that defeats the whole purpose of our existence."
4. We are aware of only one other action against an individual that has proceeded to trial. See Capitol Records, Inc. v. Thomas-Rasset, No. 06-1497, ___ F.Supp.2d ___, 2011 WL 3211362 (D.Minn. July 22, 2011).
5. MediaSentry, the third party firm that Sony retained to identify individuals engaged in the illegal downloading and distribution of copyrighted recordings, discovered the 1153 songs in Tenenbaum's Kazaa shared-directory on August 10, 2004. MediaSentry then downloaded portions of 1148 of the 1153 files and verified that the files were the actual songs identified in each file's title, and that Tenenbaum had actually made copyrighted materials available for unauthorized copying.
6. Tenenbaum contacted Sony as a result of the letter. While there were some settlement discussions, the parties were unable to resolve the matter.
7. After receiving this letter, Tenenbaum nonetheless took his laptop computer for repairs and had its operating system reinstalled and its hard drive reformatted. At trial, Tenenbaum maintained that he only had work done on the computer because "the thing wouldn't run," and that he instructed the computer repairman not to tamper with the music files stored on his computer.
8. It is also clear that Congress continues to intend that the Copyright Act be fully operational as to statutory damages after Feltner. Congress amended § 504(c) after the Supreme Court had decided Feltner. See Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-160, 113 Stat. 1774 (amendment increasing the statutory damage boundaries). "Congress is presumed to be aware of ... [a] judicial interpretation of a statute and to adopt that interpretation if it re-enacts a statute without change." Forest Grove Sch. Dist. v. T.A., 557 U.S. 230, 129 S.Ct. 2484, 2492, 174 L.Ed.2d 168 (2009) (quoting Lorillard v. Pons, 434 U.S. 575, 580, 98 S.Ct. 866, 55 L.Ed.2d 40 (1978)).
9. Although in the district court Tenenbaum raised the argument that the Copyright Act does not extend to consumer conduct as a reason why the jury's statutory damage award should be reduced, he did not present the argument, as he does here, as a basis to exempt his actions from liability altogether.
10. In the criminal infringement context, Congress has extended liability to, inter alia, those who infringe "for purposes of commercial advantage or private financial gain." 17 U.S.C. § 506. Congress has made it clear, however, that this designation applies even absent direct monetary profit. See 17 U.S.C. § 101. It has defined "financial gain" to include "receipt, or expectation of receipt, of anything of value, including the receipt of other copyrighted works." Id.
Under the "fair use" exception, which is not available to Tenenbaum, what constitutes a commercial use has also been interpreted broadly. See A & M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1015 (9th Cir.2001) ("Direct economic benefit is not required to demonstrate a commercial use. Rather, repeated and exploitative copying of copyrighted works, even if the copies are not offered for sale, may constitute a commercial use.").
11. Sound recordings constitute "works of authorship" that receive copyright protection. See 17 U.S.C. § 102(a)(7).
Tenenbaum implies that digital media should be treated differently than conventional music recordings. However, 17 U.S.C. § 102(a) makes no such distinction, and in fact explicitly provides that copyright protection exists "in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device." (Emphasis added).
12. Tenenbaum does not claim on appeal that his conduct falls under the fair use doctrine.
13. See Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 430 n. 11, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (declining to express an opinion on scope of 1971 Act's exceptions for noncommercial uses).
14. To take the point further, although the AHRA created immunity for some unauthorized, noncommercial uses of copyrighted materials, Congress explicitly declined to extend immunity to individuals who use home computers to copy copyrighted materials. See 17 U.S.C. § 1001(3); see also Recording Indus. Ass'n of Am. v. Diamond Multimedia Sys., Inc., 180 F.3d 1072, 1078 (9th Cir.1999) ("Under the plain meaning of the [AHRA's] definition of digital audio recording devices, computers (and their hard drives) are not digital audio recording devices because their `primary purpose' is not to make digital audio copied recordings.").
15. Tenenbaum argues that the 1999 Amendment pre-dated the widespread use of peer-to-peer networking sites, and observes that the 1999 Digital Theft Deterrence Act was first introduced in May 1999, a full month before the launch of Napster's file sharing network. Again, the factual premise is wrong. The Act was not signed into law until December 1999, at which point Napster was itself operational.
Moreover, Congress had in 1997 already acknowledged the advent of "audio-compression" technologies that "permit[] infringers to transmit large volumes of CD-quality music over the internet" in enacting the No Electronic Theft Act, Pub. L. No. 105-147, 111 Stat. 2678. See H.R.Rep. No. 105-339, at 4 (1997), 1997 WL 664424, at *4.
16. The statute at issue in L.A. Westermann Co. v. Dispatch Printing Co., 249 U.S. 100, 39 S.Ct. 194, 63 L.Ed. 499 (1919), contained the phrase "in lieu of actual damages." By contrast, 17 U.S.C. § 504(c) provides that statutory damages are available "instead of actual damages and profits." The point is the same.
17. The statutory damage range was also set forth on the jury verdict form. "District courts have `considerable discretion about the formulation, nature, and scope of the issues' on a special verdict form." Uphoff Figueroa v. Alejandro, 597 F.3d 423, 434 (1st Cir.2010) (quoting 9B Wright, Miller & Kane, Federal Practice and Procedure § 2506, at 119 (2d ed.1995)). Because we conclude that the district court did not err in instructing the jury of the statutory damage range under § 504(c), Tenenbaum's like challenge to the jury verdict form also fails.
18. Citing psychological studies but not law, Tenenbaum argues that informing the jury of the statutory damage range was reasonably likely to have had an "anchoring effect" that erroneously skewed the jury's award determination.
19. He argues that because Sony offered testimony regarding the harmful effects all filesharing, not just Tenenbaum's infringements, has had on the recording industry at large, and not only the named plaintiffs, the court was required to instruct the jury sua sponte to "consider only harms by the named defendant that flowed to the named plaintiffs."
20. Tenenbaum has twice waived this argument. First, we reject his assertion that he preserved it by offering the following proposed jury instructions: "While there may be evidence relating to other downloading and sharing, the only issue of infringement or fair use that is before you concerns these ... songs.... [Y]ou may only award damages, if any, as to those ... songs." This did not inform the court that Tenenbaum sought an instruction regarding harm done by other infringers or suffered by other recording companies given that Tenenbaum engaged in other downloading and sharing beyond the thirty songs at issue. See Linn v. Andover Newton Theological Sch., Inc., 874 F.2d 1, 5 (1st Cir. 1989) ("If there is a problem with the instructions, the judge must be told precisely what the problem is, and as importantly, what the attorney would consider a satisfactory cure.")
Moreover, after the court gave the jury its instructions, Tenenbaum raised no objection on these grounds whatsoever. "[E]ven if the initial request is made in detail, the party who seeks but did not get the instruction must object again after the instructions are given but before the jury retires for deliberations." Gray v. Genlyte Grp., Inc., 289 F.3d 128, 134 (1st Cir.2002).
21. 17 U.S.C. § 504(c)(2)'s so-called "innocent infringement" provision does not lend support to Tenenbaum's theory that knowledge is an element for non-willful infringement under the Act. A defendant cannot prove that he or she qualifies for a reduction of damages under § 504(c)(2) merely by showing that he or she lacked knowledge that his or her actions constituted copyright infringement. Rather, a plaintiff may still recover the full measure of statutory damages available for non-willful infringement even against an unknowing infringer if the infringer had "reason to believe that his or her acts constituted an infringement of copyright." 17 U.S.C. § 504(c)(2) (emphasis added).
22. On appeal, both Tenenbaum and Sony argue error, but neither challenges the district court's decision to bypass the question of common law remittitur. They instead focus on whether the court chose the correct due process standard to evaluate whether the award was so excessive as to violate the constitution. Tenenbaum argues the Gore factors provide the correct due process analysis and that even the reduced award violates due process under that standard. Sony argues that the Williams due process standard must apply, that under it the original award issued by the jury never violated due process, and that the district court erred in reducing the award.
23. These reasons are based on assumptions, not facts. Sony could not have decided its course of action if remittitur were allowed unless it knew the amount. Further, if Sony chose a new trial on damages, no one knows what sum a new jury would award, or whether that award would be challenged as excessive.
24. The district court also attempted to justify its decision to bypass remittitur by making certain rulings on the merits of the constitutional issue. For example, the district court reasoned that the "differences between the [Gore and Williams] approaches are, in practice, minimal[,]" a disputed issue. Sony BMG Music Entm't v. Tenenbaum, 721 F.Supp.2d 85, 101 (D.Mass.2010).
25. The Seventh Amendment provides that, "In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." U.S. Const. amend. VII.
26. Additionally, some courts have suggested that even under Gore, a court must give plaintiff the option of a new trial when it reduces a punitive damages award on due process grounds. See S. Union Co. v. Irvin, 563 F.3d 788, 790 (9th Cir.2009); Lee v. Edwards, 101 F.3d 805, 813 (2d Cir.1996).
27. Sony rather weakly asserts remittitur is not available where, as here, an award falls within a prescribed statutory range. We do not take as given the questionable proposition that in enacting the Copyright Act, Congress intended to eliminate the common law power of the courts to consider remittitur. Common law remittitur has roots deep in English and American jurisprudence. See Honda Motor Co. v. Oberg, 512 U.S. 415, 424-26, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994); Dimick v. Schiedt, 293 U.S. 474, 482-83, 55 S.Ct. 296, 79 L.Ed. 603 (1935) (citing Blunt v. Little, Fed.Cas. No. 1,578, 3 Mason 102 (1822) (Story, J.)). We see no reason to think Congress meant to override this aspect of the common law.
In the post-Feltner amendment of the Copyright Act, Congress said nothing evidencing an intent to eliminate remittitur. See Digital Theft Deterrence and Copyright Damages Improvement Act of 1999, Pub. L. No. 106-1060, 113 Stat. 1774. Congress is presumed to legislate incorporating background principles of common law unless it indicates to the contrary. See Bd. of Trs. of Leland Stanford Junior Univ. v. Roche Molecular Sys., Inc., ___ U.S. ___, 131 S.Ct. 2188, 2196, 180 L.Ed.2d 1 (2011) (rejecting statutory interpretation that conflicts with "two centuries of patent law"); Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104, 109, 111 S.Ct. 2166, 115 L.Ed.2d 96 (1991) ("Congress is understood to legislate against a background of common-law adjudicatory principles."). Further, the principle of remittitur is embodied in Federal Rule of Civil Procedure 59. Thus, the district court's decision not to consider remittitur as requested appears to be contrary to Congressional intent.
28. If the district court determines that the jury's award does not merit common law remittitur, the court and the parties will have to address the relationship between the remittitur standard and the due process standard for statutory damage awards, should the issue continue to be raised.
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