Sunday, November 30, 2008

Practice tip: statutory damages should bear some relation to actual damages suffered, Yurman v. Castaneda

In a recent case in the Southern District of New York, Yurman Studio, Inc. v. Castaneda, 07 Civ. 1241 (SAS)(S.D.N.Y. November 19, 2008), District Judge Shira A. Scheindlin reminds us of the well settled principle that "At the end of the day, 'statutory damages should bear some relation to actual damages suffered' [citing RSO Records v. Peri, 596 F.Supp. 849,862 (SDNY 1984); New Line Cinema Corp. v. Russ Berrie & Co., 161 F.Supp.2d 293,303 (SDNY 2001); 4 Nimmer Sec. 14.04[E][1] at 14-90(2005)] and 'cannot be divorced entirely from economic reality'"

The damages disproportion and economic reality disconnect in RIAA cases were recognized in the September 24, 2008, dictum of District Judge Michael J. Davis, set forth at pages 40-43 of the Court's decision (pdf) in Capitol v. Thomas, where Judge Davis observed that the statutory damages awarded were "wholly disproportionate", and urged Congressional action to prevent a recurrence. While we agree that Congressional action would be nice, we think it is clear that copyright jurisprudence itself prevents the outlandish damage awards sought by the RIAA.

The lessons to be learned from Yurman, and the body of law upon which it rests, are:

(a) it is necessary to obtain pretrial discovery into the plaintiffs' actual damages,

(b) the RIAA's outlandish theories for recovery of from 2,600 to 450,000 times plaintiffs' actual damages are inconsistent with the main body of copyright law, and cannot be allowed;

(c) the RIAA's allegation of a single copyright violation -- i.e. the use an "online media distribution system" -- should be treated as a single act of copyright infringement, and the award should be limited to a maximum of $750 in statutory damages, total, or $200 if the infringement was innocent; and

(d) as an alternative to (c), the maximum award of statutory damages should be nine (9) times the actual damages proved by plaintiffs to have been sustained, which would limit recovery to a range of from zero to $3.15 per song file (typically, lost profits are approximately 35 cents per song file).

The Courts should recognize that any other interpretation of the Copyright Act would lead to an inescapable conclusion that the statute is unconstitutional.

We should also be mindful of the rule that no statutory damages at all are recoverable if the complaint alleges (as the RIAA complaints do allege) an ongoing course of copyright infringement, for any recordings whose effective date of copyright registration is later than the date the defendant's ongoing course of copyright infringement began. 17 U.S.C. Sec. 412. See, e.g., Homkow v. Musika Records, Inc., 2008 U.S. Dist. LEXIS 14079 (S.D.N.Y. February 26, 2008); Irwin v. ZDF Enters. GmbH, 2006 U.S. Dist. LEXIS 6156 (S.D.N.Y. 2006); Shady Records, Inc. v. Source Enters., 2004 U.S. Dist. LEXIS 26143 (S.D.N.Y. 2004). As to those song files, only the actual damages are recoverable. (Example: Plaintiffs' allegations are that defendant used an online media distribution system to download and/or distribute plaintiffs' songs without permission on a continuing basis. Plaintiffs' proof is to the effect that defendant began using Kazaa on November 1, 2006; defendant used it to download copyrighted song files A through F without permission, during the period January 1, 2007, to December 31, 2007; the copyright registration effective date for song file A is October 1, 2006; the copyright registration effective date for song file B is December 1, 2006; the copyright registration effective dates for song files C through F are in 2007. Plaintiffs can recover statutory damages for Song File A only, and are relegated to actual damages only for song files B through F.)

Yurman v. Castaneda, November 19, 2008, Decision

Commentary & discussion:

TechDirt






Keywords: lawyer digital copyright law online internet law legal download upload peer to peer p2p file sharing filesharing music movies indie independent label freeculture creative commons pop/rock artists riaa independent mp3 cd favorite songs intellectual property portable music player

5 comments:

Anonymous said...

This man must respectfully disagree with the following statement:

(c) the RIAA's allegation of a single copyright violation -- i.e. the use an "online media distribution system" -- should be treated as a single act of copyright infringement, and the award should be limited to a maximum of $750 in statutory damages, total, or $200 if the infringement was innocent;

Use of an (invented term to tarnish the actual application in the eyes of the court) "online media distribution system" -- more properly known as a peer-to-peer filesharing application, P2P for short -- is not a crime. It is no more of a crime than the possession and/or use of a VCR or a Xerox machine, both of which have infringing and non-infringing uses in regard to copyrighted materials. An example of non-infringing uses of a P2P system can include, but are not limited to: a) Use as a media player for lawfully acquired media. Some P2P applications bundle in an easy-to-use MP3 player. b) Easy exchange of non-copyrighted material (e.g. family pictures or home digital movies) between family and friends where non-technologically savvy users would not be able to set up web or FTP sites to facilitate such exchanges.

This man's point is the mere allegation that a defendant used an "online media distribution system" itself is no crime at all and the RIAA should never be allowed to build any sort of case at all around it. They must be required to show actual distribution of copyrighted materials of the plaintiffs in the case to non-authorized users at the very minimum. Then, and only then, can the argument of a single instance be considered.

{The Common Man Speaking}

Ray Beckerman said...

Dear "The Common Man"

While I agree with you that the RIAA's inventive pleading should not be countenanced, a number of judges have tolerated it.

As a practicing lawyer, I work in the real world.

Anonymous said...

I was involved in the first efforts of the recording companies to use the internet. Suffice to say they had to be dragged kicking and screaming into the 21st century, and every day they try to take a step back. I note that one of the founders of kazaa is now a turncoat for the industry and seeking to force Australian ISP's to monitor their customers.
This is going too far.

I have worked out a solution, in the absence of any sense from the record companies.

I have worked out how to legally share music and other content, without needing to pay the record companies anything, and make it virtually impossible to police.

Unless there is any compelling reason to do otherwise, I intend to make it my legacy to the music and movie appreciating public who have for far too long been cheated and overcharged by the entertainment companies.

Our legal advice is that there would be no way to prosecute listeners under existing laws and that no new laws would be capable of doing so unless they were blatantly unconstitutional, although the provision will be there to pay the artist directly if listeners are impressed enough with their products.

I'd suggest an investment in an entertainment company might not have a lot of upside at this stage.
The last time I made such a suggestion, they lost billions of dollars and the industry had to amalgamate and merge in order to survive. This time the prognosis may be worse.

Best regards,
Dean Procter

eZee.se said...

@Dean Procter (above post), thats a very nice tease, how about "showing" us something rather than claiming 10 things, this will go far in proving that you are not a (if you would pardon my language) nutcase.

If you do have some proof, we can also be reached at www.eZee.se and we would love to hear from you.

@Common Man, yes, sometimes I too feel the courts live in a totally different reality and are so far away from present technology that its hopeless, and i'm guessing Ray B and people like him have no choice but are like carpenters who have to work with the tools that are available and not the tools they wish they had.

Must be frustrating to say the least.

Cheers!
Ryan
www.eZee.se

Sebastien said...

the real problem, is that they're getting fined $750 per song.


Also, why is the RIAA jumping straight to fines. Shouldn't they be putting out DMCA take down notices first? Wouldn't that be the first correct step.

Although, I suppose since they never know who the actual person is, it's tough to send a DMCA take down notice directly to the person.

Common Man is right though.
Owning a P2P file sharing program should not, in and of itself be considered a crime.