Wednesday, September 24, 2008

RIAA's $222,000 verdict in Capitol v. Thomas set aside. Judge rejects 'making available'; attacks excessive damages.

In Capitol v. Thomas, District Judge Michael J. Davis has set aside the jury's $222,000 verdict and ordered a new trial, ruling that his jury instruction -- which accepted the RIAA's "making available" theory -- was erroneous. He also rejected the 'offer to distribute' theory.

Although he did not formally reach the arguments going to the excessiveness of the damages, he had this to say on the subject:

Need for Congressional Action

The Court would be remiss if it did not take this opportunity to implore Congress to amend the Copyright Act to address liability and damages in peer to peer network cases such as the one currently before this Court. The Court begins its analysis by recognizing the unique nature of this case. The defendant is an individual, a consumer. She is not a business. She sought no profit from her acts. The myriad of copyright cases cited by Plaintiffs and the Government, in which courts upheld large statutory damages awards far above the minimum, have limited relevance in this case. All of the cited cases involve corporate or business defendants and seek to deter future illegal commercial conduct. The parties point to no case in which large statutory damages were applied to a party who did not infringe in search of commercial gain.

The statutory damages awarded against Thomas are not a deterrent against those who pirate music in order to profit. Thomas’s conduct was motivated by her desire to obtain the copyrighted music for her own use. The Court does not condone Thomas’s actions, but it would be a farce to say that a single mother’s acts of using Kazaa are the equivalent, for example, to the acts of global financial firms illegally infringing on copyrights in order to profit in the securities market. Cf. Lowry’s Reports, Inc. v. Legg Mason, Inc., 271 F. Supp. 2d 42 737, 741, 42 (D. Md. 2003) (describing defendants as a “global financial services firm” and a corporation that brokers securities).

While the Court does not discount Plaintiffs’ claim that, cumulatively, illegal downloading has far‐reaching effects on their businesses, the damages awarded in this case are wholly disproportionate to the damages suffered by Plaintiffs. Thomas allegedly infringed on the copyrights of 24 songs the equivalent of approximately three CDs, costing less than $54, and yet the total damages awarded is $222,000 – more than five hundred times the cost of buying 24 separate CDs and more than four thousand times the cost of three CDs. While the Copyright Act was intended to permit statutory damages that are larger than the simple cost of the infringed works in order to make infringing a far less attractive alternative than legitimately purchasing the songs, surely damages that are more than one hundred times the cost of the works would serve as a sufficient deterrent.

Thomas not only gained no profits from her alleged illegal activities, she sought no profits. Part of the justification for large statutory damages awards in copyright cases is to deter actors by ensuring that the possible penalty for infringing substantially outweighs the potential gain from infringing. In the case of commercial actors, the potential gain in revenues is enormous and enticing to potential infringers. In the case of individuals who infringe by using peer-to-peer networks, the potential gain from infringement is access to free music, not the possibility of hundreds of thousands – or even millions – of dollars in profits. This fact means that statutory damages awards of hundreds of thousands of dollars is certainly far greater than necessary to accomplish Congress’s goal of deterrence.

Unfortunately, by using Kazaa, Thomas acted like countless other Internet users. Her alleged acts were illegal, but common. Her status as a consumer who was not seeking to harm her competitors or make a profit does not excuse her behavior. But it does make the award of hundreds of thousands of dollars in damages unprecedented and oppressive.
September 24, 2008, decision setting aside verdict

Commentary & discussion:

Electronic Frontier Foundation
Associated Press (Via Minneapolis Star Tribune)
Ars Technica
Heise Online (German)
Digital Music News
Wall Street Journal
PC World
Duluth News Tribune
Good Morning Silicon Valley
eFlux Media
Download Squad (9/25)
ZDNet (9/25)
Hack in the Box
Torrent Freak
Digital Trends
CD Freaks
The Josh Kagan Blog
Gizmodo UK
GroundReport Technologie (Polish)
Illinois Business Law Journal


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


Lisa said...

That's huge.

That, and the DOJ's opposition to S.3325 have made it a bad couple of days for the RIAA.

Anonymous said...

So, now with this action, lets recap what they have won at trial:


And since the Judge appears to have also excluded "Making Available", and we know the RIAA has NO evidence of anyone ELSE not a RIAA agent doing any downloading in this case, I would guess their odds of getting a verdict in their favor after the retrial are also......

ZERO, or very close thereto.


raybeckerman said...

Well, albert....the RIAA's lawyers made a pretty penny on the case.

So it wasn't a total loss.

raybeckerman said...

By the way, I think it bears noting that Judge Davis has proved himself to be a total "mensch".

1. He called a foul on himself.

2. He corrected his mistake.

3. He decided the law correctly.

4. And although he was not required to do so, he made an important statement about the inequity of the RIAA's damages theory.

Scott said...

For those who are not from New York City, a "mensch" is: "A person having admirable characteristics, such as fortitude and firmness of purpose: 'He radiates the kind of fundamental decency that has a name in Yiddish; he's a mensch' (James Atlas)."

Anonymous said...

After reading over the decision, I must the RIAA's theories have taken a great hit as the judge has now rejected their 'Making Available' arguement. Although it would have been better for the defendent if no mistakes had been made in the first case, it may turn out better for the general public that the the mistake had happened as now we have the judge's opinion on the absurd amount of damages the RIAA seeks to claim per infringement.

I must also say that I now have great respect for this judge, as regardless of the reasons behind his decision take another look at this case (which I have no way of knowing since I'm not the judge), it takes a great man to know that he made a mistake, to admit to making a mistake and to seek to correct said mistake.


Anonymous said...

On page 3, Judge Davis says this: "Finally, while the Court does not adopt the deemed‐disseminated theory based on Hotaling, it notes that direct proof of actual dissemination is not required by the Copyright Act. Plaintiffs are free to employ circumstantial evidence to attempt to prove actual dissemination. Overall, it is apparent that implementation of Congress’s intent through a plain meaning interpretation of § 106(3) will not leave copyright holders without recourse when infringement occurs over a peer‐to‐peer network"

It sounds like he's giving RIAA a hook to continue to pursue these if they can come up with some flimsy "evidence" that shows that there shoulda, coulda, woulda been a distribution... Is this true???

- Puzzled but NAL

Anonymous said...

One things that bothers me about the excerpt you printed. It presumes that she has actually done the things she is accused of ( with phrases like "defendent did not violate copyright for profit, she did it to..." --paraphrasing. ).

With the verdict set aside and a new trial ( presumably ) to begin, shouldn't the statement contain the standard "weasel words" like "she allegedly did it"?

Anonymous said...

microsofthater: I doubt the judge would mistake his own meaning. So in the current case, maybe the risk of confusion is small.


Lior said...

microsofthater: I don't think there is any doubt about the basic facts. Ms. Thomas did have songs in her Kazaa shared folder, and it is likely that these songs were downloaded by the RIAA investigator.

At the end, the judges makes the point that even if what she did amounts to copyright infringement, the statutory damages are completely out of proportion to the actual damages.

It is interesting to note that the judge prices music by the cost of CDs rather by on iTunes. The error is only about a factor of 20.

Anonymous said...

The last thing I think the RIAA wants is a loss. From their point of view, considering the limits the Judge has put in his decision, I clearly think the odds are much greater for a Not Liable verdict, then another win for the RIAA.

So wonder what will happen now? I do not think this will go to trial # 2, as there is too much risk for the RIAA. If the RIAA was to lose, Im sure they would see more people fighting and not agreeing to their settlement terms. Such a loss would be very bad for their other cases.

My guess is we will see some kind of stipulated dismissal filed, which will leave us no clue as to who actually won. The RIAA might even agree to pay her lawyer, as long as she keeps her mouth shut about it. My bet is the ending document will be unclear as to who won, so the RIAA could still imply that they won to others, even if in fact that is not in fact the truth.

I am glad the Chief Judge has admitted his error and is correcting it without a trip to an appeals court. That is a very fair thing for the Judge to do.

You are right Ray about the money too. The RIAA lawyers have made a lot here. The US taxpayers have not done as the lawyers. I say this because had they paid full price for each of the John Doe cases without Joinder, the monies paid to the Court system might even be close to the amount paid to those RIAA lawyers. (Which Im sure is exactly the reason they are NOT doing it this way!)

I often wonder about that Joinder order in Texas, does anyone know if the RIAA has ever filed any other joined cases in that district since the Order? It would seem that Ignoring that district would allow carte-blanche for any P2P users on SBC (AKA the New AT&T), since isnt that the district their home office is in???


Anonymous said...

Is it possible, practicable and sensible to get an injunction aginst RIAA/Capitol etc. to stop them using the now set aside judgement or the $222000 or $9250 figures in any way suggesting that this is the nature/level of award a person might suffer for copyright infringement?
(Assuming they have been using it.)

Anonymous said...

Excellent news!!!


raybeckerman said...

trmcdougle, don't you get it? the verdict doesn't exist anymore... it's been thrown out....

and the judge said in his decision that the amount of the verdict was ridiculous....

Anonymous said...

Oh, I don't know. It might be interesting to see them cite a vacated verdict.

Let's not discourage them too much.


Anonymous said...

Great news for Ms. Thomas. The fact that the judge acted as he did is very refreshing.

Anonymous said...


Haven't they done that before?

Specifically citing Atlantic v. Howell after that verdict / summary judgment had been vacated and then denied.

I do not recall the exact cases, ISTR there were more than one.


Anonymous said...

There are two glaring errors in Judge Davis’s opinion:

First, where he said that “distribution to MediaSentry can form the basis of an infringement claim. Eighth Circuit precedent clearly approves of the use of investigators by copyright owners. While Thomas did not assist in the copying in the same manner as the retail defendant in Olan Mills – by actually completing the copying for the investigator – or as the retail defendants in RCA/Ariola – by assisting in selecting the correct tape on which to record and helping customers copy – she allegedly did assist in a different, but substantial manner. Plaintiffs presented evidence that Thomas, herself, provided the copyrighted works for copying and placed them on a network specifically designed for easy, unauthorized copying. These actions would constitute more substantial participation in the infringement than the actions of the defendants in the Eighth Circuit cases who merely assisted in copying works provided by the investigators.”
(Most unsophisticated P2P network users are not aware that they are sharing files, as RIAA testified before the FTC. At least Judge Davis said Thomas “allegedly” did assist. Furthermore, the Eighth Circuit did not hold that in the absence of knowing and active assistance by the person making copies available, the copyright owner’s own copying can be the actual copy element of a distribution.)

Second, where he said that “direct proof of actual dissemination is not required by the Copyright Act. Plaintiffs are free to employ circumstantial evidence to attempt to prove actual dissemination. Overall, it is apparent that implementation of Congress’s intent through a plain meaning interpretation of § 106(3) will not leave copyright holders without recourse when infringement occurs over a peer-to-peer network.” (Emphasis in original)

(The plaintiffs will now try to rely on the London-Sire v. Doe 1 et al. (D. Mass. 2008) novel and unprecedented “statistically reasonable inference that at least one copyrighted work was downloaded at least once” theory.)

Hopefully he will catch his errors and reverse himself again.

raybeckerman said...

There are other errors as well, such as ....

1. finding the actual damages to be $54 when they are in fact $8 (70 cents per file wholesale revenue less ~35 cents per file expense = lost profit of ~35 cents per file)

2. overlooking need to prove, in addition to dissemination, "sale or other transfer of ownership or ... rental, lease, or lending".

No one's perfect.

But on balance... it was a landmark decision on the ludicrousness of the damages... and Judge Davis has shown himself to be the kind of judge our society can be proud of.

Anonymous said...

Three cheers or better for a Judge that had the gumption to stand up and admit his initial error in that wacky trial. I truly admire him for this!

And yet, one more good, solid nail in the RIAAs coffin.


Anonymous said...

I feel nearly as good after I read this, as how bad I felt when the first trial ended.

It will be interesting to see RIAA's response and what they decide to do.


Anonymous said...

This man would expect, should this case go to a second trial, for the Defendant to assert the Innocent Infringer defense in an attempt to limit any damages to a maximum of $200 per actual song proven to have infringed any of the actual Plaintiff's copyrights in this trial. Even that is 200X or more damages. And any songs found that aren't the copyright of the actual Plaintiffs shouldn't even be considered.

That is provided that any infringement to anyone other than MediaSentry actually occurred. Remember that MediaSentry hunted down and downloaded songs that they were *paid* to find. Those may have been songs that no one else was actually looking for. To say that everybody else on the Internet was hunting for, finding on this Defendant's computer, and actually downloading these same songs from this Defendant simply defies common sense.

{The Common Man Speaking}

dnball said...

First, well-done Judge Davis.

Second, my bias when balancing the virtues of copyright with the virtues of expanding our culture is decidedly pro-expansion.

But at the end of the day, absent some direct challenge, copyright content owners will eventually succeed in codifying a "making available" right.

They've already ensured that it's recognized in the US Sentencing Guidelines (see USSG §2B5.3, comment. (n.1)), convinced the California legislature (see Penal Code 653aa), imposed it in US trade agreements, and inserted it into international copyright treaties.

It's coming. Instead of engaging in the extraordinary legalistic and linguistic exercises to determine if the "making available" right already exists, why not address the issue head on?

There must be a member of Congress sympathetic to fair use who could propose a clean bill to amend Section 102 to include the "making available" right in order to tee up the issue.

That would be a debate worth having - and would crystallize the arguments before the weight of related statutes and obligations overwhelms any argument against codifying the right. Or before the issue is teed up via the prosecution of a "making available" crime (which would not be a good procedural posture to address the issue).

Anonymous said...

"I feel nearly as good after I read this, as how bad I felt when the first trial ended.

It will be interesting to see RIAA's response and what they decide to do.

Link to this comment posted by Anonymous Anonymous"

I should think the answer to that would be obvious, file a vexatious litigant suit against the defendant!

But really, having deep pockets and a penchant for pulling on the fortune dispenser lever until they get the answer they want, one would expect the RIAA to appeal this precedent setting court decision, especially considering how many current cases have probably cited the old verdict as proof of the RIAA's position.

Anonymous said...

Maybe someone smarter than me can explain the following:

If downloads performed by MS may count as unauthorized distribution and RIAA takes this approach in court, then how can they justify using evidence from the commission of a crime in court?

If they must discount MS's evidence because MS is authorized to download these files, then there is no violation of copyright, hence no lawsuit.

Can someone explain this?

Either way, it seems like they have gotten themselves into one fine pickle with this.

skeeter said...

Wow, I was knocked off my feet after I read this ruling. Good sound judgement. I also love the press this is getting. Wall Street Journal, AP, and several online newspaper sites have picked up on it. Could this be a just a preview of what's to come if the issues of "making available" and "excessive awards" reach the appellate level? I think the odds just went up in the defendants favor.

Anonymous said...

Has anyone else noted the total lack of media coverage on the reversal of this decision? (As opposed to the first verdict)

Anonymous said...

"If downloads performed by MS may count as unauthorized distribution and RIAA takes this approach in court, then how can they justify using evidence from the commission of a crime in court?"

MS can "validate unlawful conduct". See pages 10-11. When distributing a file to MS, if defendant played a "substantial enough role", whatever that means, the judge says she could be liable. This is a much higher standard than "she shared the file and MS downloaded it so she infringed our copyright".


Anonymous said...

The judge didn't mention that plaintiffs knew there was relevant case law against the "making available" rule before they used it in this case. I believe the judge knows that plaintiffs knew this, by now. Is the judge not upset? -dp

Anonymous said...

Yes Ray I know it does not exist anymore, but will the RIAA drones in the "settlement centre", marketing or even their lawyers in court ACT LIKE they know?

I am also thinking about things like pre-existing web pages (although a Google does not find any), briefings to congressmen etc.

I am also thinking of phrases like "You might find yourself liable for we won a judgment of the order of $222,000 like the one we won against Ms Thomas, although that was set aside on a technicality." The "technicality" wording is one that I would say most people would assume meant it could happen at that level again.

Anonymous said...

P.S. What about if they link to media reports of the original verdict?