Sony BMG Music Entertainment v. Tenenbaum

First Circuit affirms judgment in favor of recording companies, holding that statutory damage award of $675,000 for willfully infringing 30 copyrighted songs did not violate defendant’s constitutional right to due process.

Joel Tenenbaum illegally downloaded and distributed as many as 5,000 songs over the span of several years, despite warnings from his father, his college, and the plaintiffs, a group of recording companies. Plaintiffs sued Tenenbaum, and a jury awarded damages of $675,000, representing $22,500 for each of 30 songs that Tenenbaum had illegally distributed. Although this award represented only 15 percent of the $150,000 maximum statutory damage award available for each willful infringement, Tenenbaum appealed, contending that the award was excessive and deprived him of his constitutional right to due process of law.

At the outset, the First Circuit panel affirmed the district court’s determination that the U.S. Supreme Court’s decision in St. Louis, I.M. & S. Ry. Co. v. Williams, established the proper standard for evaluating the constitutionality of a statutory damages award. The court declined Tenenbaum’s invitation to apply the Supreme Court’s more recent decision in BMW of North America v. Gore, in which the court held that an excessive award of punitive damages may violate due process. Emphasizing the difference between statutory and punitive damages, the First Circuit observed that Gore was animated by the principle that civil defendants must receive fair notice of the severity of the potential penalties for their actions. The First Circuit concluded that the Gore guideposts should not extend to constitutional review of statutory damage awards under the Copyright Act. First, the court stated that the fair notice concerns underpinning Gore simply do not exist in the copyright context, as the statute itself provides notice of the scope of the potential award. Second, the court noted that a comparison between the award and the harm to the plaintiff cannot logically apply to an award of statutory damages, because a plaintiff seeking statutory damages under the Copyright Act need not prove actual damages. Finally, the court indicated that the Gore guideposts, which require a comparison between the award and the authorized civil and criminal penalties, would lead to a nonsensical comparison of a civil award to itself because an award of statutory damages is “by definition” an authorized civil penalty.

In Williams, the Supreme Court held that a statutory damage award violates due process only “where the penalty prescribed is so severe and oppressive as to be wholly disproportional to the offense and obviously unreasonable.” Applying this standard, the court considered the purpose of statutory damages under the Copyright Act — which includes deterrence of wrongful conduct — as well as the egregiousness of Tenenbaum’s behavior. The court observed that the evidence presented at trial confirmed that Tenenbaum’s activities led to the same type of harm that Congress foresaw when it enacted the Copyright Act’s statutory damages provision: loss of the value of plaintiffs’ copyrights, reduced income and profits, and job losses. The court further observed that Tenenbaum’s conduct — making thousands of songs available illegally despite numerous warnings — was exactly what Congress was seeking to deter when it amended the statutory damages provision in 1999 to increase the range of statutory damages. Accordingly, the First Court upheld the $675,000 award.