Current Law

Current copyright law provides several remedies, both civil and criminal, for an owner whose rights have been infringed.

Civil remedies, i.e. those an owner pursues himself by suing the infringer include injunctions against the infringement and monetary damages. Damages can be either actual or statutory. Actual damages are the amount representing the actual loss to the copyright owner. Statutory damages are a set amount of money that an owner can choose to ask for instead of proving the amount of actual damages. This amount can range from $750 to $30,000 per work infringed. For example, if a person plays two CDs in a public place without the copyright owners’ permission, he is infringing the public performance right in the music and a court could order him to pay statutory damages ranging from $750 to $30,000 for each CD played. This amount could be reduced to $200 per CD if the user can demonstrate that he had no reason to know that he was infringing and can be increased to $150,000 per CD if the owner proves that the user knew he was infringing a copyright. In addition, courts can order the destruction of infringing copies and records and also masters or tapes from which the infringing copies were made.

Criminal remedies allow the federal government to prosecute infringers under certain conditions. Infringement becomes a criminal matter if it was made “for commercial advantage or private financial gain,” if the retail value of the infringed works exceeds $1,000, or if a work was leaked to the public before its intended distribution. Penalties may be as high as a prison sentence of 5 years depending on the scale of the infringement. These prison sentences can be doubled for second offenses. Courts can also order the forfeiture and destruction of any goods and equipment that aided in the infringement (i.e. CD-duplication equipment).

The penalty for breaking digital locks in violation of the DMCA is a fine of up to $500,000 and a maximum prison sentence of 5 years. This penalty can be doubled for a second or subsequent offense.

Impact of Remedies

The high values of statutory damages in civil cases have resulted in damage awards that have been many times larger than the actual loss suffered by the copyright owner. For example, in 2007, a Minnesota federal district court ordered, Jammie Thomas, a single mother of two, to pay $222,000 in statutory damages for “making available” 24 songs on a P2P network. The award was based on a value of $9250 per track. By contrast, the actual damage suffered by the labels, based on each song being valued at $0.99(the amount charged for a single download by iTunes), turns out to be a mere $23.76.

Huge damage awards have also been awarded against device makers, service providers and ISPs often closing down the business of those sued. For example, in 2000, MP3.com started a new service that allowed customers to listen to their own music from any place where they had access to the Internet. As a condition of access, customers had to prove that they had purchased a CD containing the song. Despite these precautions, a New York federal district court found that when MP3.com copied music onto its servers to make this service available, it was infringing copyright. The court ordered the company to pay $25,000 in statutory damages per CD infringed to the record labels, even though the record labels offered no proof that they had suffered any damage. The court observed that if the labels proved that 4,700 CDs were infringed, damages could be as high as $118 million. Maybe because the actual number of CDs infringed was in dispute, MP3.com settled with the labels for more than $200 million. Of course, the service was shut down and a financially broken MP3.com was acquired by another company. Such awards tend to chill innovation by sending a message that offering new services entails too much risk.

Copyright law’s criminal enforcement provisions have often been used against those who operate collection and distribution networks of unauthorized software, movies and music. However, the letter of the law allows criminal enforcement not only against organized networks but also against individuals who share files on P2P networks. The law allows anyone who trades in copyrighted content in excess of a retail value of $1,000 within a 180-day period to be imprisoned for up to a maximum of 3 years. This provision encompasses any one who shares files worth $5.56 per day.

Further Expansion of Enforcement

Not satisfied with the tools currently available under the law, large content owners are urging Congress to ratchet up enforcement. Congress has introduced two bills, H.R. 4279 and S.3325, that would, among other things, increase penalties for copyright infringement and provide increased resources to law enforcement. The U.S. government is also negotiating an international agreement called the Anti-Counterfeiting Trade Agreement, to possibly achieve similar results on the international front.

H.R. 4279 and S.3325

Both bills would dramatically expand current law’s forfeiture provisions that encompass devices used in infringement to include devices intended to be used in infringement. The Senate bill would also extend to devices intended to be used to circumvent digital locks. While application of such provisions against large scale commercial enterprises might seem reasonable, both bills could also allow a family’s general-purpose computer, used by one member to download music, to be seized by the government as a device intended for infringement. Additionally, both bills would institute new civil forfeiture provisions that would allow forfeiture without the heightened burden of proof that is currently required in criminal cases.

In addition to the forfeiture provisions, the bills would also amend the current law requirement that works be registered before an action is brought and allow criminal actions even where the owner does not register the copyright. It is puzzling that such a provision is present in the bills given that the movie and music industries, which would primarily benefit from criminal enforcement, already register their works.

H.R. 4279 has passed the House and is currently up for consideration by the Senate. The Senate bill S.3325 was recently introduced in the Judiciary Committee. We will keep you updated about their progress.

ACTA

The United States Trade Representative (USTR) is leading negotiations on behalf of the U.S. government to enact an international agreement called the Anti-Counterfeiting Trade Agreement (ACTA). Other countries involved in the negotiations are Japan, South Korea, Canada, Mexico, Australia, New Zealand and the countries of the European Union. The stated goal of the agreement is the international enforcement of strong intellectual property rights (that includes copyright) through increased cooperation among international government agencies. ACTA does not exist yet, though its ongoing discussions are confirmed by all the participating governments (see USTR fact sheet).

However, public interest advocates fear that the treaty would require member countries to adopt more stringent enforcement practices including those aimed at preventing Internet piracy, and increasing responsibilities of intermediaries such as ISPs in preventing infringement. None of these fears can be confirmed or denied because the treaty is being negotiated in secret. Public interest groups, including Public Knowledge are urging the US government to negotiate the treaty in an open and democratic manner so that all concerned can have their voice heard.