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.