On December 4th of this year, the legendary UK intellectual property authority Sir Hugh Laddie gave his inaugural lecture as a Professor at the University College London. The title of his lecture was “The Insatiable Appetite for Intellectual Property Rights.” Professor Laddie spoke of his great concern for the ever-strengthening of intellectual property rights. Professor Laddie has had an illustrious career as a top private practitioner, a celebrated judge of the Patent and Chancery courts, and now as a chaired professor. He is also the co-author of the leading UK treatise. He is hardly an anti-IP sort. Neither am I. I have spent 25 years as a copyright lawyer, 12 of them in private practice, the first 6 of which involved representing trade associations of content owners and individual content owners, as well as 4 and a half years in the Copyright Office, an agency that is also hardly anti-copyright. Before 2007, I spent much of the previous 7 years researching, writing, and typing a 7 volume, 6,000 page treatise on copyright, an amount of time one spends only on things that are very meaningful to you.
Regrettably, both Sir Hugh and I have been lead in recent years to speak out in protest over the unslakable lust for more and more rights, longer terms of protection, draconian criminal provisions, and civil damages that bear no resemblance to the damages suffered. As Sir Hugh noted in his speech, “A calm look at the way IP rights are obtained and enforced in practice suggests that something is wrong. The drive for more IP rights has produced startling results.” He then gives page after page of examples, drawn from copyright law, trademark law, and patent law, concluding:
Where IP rights perform their function of advancing the sciences or arts, they should be encouraged to do so. Where or to the extent that they do not, they have no justification and the normal discipline of competition should prevail. The gluttony which has resulted in the growth of completely unnecessary or excessively long IP rights undermines the system itself. As Shakespeare wrote in Richard II,– “With eager feeding food doth choke the feeder.”
I say Amen. The question is not whether copyright is a good thing: properly calibrated copyright is very good, indeed essential for certain classes of works. Sir Hugh and I are both pro-IP in this most important of senses. But an excessive amount of something that is beneficial in measured doses can become fatal in overdoses, and copyright is already at fatal strength. Yet, when they are not alienating their customers, copyright industries spend the rest of their time in efforts to obtain new, powerful, undeserved, and unnecessary remedies. Content owners act as if obtaining more and more and more will save them: it won’t, quite the reverse: it only continues an unfortunate trend of making copyright law and content owners among the most despised elements in society. While proponents of such efforts describe themselves as being pro-IP, they have the opposite effect by bringing disrespect on the entire system. I call that being anti-IP, not pro-IP.
One example of this is presented by H.R. 4279, introduced last week, and available here. There is a hearing this Thursday. The bill’s title is designed to constitute the acronym “Pro-IP,” but it will have the opposite effect, because although the bill is touted as dealing with counterfeiting and piracy, even scratching the surface of the bill reveals a grab bag of previous proposals whose origins are the suits brought by the music industry against Mp3.com in 2000, and not Nigerians selling illegitimate Prada bags in Times Square. Let’s go through two of the bill’s provisions, beginning with section 104.
SEC. 104. COMPUTATION OF STATUTORY DAMAGES IN COPYRIGHT CASES. Section 504(c)(1) of title 17, United States Code, is amended by striking the second sentence and inserting the following: `A copyright owner is entitled to recover statutory damages for each copyrighted work sued upon that is found to be infringed. The court may make either one or multiple awards of statutory damages with respect to infringement of a compilation, or of works that were lawfully included in a compilation, or a derivative work and any preexisting works upon which it is based. In making a decision on the awarding of such damages, the court may consider any facts it finds relevant relating to the infringed works and the infringing conduct, including whether the infringed works are distinct works having independent economic value.'.
This provision is one of the most gluttonous in the whole bill. It seeks to expand radically the amount of statutory damages that can be recovered, and in cases where there are zero actual damages. The provision is intended to benefit the record industry but will have terrible consequences for many others; the provision has nothing to do with piracy and counterfeiting; instead it seeks to undo rulings in the 2000 MP3.com litigation, a decidedly non-piracy or counterfeiting case, instead involving the use of digital storage lockers. Under the original MP3.com decision, where a CD had twelve tracks, there was only one award of statutory damages possible. Under the bill, there may be 25: there would be 12 for each track on the sound recording, 1 for the sound recording as a whole, and 12 for each musical composition. Under this approach, for one CD the minimum award for non-innocent infringement must be $18,750, for a CD that sells in some stores at an inflated price of $18.99 and may be had for much less from amazon.com or iTunes. The maximum amount of $150,000 then becomes three million, seven hundred and fifty thousand dollars per CD. Now multiple that times a mere ten albums, and one gets a glimpse at the staggering amount that will be routinely sought, not just in suits filed, but more importantly in thousands for cease and desist letters, where grandmothers and parents are shaken down for the acts of their wayward offspring. These private non-negotiable demands don’t see the light of day, but they have resulted in “settlements” wherein ordinary people have paid abnormal amounts of money rather than be hauled into court and thereby incur costs that will bankrupt them. One only wishes Congress would hold a hearing on this practice.
Even limiting claims to 12 tracks, this equals a minimum award of $9,000 per CD. Is there any doubt that $9,000 per CD will be demanded and described as a metzia sparing parents and grandparents from the far greater expenses of litigation? It is no answer to say, well, we are only talking about those involved in file sharing, they're bad people who deserve to pay; when was proportionality abandoned as a principle of law? During a death penalty argument in 1981, Justice Rehnquist suggested that the inmate's repeated appeals had cost the taxpayers too much money. Justice Marshall interrupted, saying, "It would have been cheaper to shoot him right after he was arrested, wouldn't it?" Imposing the death penalty on a few file sharers might discourage others, but that hardly forms the basis for sound policy, nor do statutory damage penalties that will result in economic death.
On top of this, there is absolutely zero evidence that the current system, which already provides extraordinarily high awards way out of proportion to actual damages, is inadequate. Under the current system, even assuming the lowest amount available for sharing an entire CD, the minimum recovery is $750 per work; in the Minnesota case, the jury awarded $9,250 per work. On what basis then is there a need for even greater damages? None.
The bill runs counter to one of the great successes of the 1976 Act, its clearing up the mess on statutory damages under the 1909 Act. Because it is unlikely many know this history, I will spell it out. Section 101(b) of the 1909 Act was one of the many failures of that Act. In addition to confusion over whether statutory damages were awardable under section 101(b) only when actual damages or defendant's profits were unascertainable, section 101(b) presented a baffling smorgasbord of provisions, the full effect of which can be grasped only by reading the provision. There were provisions that provided minima and maxima as well as provisions that set awards on a per copy basis, e.g., 100,000 infringing copies at $1.00 a copy, equaled a $100,000 award.
It is difficult to tell from the face of the section how it worked, and many doubts persisted until its repeal on January 1, 1978. From a bird's-eye view, there was a basic range of $250 to $5,000. Within that range, the court had discretion to award an amount considered “just,” but in all cases an award of at least $250 was required. Beyond this, the Copyright Office took the position that section 101(b) operated as follows in conjunction with actual damages or profits: if actual damages or profits were less than $250, the court was required to award at least $250, but could award a higher sum up to $5,000. If actual damages or profits were established in some amount between $250 and $5,000, the court could award either the established amount of those damages or any higher amount up to $5,000. If actual damages or profits were established in excess of $5,000, the court had to award that amount and could not award statutory damages, except where the infringement was willful, in which case there was no limit on the amount of statutory damages that could be awarded. There were also a number of special statutory damages provisions: motion picture companies that innocently infringed a dramatic work were liable only for a single award in an amount between $250 and $5,000. In other cases, specified amounts were set and calculated by the number of infringements, not by the number of works infringed, at least theoretically. For example, in Law v. NBC, a musical composition was broadcast by NBC in a chain hookup to 67, 66, and 85 stations, equaling 218 stations, and, according to the court, 218 infringements. In Burndy Engineering Co. v. Sheldon Service Corp., a catalog that infringed three copyrights was published in two separate editions, the second of which had three printings. The number of infringements was deemed to be 12: (a) 3 × 1 (the first edition), + (b) 3 × 3 (all three printings of the second edition). The four categories at the end of section 101(b) for specified subject matter could also lead to high awards, e.g., 100,000 copies of an infringing painting times $10 per copy. Numbers set forth in the statute were not set in stone, though; they were subject to the court's discretion, thus resulting in tremendous uncertainty in determining one's possible recovery (or exposure in the case of defendants).
It is not surprising, then, that in his 1961 recommendations to Congress for a new Act, the Register of Copyrights concluded that the schedule of statutory damage awards in section 101(b) “has not proved to be a very useful guide, because the amounts are arbitrary and the number of copies or performances is only one of many factors to be considered in assessing damages. In most cases the courts have not applied the mathematical formula of the schedule, and in a few cases where this has been done the results are questionable.” The Register also expressed concern about the operation of section 101(b) on innocent infringers, over multiple infringements, and over awards against defendants who infringed after receiving notice from the copyright owner. The Register not surprisingly called for a thorough overhaul of statutory damages with these two recommendations:
(1) Where an award of actual damages or profits would be less than $250, the court shall award instead, as statutory damages for all infringements for which the defendant is liable, a sum of not less than $250 nor more than $10,000, as it deems just. However, if the defendant proves that he did not know and had no reason to suspect that he was infringing, the court may, in its discretion, withhold statutory damages or award less than $250. (2) Where an award of actual damages or profits would exceed $250 but would be less than the court deems just, the court in its discretion may award instead, as statutory damages for all infringements for which the defendant is liable, any higher sum not exceeding $10,000.
Two recommendations in the 1961 Report excited, negatively, the copyright bar: the innocent infringer reduction, and the limitation of one award for all infringements for which the defendant was liable. This limitation meant that if defendant infringed 200 works, there was only one award; or, if defendant infringed three works by different acts for each work (reproduction, distribution, and performance), there was still one award. As a result of comments on the report by the copyright bar, in 1963 the Register circulated a draft omnibus bill. Section 38 of this bill covered damages. The subsection on statutory damages took a new, two-tier approach based on whether registration had been made before the infringement occurred. The first tier covered works infringed after registration. In this circumstance, the copyright owner would receive the larger of actual damages/profits or statutory damages of not less than $250 or more than $10,000 “for all infringements of a single work for which the infringer is liable.” A single work was defined as “including all of the material appearing in any one edition or volume or version of a work used by the infringer. The 1963 preliminary draft bill thus softened (but did not eliminate) the 1961 report's recommendation on how to deal with the specter of multiple awards against the same defendant. The 1961 report had gone too far in favoring the defendant. Under that report's recommendation, a defendant had every incentive to infringe as many works as possible since there would be only one award for “all infringements for which the defendant is liable.” The 1963 preliminary draft bill, by contrast, permitted separate awards for each “single work” infringed, but defined a “single work” so that a defendant who infringed, say an anthology of 500 poems, would be liable for only one award. Different copyright owners whose works were infringed in a “single work” would have to share the single award. This concept was included, in a revised form, in section 504(c) as enacted.
In discussions on the draft at the Copyright Office with members of the copyright bar and industries, the issue of the single-work limitation was raised. In a revealing explanation of how the limitation would work in practice, Copyright Office General Counsel Abe Goldman addressed the concern expressed by an in-house counsel at ABC that if a plaintiff alleged a motion picture infringed five different versions of a work, five awards would be required, even though the material copied was found in all five works. The position of the Copyright Office was as follows:
GOLDMAN. Won't you find all of this material in one version? Did the infringer pick some from this version and some from that version? OLSSON. I write the poem, and then I revise it somewhat, and I do this five times. This is done with motion pictures occasionally, where you find the same stock footage, let's say, in five different pictures. Each one is copyrighted. What was infringed by the infringer is the stock footage. The plaintiff comes in and says, “Ah, you owe me $1,250 [$250 × 5] as a minimum under th[e] statute.” GOLDMAN. But under this definition you could point to one film and say that everything you copied is in this one film. OLSSON. But wouldn't the plaintiff dispute that, Abe? He might say, “No, in my belief you copied them all. You took something from each copyright.” A “single work” is work A, and another “single work” is Work B … GOLDMAN. I think this definition says, Harry, that if the infringer can show that everything he copied was all in one film, that constitutes an infringement of a single work. OLSSON. I see. The other works would not be infringed in your view, Abe? GOLDMAN. That is my understanding of what this definition would mean in that case.
The first revision bills were introduced in Congress in 1964. Section 38 of these bills provided, with respect to statutory damages:
Instead of actual damages and profits, the copyright owner is entitled, at his election, to an award of statutory damages for all infringements of any one work for which the infringer is liable, in a sum of not less than $250 or more than $10,000 as the court considers just. In a case where the copyright owner proves that infringement was committed willfully after service upon the infringer of a written notice to desist, the court in its discretion may award statutory damages of more than $10,000. For purposes of this subsection, all the parts of a compilation or derivative work constitute one work.
Section 38 differs in a number of respects from the Copyright Office's 1963 draft. From the top to the bottom, the first change is that the copyright owner was given the sole option of determining whether to elect actual damages/profits or statutory damages. As a result, the bills eliminated the necessity of calculating which form of recovery was greater. The bills did not define, however, when the election was to be made, an oversight corrected in 1966. While the 1964 version continued the 1963 limitation of a single award to “all the infringements of one work for which the infringer is liable” (albeit with a change from a “single work” to “one work”), the 1963 version's definition of “single work” as “all of the material appearing in any one edition or volume or version of a work used by the infringer” was changed to read “all the parts of a compilation or derivative work constitute one work.” Additionally, the Copyright Office dropped the provision permitting the court to reduce or eliminate entirely statutory damage awards for innocent infringers, while at the same time including a new provision increasing, without a ceiling, the amount awardable for willful infringement, but only after defendant received service of actual notice of infringement. This last provision was a throwback to the 1909 Act.
In meetings with the Copyright Office on the bill, the issue of awards for multiple infringements proved problematic. In particular, it was inquired of the Copyright Office whether its intent was to “cover several infringers in several media, or … might [the provision] be limited to infringements of only a particular right and that there might then be the question of overlapping exclusive rights.” The Copyright Office's General Counsel responded as follows:
GOLDMAN. With respect to more than one infringer being involved, the language of the clause … says “ … all infringements of any one work for which the infringer is liable …” The assumption there was that you were dealing with one infringer. If you have two separate infringers who commit separate infringements, presumably you can sue two people separately and collect from each. The thought here was to avoid the award by a court of a tremendous amount of multiplying $250 times some supposed number of infringements by one person. In the case, for example, where you have a motion picture that is shown in a thousand movie houses, is the producer to be liable for $250 times a thousand if the motion picture contains infringing material? With respect to a series of infringements, if you bring suit today for infringements that have occurred before today, you certainly don't foreclose your claim for damages for infringements that are going to occur in the future, but you do recover for all the infringements for which the defendant is liable up to today. If you have more than one work involved, I think the answer is also spelled out here. It says, “infringements of any one work” and you will find at the end of that section a sentence which relates to the “one work” reference: “For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.” This means, for example, that if somebody infringes by taking ten different cuts out of an advertising catalog, he's committed one infringement and not ten. This question has come up, as I think you know, in a number of cases.”
With the expiration of the 88th Congress and no action on a revision bill, new bills were introduced in the first session of the 89th Congress. Accompanying those bills was the promised supplementary report by the Register of Copyrights explaining the 1965 bills (and reproducing them). The 1965 bills (in addition to renumbering the section to its present 504(c)) read in relevant part:
(1) Except as provided in clause (2) of this subsection, the copyright owner may elect to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $200 or more than $10,000 as to the court appears just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work. (2) In a case where the copyright owner sustains the burden of proving that infringement was committed willfully after service upon the infringer of a written notice to desist, the court in its discretion may increase the award of statutory damages to a sum of not more than $20,000. In a case where the infringer sustains the burden of proving that he was not aware and had no reason to believe that his acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not less than $100.
Present section 412 was also put in place (although numbered temporarily as section 411). Section 504(c) of the 1965 bills contained a number of important changes from the 1964 bills. In explaining the changes with respect to multiple infringements, the Register of Copyrights stated:
In an action under the bill involving more than one infringement—whether the infringements are separate, isolated, or occur in a related series—a single award of statutory damages in the $2500–$10,000 range could be made under the following circumstances: (1) Where the infringements are all of “any one work.” This marks a change from the 1961 Report's recommendations, which would have provided a single recovery of statutory damages for all infringements for which the infringer is liable. Under the bill, where separate works are involved, separate awards of statutory damages could be made. However, the bill makes clear that, although they may constitute separate works for other purposes, “[f]or the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.” Note that the criterion here is the number of distinct “works” infringed, and not the number of copyrights, exclusive rights, owners, or registrations involved. (2) Where, with respect to the infringements in question, “any one infringer is liable individually, or any two or more infringers are liable jointly and severally.” Where the infringements in suit were committed by joint tortfeasors, the bill specifies a single award of statutory damages for which they would be jointly and severally liable. Where, however, separate infringements, for which two or more defendants are not jointly liable, have been joined in the same action, separate awards of statutory damages could be made.
The relevant language did not change after this. The committee report in 1976 explains: Where the suit involves infringement of more than one separate and independent work, minimum statutory damages for each work must be awarded. For example, if one defendant has infringed three copyrighted works, the copyright owner is entitled to statutory damages of at least $750 and may be awarded up to $30,000. Subsection (c)(1) makes clear, however, that, although they are regarded as independent works for other purposes, “all the parts of a compilation or derivative work constitute one work” for this purpose. Moreover, although the minimum and maximum amounts are to be multiplied where multiple “works” are involved in the suit, the same is not true with respect to multiple copyrights, multiple owners, multiple exclusive rights, or multiple registrations. This point is especially important since, under a scheme of divisible copyright, it is possible to have the rights of a number of owners of separate “copyrights” in a single “work” infringed by one act of a defendant.
The purpose for the limitation on statutory damages for elements of collective works was sound, reflecting dissatisfaction with the 1909 Act, and compromising competing views of how damages should work under the 1976 Act: the compromise preserves the ability of copyright owners to get damages of up to $150,000 per work – an amount quite generous enough to satisfy the economic harm to all constituent elements while not crippling penalties out of all proportion to any harm suffered. Section 104 of H.R. 4297 will run roughshod over the careful and correct approach taken by the Copyright Act, and without any changed circumstances justifying such a dramatic change.
There is one final provision I would like to note, those dealing with civil forfeiture:
g) Forfeiture and Destruction; Restitution- `(1) CIVIL FORFEITURE PROCEEDINGS- (A) The following property is subject to forfeiture to the United States: `(i) Any copies or phonorecords manufactured, reproduced, distributed, sold, or otherwise used, intended for use, or possessed with intent to use in violation of section 506(a) of title 17, and any plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies or phonorecords may be made and any devices for manufacturing, reproducing, or assembling such copies or phonorecords. `(ii) Any property constituting or derived from any proceeds obtained directly or indirectly as a result of a violation of section 506(a) of title 17. `(iii) Any property used, or intended to be used, to commit or facilitate the commission of a violation of section 506(a) of title 17 that is owned or predominantly controlled by the violator or by a person conspiring with or aiding and abetting the violator in committing the violation.
The idea that criminal forfeiture provisions, drafted to reach major drug traffickers like the Columbian cartels, should be inserted into civil copyright tort provisions with a preponderance of the evidence burden, is mind-blowing. The capacity – if not intent – of these provisions for profound mischievousness is obvious: in addition to the gluttonous statutory damages that would be available, content owners now want to defendants to forfeit their computers, their cars, and their homes: all of these can be said to have been used in the commission of infringement (say defendant uses his phone to call someone else involved in the infringement and says “meet me at 11 at Moe’s).
But the bill goes even further: it is not only property actually used that is subject to forfeiture, property that wasn’t used but was “intended to be used” can also be seized. Say, a defendant intended to use his car to transport a computer used in connection with infringement, civil infringement, but decided to take his wife’s car instead. Under the bill, both cars, the computer, and the house where the cars and the computer are stored can be forfeited. But there is more: the bill also includes property “derived from any proceeds obtained directly or indirectly” as result of civil infringement. A television, children’s toy, anything that a defendant owns could fall within this: how could one disprove that any property purchased in the relevant time period was not indirectly derived from infringement. Is even gluttony enough to describe this?
For those who think I am overreacting, I will mention a single case that involved a fact setting where actual criminal conduct was involved, and not, as here, a mere civil, economic tort. The case involved forfeiture of a fishing boat based on a crew member’s possession of marijuana, a fact the owner of the boat knew nothing of. Here is a description of the case from a faculty blog at the University of Missouri-Kansas City Law school blog, a site that includes other examples so you don’t think I have picked an atypical one:
Kevin Hogan and a crew of three headed for Alaska in a $ 140,000 fishing boat he had just purchased in Washington. The boat developed engine problems along the route and was forced to stop briefly in Canada for repairs. The Canadian stop was reported to customs agents in Ketchikan, who searched the boat. The search revealed that one of Hogan's three crewmembers had 1.7 grams of marijuana in his jacket. Customs officials acknowledged that Hogan knew nothing about the marijuana aboard his boat, the Hold Tight. Under the "Zero Tolerance" program initiated less than two months earlier, even small amounts of drugs could result in arrests and forfeitures of property. Customs agents decided to seize Hogan's boat. Hogan had planned to use the boat during Alaska's twenty-four hour halibut season later that month. The halibut catch could have netted Hogan the $ 40,000 he needed to pay the mortgage on the Hold Tight. Hogan said as a result of the seizure, "I stand to lose it all in this deal," referring to everything for which he had worked during the prior fifteen years. In Hogan's hometown of Homer, Alaska, more than 1,000 people signed petitions supporting Hogan. The city council passed a resolution urging that Customs officials show "some sense of proportionality" in the Hogan case. The Customs Service expressed its position in a letter written by John Elkins, acting director of the Service's regulatory procedures and penalties division in Washington, D.C., to the Customs Service's Anchorage office. Elkins said that it is not enough to warn crewmembers of the drug program, as Hogan said he had done. Elkins contended that Hogan was negligent in not detecting the marijuana: "It is our view that Kevin Hogan was, as owner and master, responsible for the actions of crew members."
So this it: a Zero Tolerance approach to a civil, economic tort, copyright infringement. The dangers in the new Zero Tolerance to copyright go far beyond the individuals swept within its net, although that is bad enough: the Zero Tolerance approach threatens respect for law itself. People do not obey laws they abhor, and there is much to abhor in H.R. 4279. Copyright owners have proved themselves incapable of understanding their customers and the public’s outrage over the direction copyright has taken; perhaps they delude themselves into thinking that the opprobrium comes from those who don’t respect law anyway; but it doesn’t: it also comes from those like Sir Hugh and I who love copyright law and who have devoted our professional careers to it. If section 104 and the civil forfeiture provisions of H.R. 4297 pass, there will be many others.