Friday, October 2, 2009

New case throws cold water on constitutional challenges to statutory damages awards

The record label plaintiffs in the Jammie Thomas-Rasset case have filed a notice of supplementary authority, identifying for the court a new case rejecting the defendant's argument that the Supreme Court's cases imposing constitutional limits on punitive damage awards apply to statutory damages.
Verizon v. OnlineNIC, Inc.
The new case, Verizon California Inc., v. OnlineNIC, No. C 08-2832 JF (RS), 2009 WL 2706393 (N.D. Cal. Aug. 25, 2009), is not a copyright case; instead it involved claims under the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d). Similar to the Copyright Act's statutory damages provisions, that statute provides for statutory damages ranging from $1,000 to $100,000 per violation. See 15 U.S.C. § 1117(d). After finding that the defendant had engaged in various willful misdeeds, the court awarded Verizon $50,000 per violation, totaling $33.15 million.

The defendant challenged the court's award on due process grounds, arguing that the court should void or reduce the amount under BMW v. Gore and its progeny. But the court soundly rejected the defendant's argument and refused to reduce the award:
Finally, and most importantly, it is highly doubtful whether Gore and Campbell apply to statutory damages awards at all. Like the Sixth Circuit, this Court “know[s] of no case invalidating . . . an award of statutory damages under Gore or Campbell.” Zomba Enterprises, Inc. v. Panorama Records, Inc., 491 F.3d 574, 587 (6th Cir. 2007). Under binding authority decided before Gore, “only where the [statutory] penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable” will it violate a defendant’s due process rights. United States v. Citrin, 972 F.2d 1044, 1051 (9th Cir. 1992) (quoting St. Louis, Iron Mt. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67 (1919)); see also Zomba Enterprises, Inc., 491 F.3d at 587 (“Regardless of the uncertainty regarding the application of Gore and Campbell to statutory-damage awards, we may review such awards under [Williams] to ensure they comport with due process.”); Arrez v. Kelly Services, Inc., 522 F. Supp. 2d 997, 1008 (N.D. Ill. 2007) (“In determining whether the penalty is grossly disproportionate, ‘the fine need only bear some relationship to the offense’s gravity; this is not a proportionality inquiry.’” (citation omitted)).
The court goes on to explain in detail why BMW v. Gore's three "guideposts" for evaluating awards of punitive damages simply do not fit in the context of statutory damages.

The jury's award of $80,000 per song, totaling $1.92 million, for Thomas-Rasset's willful infringement of 24 songs is currently the subject of a new trial/remitittur motion, which Judge Michael Davis could rule on at any time. (The labels' opposition is here.) Joel Tenenbaum is expected to file a similar motion soon.

Of course, the Verizon case from the Northern District of California is not binding on Judge Davis, or on Judge Nancy Gertner in Tenenbaum's case, and they are free to ignore it. But the more cases piling up that reject the application of BMW to statutory damages, the harder it becomes for the defendants to convince the courts that existing law supports their position.

(h/t to Shourin Sen of Exclusive Rights, who first reported on the Verizon case September 10.)


  1. OnlineNIC doesn't strike me as a particularly strong challenge to the constitutionality of some statutory damage awards. The court made no bones about what it perceived as bad faith conduct from the defendants (which will get anyone launched) and it looks like the judge wasn't pleased with some of the lawyering.

    Cybersquatting also strikes me as a more destructive activity than file sharing, though reasonable minds can disagree. When you look at how pervasive OnlineNIC's cybersquatting was 31.5 million is quite reasonable -- no where near as questionable as some of the recent recording industry damage awards.

  2. @Anonymous:

    All that may be true, but what's important isn't the specific facts of this case, but that the court strongly rejected the notion that BMW even applies in the context of statutory damages. As far as I'm aware, no court has ever reduced or voided an award of statutory damages on constitutional grounds. This case once again demonstrates what an unprecedented move that would be. I'm not saying it can't happen, but it would be a first.

  3. Thanks for the response Ben.

    I don't read the dicta as forward-leaning as you do. "It is highly doubtful" is a hedge, and if a court were to invalidate a statutory damages award, it's very possible that the decision would not be part of the Gore lineage, but a new line of interpretation with a new test. All the court said is that Gore likely doesn't apply, not that there is no constitutional challenge outside of Gore.

    This is why I look to the facts. I think we both agree that invalidating a statutory damages award is a nuclear option. The facts of this case aren't compelling to me for a number of reasons. If a court of appeals and the Supreme Court are going to go nuclear, it's not going to be with OnlineNIC.


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