Thomas-Rasset faces million-dollar damages; judge shuts down LimeWire
Recording companies won two recent copyright infringement cases in an ongoing battle with online networks that facilitate music sharing and their users. Meanwhile, the U.S. Supreme Court declined to hear arguments on whether individuals sued for infringement in such cases should be subject to lower damages if they can show they were unaware that their activities violated the law.
In Third Trial, Minnesota Woman Ordered to Pay $1.6 Million for Downloading
On November 3, 2010, a federal jury returned a verdict against Brainerd, Minn. resident Jammie Thomas-Rasset to pay $1.6 million in damages to the companies that own the rights to 24 songs that she downloaded.
The November verdict is the latest installment in a series of three proceedings against Thomas-Rasset, all of which arose out of the same set of facts. In two previous cases, juries returned verdicts against Thomas-Rasset and in favor of the record companies who brought the suit in the amount of $222,000 and $1.9 million respectively. For more on Thomas-Rasset's first two trials, see "Music Industry Wins First Internet Piracy Case" in the Fall 2009 Silha Bulletin.
The first verdict against Thomas-Rasset was overturned because of deficiencies in the jury instructions. The second verdict award was reduced to $54,000--or $2,250 per song-- by Chief U.S. District Judge Michael Davis in January 2010. Davis, calling the damage award "monstrous" and "shocking," wrote that although jury awards are an effective deterrent against people illegally downloading copyrighted music, "the need for deterrence cannot justify a $2 million verdict for stealing and illegally distributing 24 songs for the sole purpose of obtaining free music." Capitol Records, Inc., et al v. Thomas-Rasset, No. 06-1497 (D. Minn. Jan. 22, 2010)
Following Davis's reduction in damages, the plaintiff record companies offered Thomas-Rasset a different arrangement: if she accepted a damage award of $25,000 to be paid to a musician's charity, the plaintiffs would not challenge Davis' reduction order, according to a January 27, 2010 post on CNet News.
Thomas-Rasset rejected both the plaintiffs' offer and Davis' reduction, opting instead for a separate re-trial on the issue of damages alone. At her November 1 trial for damages, her attorney, Kiwi Camara, argued that Thomas-Rasset did the plaintiffs no actual harm. According to a November 3 story in the Minneapolis Star Tribune, Camara told the jury that although "she may have engaged in the conduct, that doesn't mean they can take her head and stick it up on a pole." Camara also told the jury that his client was selectively targeted for litigation by the music industry, arguing that the case was only pursued by the plaintiffs to prove that suing individuals--and not just the networks they use to download music--can work as a strategy to combat piracy, according to the Star Tribune. Camara told the jury that millions of other people download music exactly as Thomas-Rasset did, but that most of them are not sued; some merely receive letters threatening a lawsuit, Camara said. "The only difference is that they picked her out in order to make headline news," he said.
Neither Thomas-Rasset nor Camara spoke to the press following the November verdict. She has not said whether she will appeal the damage award.
Judge Shuts Down Peer-to-Peer Network LimeWire
On October 26, 2010, U.S. District Judge Kimba Wood issued a permanent injunction against peer-to-peer file sharing client LimeWire, ceasing its operations. The injunction followed a May 11, 2010 order in which Wood ruled against LimeWire in a copyright infringement suit brought by 13 record companies. Wood's May 11 order not only found LimeWire liable for infringement, but held the network's founder personally liable as well.
LimeWire is a program that allows users to search other LimeWire users' computers for digital music, movies, or any other type of file. The case arose when the music companies--who, according to Wood's May 11 order, represent "the vast majority of copyrighted sound recordings sold in the United States"--sued LimeWire and its founder and CEO Mark Gorton in federal district court for the Southern District of New York. The plaintiffs claimed that because LimeWire's users transmitted copyrighted music over the network, the company should be liable for copyright infringement. Arista Records, LLC, etal v. Lime Group LLC, No. 06-CV-5936 (S.D.N.Y. May 11, 2010)
Wood agreed with the plaintiff, and found LimeWire liable for direct infringement on a theory of secondary liability. Wood found that although LimeWire never actually stored and directly distributed copyrighted music, because it distributed "infringement-enabling products [and] services, [it] enable[d] direct infringement on a massive scale, making it impossible to enforce [copyright] protection effectively against all direct infringers."
In addition, Wood wrote that because "in internal communications, [LimeWire employees] regularly discussed the fact that LimeWire users downloaded copyrighted digital recordings through the program, [and] tested [the program] by searching for infringing content" and because the company "marketed LimeWire to users of Napster and similar programs, and promoted LimeWire's infringing capabilities," the company intentionally encouraged people to use its program to infringe. Wood also wrote that the company's failure to take actions to mitigate infringement despite knowing that infringement was occurring was evidence that the company induced copyright violations.
Wood's May 2010 decision relied heavily on MGM Studios, Inc. v. Grokster, 545 U.S. 913 (2005), where the U.S. Supreme Court extended and clarified its rule from Sony Corp. of America v. Universal Cities Studios, Inc., 464 U.S. 417 (1984). In Sony, the Court held that if technology has "significant, noninfringing uses," the proprietors of that technology could not be held liable for copyright infringement--known as the "Sony Safe Harbor" rule. The Grokster decision concerned peer-to-peer technology similar to LimeWire. There the Court found that although peer-to-peer technology could be used for noninfringing purposes, the vast majority of downloads over the Grokster network were of copyrighted materials, and that Grokster's owners and operators promoted it for that purpose. The Court observed that Grokster had sought to market its services to "former Napster users," which indicated "a principal, if not exclusive, intent ... to bring about infringement" and that it had not "attempted to develop filtering tools or other mechanisms to diminish the infringing activity." Therefore, the court reasoned that "one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties." For more on the Grokster decision, see "U.S. Supreme Court Rules in Grokster" in the Summer 2005 issue of the Silha Bulletin.
In the May 11 ruling, Wood noted that following the Grokster decision LimeWire began requiring users to click a box affirming that they would not use the software for infringement purposes as a condition of downloading the program. "The notice and statement of intent requirements, on their own, do not constitute meaningful efforts to mitigate infringement," Wood wrote, adding that the company's "failure to utilize technology to create meaningful barriers [was] a strong indicator of intent to foster infringement."
Wood also found Gorton personally liable for infringement on the same theories of liability as the corporation. Wood wrote that precedent established that "an individual, acting as a corporate officer, who has the ability to supervise infringing activity and has a financial interest in that activity ... is personally liable for infringement," citing Stumm v. Drive Entertainment, Inc., 2002 U.S. Dist. LEXIS 7762 (S.D.N.Y. 2002) (emphasis in original). Wood found that the evidence showed that Gorton was the company's "ultimate decisionmaker," whose approval was required for "any major strategic and design decisions," and that Gorton benefited financially from LimeWire's infringing activities. A preliminary hearing date of May 2011 has been set to determine how much Gorton and LimeWire must pay in damages.
In her October 26 order, Wood noted that in the months since she found LimeWire liable for infringement, millions of songs and videos continued to be shared over LimeWire's network. She permanently enjoined LimeWire from continued existence, writing that "based on the record of both proven intentional inducement of infringement, and continued inducement of infringement even after the Court found [liability], the evidence warrants injunctive relief."
High Court Denies Certiorari in 'Innocent Infringer' Case
The U.S. Supreme Court denied certiorari to a case that could have tested whether an individual found guilty in a file sharing infringement case may use an "innocent infringer" defense to limit her damages. Justice Samuel Alito dissented from the Court's denial, arguing that the court should consider the legal viability of the defense.
The case, Maverick Recording Company, et al v. Harper, No. 5:07-CV-026-XR (W.D. Texas, Aug. 8, 2008), arose when a group of record companies sued then-high school student Whitney Harper under the Copyright Act, 17 U.S.C. § 101 et seq, for downloading 39 copyrighted songs using the peer-to-peer program KaZaa.
The plaintiffs moved for summary judgment, asking the court to enjoin Harper from downloading any more music, and requested damages of $750 per song--the minimum amount under the Copyright Act--for a total of $29,250. Harper argued that "due to her age--sixteen years old at the time of the infringement--and technological experience, she did not intentionally violate Plaintiffs' copyrights and should therefore be considered at most an innocent infringer." Under § 504 (c)(2) of the Copyright Act, "where the infringer ... was not aware and had no reason to believe that his or her 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 $200."
The district court agreed with Harper, and found that although she infringed on the plaintiffs' copyrights when she downloaded the music, she was unaware that her actions constituted infringement. The plaintiffs argued that warning labels they placed on compact discs--the common source for music found on to peer-to-peer networks--was sufficient notice to defeat Harper's innocent infringer argument. Even though Harper was aware that compact discs contain labels indicating that the material on them is copyrighted, U.S. District Judge Xavier Rodriquez wrote that "a question remains as to whether Defendant knew the warnings on compact discs were applicable in this KaZaA [sic] setting."
The plaintiffs appealed to the 5th U.S. Circuit Court of Appeals, where a three-judge panel reversed Rodriquez's ruling. The panel wrote that Harper "cannot rely on her purported legal naivety [sic]" to escape paying damages, and that "one need only have access to [a] CD and see that the recording is subject to copyright" to know that the music is copyrighted. Maverick Recording Company, et al v. Harper, 598 F.3d 193 (5th Cir. 2010)
On November 29 the Supreme Court denied certiorari. In his dissent, Alito wrote, "there is a strong argument that §402(d) does not apply in a case involving the downloading of digital music files. This provision was adopted in 1988, well before digital music files became available on the Internet."
- Geoff Pipoly
Silha Research Assistant