'Copyright Enforcement in the Digital Age: When the Remedy is the Wrong' by Ben Depoorter in (2019) 66
UCLA Law Review 400
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Statutory damage awards are controversial in copyright law. To some, statutory damages are indispensable to enable the pursuit of meritorious copyright infringement claims that otherwise are too costly to pursue. Others are convinced that the availability of statutory damages tempts plaintiffs into asserting dubious infringement claims in order to obtain generous settlement concessions from risk averse defendants. In light of these contrasting viewpoints, we face the important policy question whether statutory damages should be redesigned for the digital age or, to the contrary, be retained in their current form, given the difficulties of enforcing copyrights online.
This Article conducts a comprehensive empirical study of copyright statutory damages. An extensive examination of docket entries and case law reveals a widespread practice of overclaiming of remedies in copyright litigation. Although 80 percent of plaintiffs in all disputes claim that they suffered conduct that constitutes willful infringement, courts find willful infringement in just 2 percent of cases where plaintiffs obtain a favorable verdict.
The findings suggest that remedy overclaiming in copyright serves strategic purposes. For instance, by highlighting the outer range of enhanced statutory awards in complaints, plaintiffs leverage the risk aversion of defendants to induce generous settlement concessions. In order to curb opportunistic uses of the statutory damages, I provide policy suggestions that would make remedy overclaiming more costly to plaintiffs and less threatening to defendants.
Depoorter argues
In 2008, several major record labels sued a handful of individuals for
distributing music on peer-to-peer (P2P) networks. In the ensuing litigation,
one file-sharer was ordered to pay $222,000 in statutory damages for sharing
twenty-four songs online. In another case, a jury imposed $675,000 in statutory
damages for the sharing of thirty songs. A veritable copyright enforcement
industry emerged. Targeting hundreds or even thousands of copyright
defendants, so-called copyright trolls have obtained quick settlements against
users of P2P software.
These lawsuits are enabled by U.S. copyright law’s statutory damages
regime. The Copyright Act does not require that a copyright holder provide evidence of harm from infringement in order to recover damages. Once
infringement has been established, a copyright holder can elect to receive a
statutory damage award.
Conventional wisdom holds that the system of statutory damages is
indispensable to protect the interests of copyright holders. By eliminating the
burden to prove harm, statutory damages enable the pursuit of meritorious
infringement claims that otherwise would be out of reach for cash-strapped
plaintiffs. Independent photographers and designers, for instance, rely on the
litigation-cost-reducing effect of statutory damages in order to obtain recourse
against online infringements of their works by large corporations.
Additionally, by increasing the potential incentives for enforcement of copyright
law,statutory awards help sustain the deterrent effect of copyright law. In recent years, however, this traditional perspective on statutory damages
has been challenged by a much bleaker outlook. There is a growing
understanding that statutory damage awards, as written into the Copyright Act
in 1976, are a poor fit for the digital age. Because a statutory damage award is
set for each individual infringed work,the total damages can add up significantly
for online infringements that involve multiple works. For instance, even at the
statutory minimum of $750 for each file, a user of a file-sharing network faces
potential statutory damages of $360,000 when sharing forty songs. At the other
end of the statutorily provided range, a plaintiff can claim enhanced damages of
up to $150,000 against someone who, for example, watched an illegal live
stream. Finally, due to the sheer amount of infringed works, digital
intermediaries and online platforms face claims for astronomically high
statutory damage awards. In one case involving secondary liability for operating
a file-sharing network, the plaintiff demanded a statutory damages award of $75
trillion. Similarly, Google’s Book Search project exposed Google to potential liability of at least $4.5 billion. Critics observe that the availability of statutory
damages tempts plaintiffs into asserting dubious infringement claims.
These two contrasting viewpoints raise an important question: To what
extent are statutory damages applied opportunistically by rent-seeking plaintiffs
as opposed to providing cash-strapped copyright holders an avenue to
pursue meritorious infringement claims? This controversy goes to the core of
copyright enforcement in the digital age: Since 2008, copyright holders face
massive amounts of copyright infringements online and have reacted by
aggressively enforcing their rights. In response, copyright holders turned to
automated enforcement tactics that spit out takedown notices on a massive
scale. Statutory damages play a crucial role in this issue. In copyright law,
remedies dictate what claims actually get filed and litigated, and how those
claims are evaluated by defendants. The familiar ideal is that the remedy should “fit the wrong,” but if the opportunistic narrative on statutory damages is
correct, in copyright law the remedies actually create the wrong. As a matter of
public policy, we face the important question of whether statutory damages
should be redesigned for the digital age or, to the contrary, be retained in their
current form, given the difficulties of enforcing copyrights online.
Despite the controversy, systematic and comprehensive information on
the use of statutory damage awards by litigants is absent, leaving us with many
unanswered questions. We have little to no information on when and how
copyright holders turn to statutory damages when challenging copyright
infringers. To what extent do plaintiffs use statutory damages in an
opportunistic manner? Or do statutory damages mostly serve the beneficial
function of increasing access to justice for cash-strapped copyright holders? We
also lack comprehensive information on the role of courts in mediating statutory
damage claims by plaintiffs. Courts may enhance statutory awards when they
deem the defendant’s infringement willful, but what definition or definitions of
“willfulness” do courts employ when assigning enhanced statutory awards? Is it
possible to distill a reliable set of factors from the pertinent case law? Answers to
these questions are essential if the U.S. Congress is to effectively reform and
adapt the Copyright Act to the digital age.
This Article examines the role of statutory damages in the copyright arena
on the basis of an in-depth empirical analysis of docket records and case law. I
conduct a docket study using a publicly available database containing docket
entries, complaints, and pertinent documents from approximately one
thousand copyright disputes, providing valuable new insights on the types of
claims, plaintiffs, and defendants involved in statutory damage litigation. Also,
I systematically analyze all judicial decisions on copyright statutory damages
by courts over a three-year period. The findings reveal that statutory damages claims are commonplace in
virtually all areas of copyright law. Plaintiffs in copyright litigation request
statutory damages in 90 percent of pleadings. Instead of seeking compensation
forthe actual harm suffered from infringement, a large majority of plaintiffs turn
to juries to set a statutory award. Not only that, copyright holders, even in
industries that enjoy only weak copyright protection, almost universally claim
that they are entitled to enhanced statutory damages due to willful infringement.
However, courts rarely grant enhanced damages. Plaintiffs sought enhanced
damages for willful infringement in 81 percent of all copyright disputes in the
examined period, yet courts awarded enhanced damages in less than 2 percent
of all cases that moved to verdict. The striking gap between the demand and
supply of statutory damages, as well as several additional factors relating to
nature of claims and subject-matter areas, undermine the credibility of the
nearly ubiquitous claims of willful infringement by plaintiffs.
These findings suggest that remedy overclaiming in copyright serves
strategic purposes. For instance, by highlighting the outer range of enhanced statutory awards in complaints, plaintiffs leverage the risk aversion of
defendants to induce generous settlement concessions. First, claims of willful
infringement might be deployed by plaintiffs as a “bait-and-switch” tactic: By
accusing the defendant of willful infringement, a plaintiff may appear more
reasonable to the court and jury when subsequently requesting the application
of damage awards in the regular statutory range and may hope to obtain a higher
award overall. Second, by highlighting the potential application of enhanced
damages for willful infringement, plaintiffs are able to intimidate risk-averse
defendants into generous settlements. In doing so, plaintiffs are able to leverage
the risk aversion of many defendants, especially individual defendants and small
businesses. Plaintiffs might anticipate that accused infringers will prefer to avoid
the uncertain outcome in the relief stage and thus settle the dispute out of court.
The alternative for these defendants—incurring steep litigation costs to bring a
successful defense—is dire. Infringement claims that are strong on the merits but include doubtful
damage claims are especially vexing to accused infringers. Although the risk of
a steep damage award might be minimal, the plaintiff is likely to win the case on
the substantive merits. Because the Copyright Act enables a winning party to
recoup his or her litigation costs byway of fee-shifting, the defendant also faces
the unpleasant prospect of incurring considerable legal expenses. The anxiety of
risk-averse defendants is further amplified by various features of copyright law,
including the considerable discretion of juries in setting awards along the
statutory range and the uncertainty about litigation outcomes.
I provide several recommendations that would curtail opportunistic
applications of enhanced statutory damages. First, Section 505 of the Copyright
Act could be revised so that courts are able to take away from prevailing plaintiffs
the benefit of fee-shifting if they overstated the damage claim. Second, courts
should be enabled to award attorney fees against a prevailing plaintiff who engaged in egregious overclaiming of the damage entitlement. Both approaches
would make the abuse of the statutory damage framework costlier and induce
more realistic claims for relief by copyright plaintiffs. Third, an alternative tactic
could reduce the overall risk of abusive damage claims to defendants. This could
be accomplished through various measures, including the formulation of
judicial guidelines, reducing the scope of enhanced damages, and making
statutory damages unavailable when evidence of the inflicted harm is readily
available. By reducing uncertainty about the actual application of statutory
awards in courts,these measures, or a combination thereof,would curb the more
opportunistic and abusive practices, while retaining statutory damages as a
crutch for cash-strapped plaintiffs with meritorious claims.
This Article proceeds as follows. Part I describes the statutory damages
framework under federal copyright law. Part II describes the background,
motivation, and unintended consequences of statutory damages in copyright
law. Parts III and IV describe the empirical studies and present their main
findings. More specifically, Part III explores docket and court records, while
Part IV looks behind the docket entries to examine the precedents set out in the
case law. Together, both studies help to evaluate the credibility of damage claims
by plaintiff against the considerations and practices adopted by courts. Part V
provides policy recommendations.
