Incredible. After being told to shut up and take their $160 million from Facebook, the Winklevoss twins are apparently still planning to appeal the ruling from the 9th Circuit. They're filing for an en banc hearing (basically asking all of the judges on the court to rehear the case, rather than the typical panel of three). On issues where there is some disagreement among the judges you'll see en banc hearings. Frankly, I'd be pretty surprised if the 9th Circuit is willing to rehear this case. And, at that point, their only resort will be to appeal to the Supreme Court, who I really doubt would find this a pressing matter of Constitutional importance. What's amazing to me is how much these guys seem to be hurting their own reputations here. Seriously, take the $160 million or so and move on.
The latest in the ongoing trial of Joel Tenenbaum, the student who was found guilty of sharing 30 songs online, and told to pay $675,000 for it, until the judge unilaterraly reduced the amount to $67,500. As we noted at the time, it really seemed like Tenenbaum had horrifically bad legal counsel, in the form of Harvard law professor Charlie Nesson, who still seems more focused on making the case a circus, rather than focusing in on the key issues. That does not, however, mean there aren't key issues here, with the big one being the appropriate standards for determining how much one should have to pay if found guilty of file sharing.
The appeal was just heard on Monday, and you can listen to the oral arguments (mp3) from the court's website. It's definitely an interesting hearing and worth listening to. As with most appeals court situations, the bulk of the work is done in the briefs that were filed prior to the hearing, and which everyone is familiar with. The oral hearings get right to the point and drill down on where the panel of judges has questions.
The hearing opens with a representative of the US Department of Justice, which stepped in on the case, because it was concerned that the court might rule that the statutory rates for copyright infringement (which, of course, can go up to $150,000 per infringement in cases of willful infringement) were not meant for cases like a person sharing copyrighted music for their own pleasure, rather than any commercial purpose. The Justice Department sides with the RIAA (of course), in saying that it's just fine to apply copyright law -- which really was designed for commercial cases of infringement -- to kids sharing files. At least one of the judges appears skeptical of this, asking directly:
Was file sharing in existence at the time the statute was passed?
The Justice Department tries to get around this by pointing to the legislative record from the last time the statutory damage rates were changed, but the judge is not buying it. He immediately points out that if this is what Congress intended, it's quite odd that no such cases (or perhaps one other case -- by which they're referring to the Jammie Thomas case) have been tried, involving file sharing for non-commercial means. The judge clearly seems skeptical that copyright law was intended for such cases. While the lawyer tries to explain all of this away, with some claim about how everyone makes choices in who they sue, another judge chimes in and points out that for all the claims that Congress meant for these damages to cover non-commercial file sharing, wouldn't Congress also know that the law had never been used that way.
The lawyer again goes on to insist that since file sharing "greatly multiplies the harm" to the copyright holder (um... citation needed on that one...), Congress must have meant for such ridiculous statutory rates to cover file sharing as well. Again, the judges seem skeptical, pointing out that in this particular case, the only evidence was that Joel Tenenbaum downloaded 30 songs, and the RIAA presented no evidence that anyone else copied from him. In other words, they immediately push back on the claims of "harm." The lawyer, again says that there's lots of other evidence, even though the labels chose not to bring it.
Once again, the court is skeptical. They ask the DoJ lawyer: if Tenenbaum had sat down in a single setting and downloaded 1,000 songs, would it be appropriate under the law to claim he owed $75,000 for each download. And the lawyer says, effectively, yes, after going through the specific statutory rates ($750 to $30,000 for non-willful, and up to $150,000 for willful). Realizing how ridiculous this sounds, the lawyer tries to focus on the fact that the judge can tell the jury about mitigating factors and be specific in the jury instructions.
From there, the lawyer for the record labels, Paul Clement, steps in, and claims that the ridiculously high damages are fine because Congress wanted to send a message about the harm of "willful" infringement. He then goes on to rail about how Tenenbaum's downloading destroyed "the value of the copyright," and complains about how the district court judge likened downloading to public performance rights. At that point, another judge interrupts, and says that he basically doesn't understand "the mechanics" of infringement, and would like more specific info.
After explaining (somewhat misleadingly, but carefully) how file sharing works, Clement goes on to rail against file sharing as being incredibly damaging, because it pushes people who download to also upload... and immediately a judge cuts to the heart of one of the key legal questions:
Is "making available" the same as distribution?
Clement sidesteps this, by noting that while the RIAA obviously thinks it is, that's "not an issue in this case." The judge doesn't want to give up, though, and asks him if the record labels "have the technological capacity to determine if distribution was actually effectuated?" Again, Clement tries to get around this, by saying it doesn't matter in this case.
Another judge asks a pertinent question about damages, wondering if the actual damage to the record labels was just "the lost sales" from people not buying the music, and Clement, quite ridiculously, then tries to pin the entire demise of copyright law on Tenenbaum:
"It's more than that, your honor. It's really the complete undermining of the copyright. What I mean by that is you can't just isolate what's going on here as if it's an individual's, by copying it, has not gone and bought the work on iTunes or not bought the work in a record store when we used to have record stores. What happens is, by distributing it to others, there are... the viral nature of this technology, really has a substantial impact on the value of the work. And the way I'd ask you to think about it is this: one, I think, relevant question in a statutory damages case is, what would it cost to get a license for what the defendant has done. And, if all the defendant had done was making a copy and that was it, then maybe an analogy to just getting a copy off of iTunes would be appropriate. But here, by distributing it... if someone wanted to go to one of the record companies and say 'we'd like to do what the defendant did in this case,' the value of that license would be essentially the value of the entire copyrighted work. Because the effect of putting this work up on peer-to-peer technology is essentially you take a copyrighted work, and put it in the public domain."
He goes on to blame the poor financial state of the record labels on file sharing, and seems to indicate that we should blame Tenenbaum for this.
After a brief, and somewhat inconsequential, discussion by Julie Ahrens, representing the EFF (which the judges clearly didn't have much interest in, pointing out that any of the issues raised should have been raised to the jury, not to them -- even though that would have raised questions by the RIAA folks of an attempt at jury nullification...), we move on to Tenenbaum's own defense, which was handled (with permission) by a Harvard Law student, Jason Harrow. He kicks off his talk by pointing out that the Justice Department's claim that companies didn't bring such lawsuits for non-commercial infringement in the past because it wasn't cost effective, is on its face ridiculous. After all, if you can get $150,000 per infringement for someone infringing on a $1 work, how is it not cost effective to bring that lawsuit over and over again (just ask the various mass file sharing lawsuit filers...). Instead, he notes that the better explanation is that "no one thought that the statute would apply to such consumer usage."
One of the judges immediately jumps in and says that Congress could have made an exception, but didn't. Harrow points out that perhaps it didn't because the result would naturally be absurd: the idea that someone sitting at home, listening to music, would suddenly be liable for billions of dollars, doesn't make any sense. The judges' questioning of Harrow seems focused on the specific standards and jury instructions, rather than on the larger issue.
Finally, Charlie Nesson presents, and goes through the history of copyright law, and how statutory damages were clearly, originally intended for commercial infringement, not non-commercial. One of the judges points out that the RIAA began these lawsuits in 2003, and if Congress was upset about them, it's had eight years to amend the statute to specify that statutory damages don't apply to non-commercial use. Of course, that ignores the reality, which is that it's effectively impossible for Congress to change copyright law in a manner that benefits consumers, since the entertainment industry would go ballistic. The court also chides Nesson a bit for "pushing the bubble" very far in some of his arguments.
Clement then comes back for a brief rebuttal, trying to claim that the very first Congress put in place statutory damages for copyright... which is immediately shot down by one of the judges, who notes that the Congress felt that statutory damages should not be punitive, which Clement tries to sidestep around (not very successfully, in my opinion).
And that's about it. If you had asked me prior to the oral hearing, I would have said that the court would almost certainly uphold the statutory damage rates as being perfectly reasonable. It just seems like the sort of question that the courts don't want to touch -- especially (as mentioned by one of the judges in the case) noting that Congress has said nothing on the issue in the last decade. However, I have to admit that I was surprised at how (I believe) two of the judges really seemed to dig in against both the Justice Department lawyer and the RIAA/labels lawyer, on the big key questions, and suggested, repeatedly, that they're not buying the overall claim. I'm still guessing that the court won't say that the award was unconstitutionally excessive, but I'm not nearly as certain after listening to the hearing as I was before it...
Here's some big news. You may recall a few years ago that the courts more or less said that the ACLU had no standing to file a lawsuit over the government's warrantless wiretapping program, because they weren't the people being spied on. Of course, that left people in quite the catch-22 situation. The wiretapping was entirely secret, and no one could sue unless it was known that they were being wiretapped. So how could you possibly question the legality of the program? The only case that was able to move forward was the one where the government accidentally revealed it was wiretapping, but otherwise the wiretapping program has continued. In fact, to deal with this, Congress even passed a law that explicitly stated that warrantless wiretapping was okay (and also granting telcos retroactive immunity for helping out prior to the law being passed).
Of course, with the passage of the new law, the FISA Amendments Act, there was a new issue to sue over, and the ACLU and some others brought a new suit, challenging the specific law. The lower court, again, said that the ACLU had no standing, but the 2nd Circuit appeals court has now reversed that ruling and sent it back to the lower court, saying that the ACLU and the others have made a strong case that they should be able to challenge the constitutionality of the law:
plaintiffs have good reason to believe that their communications in particular, will fall within the scope of the broad surveillance that they can assume the government will conduct. The plaintiffs testify that in order to carry out their jobs they must regularly communicate by telephone and e-mail with precisely the sorts of individuals that the government will most likely seek to monitor – i.e., individuals “the U.S. government believes or believed to be associated with terrorist organizations,” “political and human rights activists who oppose governments that are supported economically or militarily by the U.S. government,” and “people located in geographical areas that are a special focus of the U.S. government’s counterterrorism or diplomatic efforts.” The plaintiffs’ assessment that these individuals are likely targets of [FISA Amendments Act] surveillance is reasonable, and the government has not disputed that assertion.
As the report linked above notes, it's expected that the US government will do its usual "state secrets!" claim to try to get away from having to actually defend how this law meets the requirements of the 4th Amendment. Hopefully the courts will actually stand up to the government for once on such a claim.
I guess it's fitting that this happens in early February. Slashdot points us to the news that, as was widely expected, the record labels have opted for a third trial of Jammie Thomas-Rasset, rather than accept the reduced award of $2,250 per song, as set by the judge. Not surprisingly, the labels are doing this because they disagree with the precedent of a judge changing the jury award, and the new trial is limited solely to the damages question. But, honestly, the whole thing is a bit weird. If the judge can reduce the older jury award, and a new jury sets a higher rate, can the judge just reduce it again, and we go through this entire process for the fourth time? The Slashdot post, written by Ray Beckermann claims that the labels "could only win a verdict that is equal to, or less than, $54,000," in the new trial, but I'm not sure why he says that. Is it because the judge would reduce it again? This is not at all clear.
While Plaintiffs do not believe that either verdict was improper under the law, or
that the second verdict should be remitted, they would have considered accepting a
remittitur simply so that this case could finally come to an end. However, any remittitur
must otherwise be consistent with the law and be guided by what actual juries have
awarded under similar circumstances. Unfortunately, Plaintiffs find it impossible to
accept a remittitur that could be read to set a new standard for statutory damages --
essentially capping those damages at three times the minimum statutory amount of $750
(or $2,250) for any "noncommercial individuals who illegally download and upload
music." (Id. at 2, 25.) This far-reaching determination is contrary to the law and creates
a statutory scheme that Congress did not intend or enact.
It's a bit of a stretch to claim that this would be a cap on "any" unauthorized noncommercial file distribution. I would imagine that any court still has the right to take into account the specific circumstances to make sure the award is proportionate to the rights being violated. The labels' lawyers are stretching what the judge said here.
Indeed, Congress has spoken on this very topic. Congress deliberately and
purposefully established a range of statutory damages that applies without regard to the
commercial motivation of the defendant.
I find this statement funny, because they then cite what Congress said way back in 1999. Fair enough, Congress (which basically just took RIAA talking points and put them into the Congressional record) did make those comments -- but these are the same entertainment industry lawyers who supported a "secondary liability" or inducement standard in the Grokster case, even though Congress had specifically rejected an attempt to put an inducement standard into the law. And when confronted, how does the RIAA explain that? Well, they say "the situation changed." Ah, so it's okay to have the courts change copyright law when the situation changes in one direction, but not the other?
What the judge was doing here was recognizing that the amount the jury awarded was clearly out of proportion to the actual infringement -- just as the courts in Grokster supposedly recognized that an inducement standard made sense in shutting down third parties (something I disagree with, but it's how the court felt). It seems that the RIAA and its lawyers have a massive double standard here.
A rule that the maximum permissible award in cases involving so-called
"noncommercial" infringers is three times minimum statutory damages also ignores the
harm caused by such infringers. From an economic perspective, individuals who give
away copyrighted works illegally can cause as much harm as those who sell those works
illegally, particularly when the so-called "non-commercial" infringer uses a P2P service.
The notion that an infringer who does not make a profit should automatically be entitled
to better treatment than an infringer who does make a profit is found nowhere in the law.
The "not for profit" infringer is hardly entitled to special protection, which is why
Congress conferred no such protection.
Again, Congress also conferred no such thing as an inducement liability, but the courts -- at the urging of the RIAA -- conferred exactly that via the courts. Why such a double standard?
The Court's cap would set a
new ceiling such that no copyright owner could effectively enforce their rights unless
they could and did sue on numerous works. No copyright owner would be motivated to
enforce its rights where it could only sue on a handful of works because the potential
recovery would be too limited. Congress set a wide range of statutory damages for
copyright cases precisely because plaintiffs need to be incentivized to bring appropriate
cases to enforce their rights -- even those who own a small number of copyrights or those
who only have a limited number of works infringed. Conversely, the Court's artificially
depressed cap compels parties with a large number of copyrights at stake to sue on all of
them, rather than a more modest number. This serves only to increase the discovery and
trial burdens on parties and courts. Yet the Court's inflexible "three times" cap would
invariably penalize plaintiffs with a small number of works at issue, and would force
those with a lot of works to add to their complaints unnecessarily.
Woe is the RIAA. If the awards for unauthorized sharing of a $1 song that might help promote their artists and help them make more money (if only the RIAA were to adapt to a changing market place) might "only" be 2,250 times the market price of the song? Cry me a river. And, even more ridiculous is the claim that this is some undue burden on the RIAA that it might have to actually sue over all of the songs someone distributed in an unauthorized manner, rather than just selecting a handful as it does now. This is a major issue. Technically, the RIAA has been able to just pick a couple dozen songs and sue over those, knowing that the totally disproportionate statutory damages will "cover" the rest. But does that seem right to anyone? The idea that rather than proving the actual harm done by the actual distribution, the RIAA is allowed to just pick a "sampling" and without proof get back many times the price without even presenting any actual evidence of the wider damage or the wider distribution of more files?
It seems perfectly reasonable to expect the RIAA should have to actually include what they claim was infringed, rather than being able to just pick a handful, knowing that the totally out of proportion statutory damages will "cover" the rest.
In fact, the paragraph above is effectively the RIAA admitting that it knows the statutory damages are out of proportion, but it believes it's fair because the RIAA is too cheap and too lazy to actually sue people for what it claims they infringed on.
Talk about a sense of entitlement.
Still, as we've said for a while now, this is a really bad case all around. It's pretty clear that Thomas-Rassett was involved in widespread infringement, and then lied about it. If people are going to challenge ridiculous statutory rates and other aspects of copyright law, this is really bad case to do that (ditto for the Tenenbaum case). This is one where it seems like she really might have been better off settling early and moving on. And the oddity of the judge reducing the jury award just makes this whole case into something of a circus...
After the judge in the Jammie Thomas-Rasset case decided to reduce the amount awarded to the record labels by the jury, we had hoped that both sides would figure out a way to just end this lawsuit. However, it looks like that's not happening. As we noted, the RIAA was extremely reluctant to accept the new, greatly reduced, award, not because of the amount, but because they're afraid to set precedent that a judge can lower the award in chosen by a jury using statutory damages in a copyright case. So, instead, the RIAA tried to offer Jammie a deal: pay $25,000 (donated to a musician's charity) and ask the judge to vacate the reduction in the award, and the case would be settled. This isn't surprising. The RIAA would just like the case to be over, but doesn't want to set the precedent, so they ask Thomass-Rasset to pay less, but the "trade" is to get the decision deleted. Thomas-Rasset quickly rejected the offer, and now it seems likely that the RIAA will reject the reduced amount and everyone will go back to trial over just the damage amount. In an interesting bit of spin, Thomas-Rasset's lawyers are claiming that this shows that the RIAA just wants to use this case as a "bogeyman" in order "to scare people into doing what they want," rather than as an attempt to actually recover any real damages.
It looks like the judge who oversaw the Jammie Thomas-Rasset case realized that the original $1.92 million award was just ridiculous -- even if the Justice Department supported it. Instead, the court has reduced the award to $2,250 per song, saying that seems much more reasonable:
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. Moreover, although Plaintiffs were not required to prove their actual damages, statutory damages must still bear some relation to actual damages
While I question the use of "stealing" here, and still think that $2,250 seems pretty high (even the judge admits that if he weren't reducing the amount from the jury and had been able to set the amount originally, he probably would have gone even lower), this case had all sorts of problems from the start -- with tremendous evidence (well beyond just an IP address) that Jammie was, in fact, doing a fair amount of file sharing. Her defense and attempted reasoning were weak and not at all helpful. This seems like a case where she would be better off paying this off (somehow) and moving on.
It's now in the hands of the record labels if they'll accept this or if they want to have a new trial concerning damages. Again, for them, this might be a situation where they're best off accepting it and moving on. The original $80,000 damages got the labels a ton of bad press, with even the musicians whose music was shared speaking out against the case and other musicians arguing it was a reason to disband the RIAA.
Update: News.com suggests both sides might appeal. The interesting part is from the labels who, like I suggested above, do want to just bury this story and have the case be over with -- but might be worried about setting a precedent allowing a judge to lower a jury award.
As we speculated earlier this week, given the silence from the Jammie Thomas camp since the $1.92 million verdict against her, we assumed she was gearing up for an appeal -- and that's now been confirmed. Thomas' lawyer has announced that Thomas has decided to appeal, questioning the constitutionality of the statutory damages awarded, which was the obvious attack point. It will be interesting to see who gets involved in actually managing the appeal.
Lawyers for an Arkansas building materials firm have appealed a $12.6 million judgment against the company, alleging that
a juror's Twitter messages show that he was biased against the company. The lawyers say tweets like "I just gave away TWELVE MILLION DOLLARS of somebody else's money" and "oh and nobody buy Stoam. Its bad mojo and they'll probably cease to Exist, now that their wallet is 12m lighter" illustrate that the juror was predisposed towards a verdict that would "impress his audience". Meanwhile, in a corruption case in Philadelphia, a defandant's attorneys allege a juror's tweets and status updates broke rules about disclosing deliberations, and say they could warrant a mistrial. Lawyers, along with everybody else, are paying more and more attention to social-media updates, so it's likely we've not heard the last of the silly Twitter-based legal maneuver. But it's not just the information-spreading that's got lawyers and judges worried, it's also juries looking up info on their phones during trials. In a recent federal drug trial in Florida, a judge declared a mistrial after learning that 8 jurors had accessed online information on their mobile phones during a trial. A cornerstone of the US' adversarial legal system is that juries can only consider the evidence that's presented to them, and jurors looking info up on their own breaks the longstanding rules of evidence of the system. It's not as if the legal system is under threat from technology, but certainly expect to see plenty more stories along these lines in the near future.
While the ruling against Comcast was rather pointless and meaningless, this appeal could create a much more interesting lawsuit, helping to more clearly define the FCC's authority on these issues. Amusingly, despite the effective issues being identical to the question of the FCC's authority over consumer electronics in the broadcast flag debate from four years ago, expect various public interest groups to align on the opposite sides of where they did back during that fight. Apparently, FCC regulation is bad, except when it's in agreement with your opinion.
