The Key To Fixing Copyright Is Ending Massive, Unpredictable Damages Awards

We’re taking part in Copyright Week, a series of actions and discussions supporting key principles that should guide copyright policy. Every day this week, various groups are taking on different elements of copyright law and policy, addressing what’s at stake and what we need to do to make sure that copyright promotes creativity and innovation.

What if a single parking ticket carried a fine of up to a year’s salary? What if there were no way to know consistently how much the fine would be before you got it? And what if any one of thousands of private citizens could decide to write you a ticket? What would happen? People would start avoiding public parking and stay home more often. Business would decline. The number of false or unfair tickets would rise. Everyone would lose confidence in the system—and in the law—as parking became a huge gamble.

Something very close to this scenario is a reality in copyright law. Copyright holders who sue for infringement can ask for “statutory damages.” That means letting a jury decide how big of a penalty the defendant will have to pay—anywhere from $200 to $150,000 per copyrighted work, without requiring any evidence of actual financial losses or illicit profits. That’s a big problem for anyone who uses works in lawful but non-traditional ways. Musicians, bloggers, video creators, software developers, and others gamble with these massive damages whenever their art or technology touches another’s work. They risk unpredictable, potentially devastating penalties if a copyright holder objects and a court disagrees with their well-intentioned efforts.

On Copyright Week, we like to talk about ways to improve copyright law. One of the biggest improvements available is to fix U.S. copyright’s broken statutory damages regime. In other areas of civil law, the courts have limited jury-awarded punitive damages so that they can’t be far higher than the amount of harm caused. Shockingly, it’s been determined that large jury awards for fraud, for example, offend the Constitution’s Due Process Clause. But somehow, that’s not the case in copyright—some courts have ruled that Congress can set damages that are potentially hundreds of times greater than actual harm, if it chooses to do so.

Massive, unpredictable damages awards for copyright infringement, such as a $222,000 penalty for sharing 24 music tracks online, are the fuel that powers exploitative litigation business models: law firms and companies that bring dubious claims of infringement against thousands of Internet users, demanding cash settlements to avoid being served with a lawsuit. These businesses, often called copyright trolls, use the threat of statutory damages to coerce settlements, often without doing the work to make sure their accusations are correct.

Statutory damages also magnify other problems in copyright law, and make reform more difficult. The Music Modernization Act, passed in 2018, was the biggest overhaul of the licensing market for songwriters in a generation, addressing a market that nearly everyone agreed was broken. But a minority resisted any reform, apparently preferring the mere possibility of a multimillion-dollar statutory damages windfall to a smaller but steadier stream of royalty payments.

By turning litigation into a game of financial Russian roulette, statutory damages also discourage artistic and technological experimentation at the boundaries of fair use. None but the largest corporations can risk ruinous damages if a well-intentioned fair use crosses the fuzzy line into infringement.

Many reforms are possible. Congress could limit statutory damages to a multiple of actual harm. That would bring U.S. copyright in line with other countries, and with other civil laws like patent and antitrust. Congress could also remove statutory damages in cases where the defendant has a good-faith claim of fair use, which would encourage creative experimentation. Fixing fair use would make many of the other problems in copyright law more easily solvable, and create a fairer system for creators and users alike.

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Author: Mitch Stoltz

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