Copyright Hearing Recap: Remedies

by Kevin Erickson, Communications Associate.

On July 24, the House Judiciary Subcommitee on Courts, Intellectual Property, and The Internet continued its ongoing review of copyright law with a hearing on the topic of Remedies. US Copyright laws give creators a number of exclusive rights controlling how their works can be used, but when one of those rights are violated, they must have options for recourse. As Rep. Jerrold Nadler (D-NY) noted, the legal maxim goes “there’s no right without a remedy.” That’s what this hearing addressed, and while there was consensus that the current system leaves plenty of room for improvement, a wide range of views were presented on what problems currently exist, and how to solve them. (You can watch the full hearing and read written testimony at the House Judiciary website.)

Nonetheless, three areas of focus emerged:

1) Should statutory damages be altered? Currently, when someone sues for copyright infringement, they can demand actual damages (based on an estimate of the actual economic harm to the plaintiff) and/or statutory damages, where the amount awarded is based on figures written into the law. Some feel that current statutory damages are too high and need recalibration, while others think the current amounts make sense.

2) Should penalties for infringement in the form of streaming be harmonized with penalties for downloads? Currently, if you make a bunch of albums available for download without permission of the rightsholders, you can be charged with a felony. But making the same works available for streaming is only a misdemeanor. The copyright office and others have recommended that these penalties be harmonized. (You may remember that opponents to this potential change led a funny but wildly irresponsible and misleading campaign to “free Justin Bieber.” Happily, this myth wasn’t rehashed at the hearing.)

3) Should a small claims process be set up to address copyright infringement claims of a lower dollar amount? As Rep. Howard Coble (R-NC) noted in his opening remarks, “As much as larger copyright owners find the civil litigation system expensive, smaller copyright owners find it not worth their time or money.” Coble noted that a report from the Copyright Office found that smaller copyright owners are at a significant disadvantage when it came to protecting their rights. John Conyers (D-MI) added that the estimated median cost of litigation is $350,000, making it impossible for most individual creators to file suit; even when their work is clearly and repeatedly infringed, “they simply lack the funds to consider litigation.” A voluntary small claims alternative would make it easier and more inexpensive to resolve such claims.

Witnesses at the hearing included David Bitkower, a deputy attorney general with the Dept of Justice; Steven Tepp, an IP lawyer and consultant who has represented many large clients including the US Chamber of Commerce; Matt Schruers of the Computer & Communications Industry Association, a leading technology trade organization; Sherwin Siy of public-interest group Public Knowledge; and Nancy Wolff, a lawyer who represents many photographers groups and smaller rightsholders.

David Bitkower of the Deptartment of Justice focused his testimony on criminal enforcement measures—as opposed to civil enforcement. He highlighted the Dept of Justice’s efforts to take down MegaUpload and bring its operators to trial both as an example of where the DOJ was focusing its criminal enforcement efforts—that is, on large-scale, international commercial copyright infringement—and as an example of two current challenges with enforcement. Bitkower’s recommendation was to make illegal stream hosting a felony on par with illegal download hosting for an improved deterrent effect. The other challenge Bitkower identified was budgetary: while the Dept of Justice is part of the executive branch, the legislative branch controls its budgets; Bitkower argued for more investment in staff for international partnerships which would improve enforcement efforts.

IP lawyer Steven Tepp took the discussion back to civil law, and presented copyright as a property right and gave a strong defense of statutory damages. He noted that actual damages are difficult or impossible to accurately calculate, and argued that today’s damages are lower than 1909 levels, adjusted for inflation, saying “the very last thing you should consider is weakening them.”

An opposing view was presented by Matt Schruers of CCIA, who emphasized that statutory damages can be awarded with “no proof of injury or harm.” He argued that high damages (up to $150,000 per work for “willful infringement”) can incentivize “copyright trolls” who use predatory litigation as a business model, particularly in the adult film industry. Secondly, he argued, these damages discourage investment in new digital services, because the nature of digital content delivery potentially involves thousands of users and thousands of works. He pointed to the case of user generated video service Veoh, which was targeted for a lawsuit. Although the company was eventually exonerated, it ultimately went bankrupt. Schruers recommended lower minimum and maximum amounts and limiting the aggregation of damages, saying “You can have too much of a good thing, and it might be time to recalibrate the system.”

Sherwin Siy of Public Knowledge concurred, arguing “uploading a video to YouTube could expose a user to $150,000 in damages” a mash-up containing 10 works could lead to “1.5 million” in damages. Siy’s recommended that limitations on damages for good-faith fair use attempts to be expanded, and for similar limitations be extended to noncommercial use. He also advocated caps on damages, and suggested that damages be scaled to some multiplier of “actual harm,” although like Schruers, Siy may have understated the challenges often inherent in assessing actual harm. At this point, few would argue that every download equals a lost sale, but the widespread problem of unauthorized file sharing can have industry-wide impacts in the form of a downward pressure on pricing as legitimate vendors are forced to “compete with free.”

It’s also important to understand that in 2014, music rightsholders aren’t generally in the business of suing end users over their uploads to UCG sites—in part because better tools have emerged to exert some degree of control. To take Siy’s YouTube example, the licensing paradigm enabled by Content ID means that rightsholders have technologies at their disposal that are far less expensive than litigation (at least, for those who can get into the voluntary rights-protection systems—it’s not always easy). To raise the prospect of astronomical damages against YouTube users, Siy had to rely on theoreticals. Later, Rep. Blake Farenthold (R-TX) cited a famous case involving 1.5 million dollar judgement over songs shared on KaZaa. But that case was originally tried in 2007, and the award was later reduced, so while this might be relevant in evaluating potential flaws in the statute, it doesn’t represent current practice. Happily, the era of RIAA lawsuits against individual unlicensed downloaders seems to be over.

Finally, Nancy Wolff took the conversation out of the abstract and spoke of her experience representing individual photographers and their licensing agents. She contended that instances of individual infringement may have “a low value compared to the big cases that are battled out between the big corporations” and that it is hard to get legal representation because “it costs more to get the key to the courthouse than you would get in recovery.” Wolff downplayed the reports of high dollar suits; “these references to extraordinary damages, in my years of experience, I just have not seen that.” Rather, she argued the threat of statutory damages “gets you a phone call from the other side” and often facilitates mutually agreeable resolutions out of court. Wolff also noted that the burden of registration is too large a hurdle for many photographers because of the volume of work they create, ruling out the possibility of statutory damages for many. Federal court, she argued “is like giving an artist a sledgehammer, when all you need is a flyswatter.” That flyswatter could be a small claims system like that proposed by the Copyright Office. Wolff also argued that the cost of copyright registration should be lowered; this would make it easier for more prolific creators (a group which certainly includes many musicians) to register their works.

Wolff’s sledgehammer vs. flyswatter argument makes us wonder how the entire conversation about unauthorized downloading might have been different if tools had existed to address the problem with fines more on the order of a traffic ticket rather than big-dollar infringement suits. The latter no doubt contributed to a perception that unauthorized downloading was somehow “sticking it to the man.”

So where does FMC ultimately land on the three central questions this hearing addressed?

1) Should statutory damages be altered? It’s definitely worth considering. While statutory damages remain an important remedy, especially for dealing with the more malicious forms of commercial infringement, Tepp’s assertion that “complaints about a particular jury verdict don’t prove there’s anything wrong with the system” seems unlikely to convince the public. Siy’s suggestion that “Congress could simply add guidance to the statute for application for this wide range of values, reducing uncertainty for the parties, but also for judges and juries who are asked to apply them.” Seems reasonable, and likely to mitigate some criticisms.

However, it’d be easier to take the critics of excessive statutory damages seriously if they were more eager to acknowledge that infringement remains a serious problem, even if it’s not motivated by commercial gain, and that “actual damages” can be difficult to ascertain, particularly for smaller creators. 

2) Should penalties for infringement in the form of streaming be harmonized with penalties for downloads? This too is certainly worth considering. As streaming has become more popular as a legitimate source of delivery, illegitimate unlicensed competition has taken off as well. Bitkower of the DOJ did a good job of describing how such a change could be narrowly tailored to solve the imbalance in the current law without creating unintented problems.

3) Should a small claims process be set up to address copyright infringement claims of a lower dollar amount? This definitely seems like it could be a good idea, but of course, the devil is in the details. One of the challenges with a small claims court noted by Wolff: “being voluntary, there’d have to be teeth.” Wolff noted the possibility of a wealthy infringer refusing to take part in the process, and assuming a plaintiff would have to take the case to federal court to obtain recourse, and for incentives that would encourage participation. Remember that independent musicians have been on both sides of copyright infringement suits; a system that would offer remedies currently not available to those who can’t afford expensive litigitation while treating all parties fairly regardless of their size would certainly be a positive step. Rep. Doug Collins (R-GA) even suggested that a small claims pilot program, potentially just for music-related infringement, could be a way to test the concept.

This congressional session has wrapped up and many members of congress are out now out on the campaign trail, but with all of these hearings behind us (check out the full list here), the committee has laid out a broad range of specific areas where future action could be taken. The groundwork has been laid for some potentially exciting legislative debates to come.  We’ll keep you posted.

Submitted by kevin on August 10, 2014 - 9:20am

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