A $675,000 Damages Award for Illegal File Sharing: Joel Tenenbaum’s Ferocious Battle Against the Music Industry

Part 1: Background and The District Court’s Decision

In June of 1999, Napster burst onto the scene and quickly attracted the hearts of high school and college students across the country.  Napster was originally a peer-to-peer file sharing network, where users could download mp3 songs from other users for free.  The network essentially made it quick and easy to download practically any song within seconds without having to pay a dime.  This scheme appealed to many young Americans who were distraught with the high prices of CD’s, which commonly sold for about $15 at the time.  Napster was a way to ‘stick it to the man’ by getting back at the music industry.  By 2001, however, Napster lost a copyright infringement suit and closed its doors (at least free access) to its millions of minions.  In the meantime, other networks have risen over the years to offer similar perks including AudioGalaxy, Morpheus, Kazaa, and Limewire.

To combat individuals downloading music online illegally, the Recording Industry Association of America (RIAA) has worked to protect the intellectual property rights of musicians and music labels by suing copyright infringers.  RIAA encompasses around 85% of recorded music that is produced and sold in the U.S.  To date, only two copyright infringement cases involving RIAA have gone to trial.  One is the interesting case involving Joel Tenenbaum, a doctoral student in physics at Boston University who has been accused of downloading and distributing 30 copyrighted songs using file-sharing software.  As is usually the case in illegal file-sharing disputes, Tenenbaum was a college student when his activities were exposed.  After a series of battles that started in 1999 between Tenenbaum and the RIAA, Nancy Gertner, a district judge in the United States District Court in Massachusetts, slashed the jury’s damages award in favor of RIAA, from $675,000 to $67,500 on July 9, 2010.

To put things into perspective, the other case that went to trial was the Jamie Thomas-Rasset case, which gave RIAA a damages prize of $2,250 per song; the exact same ratio seen in the Tenenbaum case.  Much more frequently, these disputes have led to settlements between the parties where the average settlement is from $3,000-$12,000.  Moving to a more basic level of analysis, the average price of a song from a major record company that is sold to a company such as Apple through its iTunes program or the current fee-based Napster is 70 to 80 cents per song.  Multiplying this 70 cent figure by the 30 songs that Tenenbaum was sued for downloading means that Tenenbaum deprived the RIAA of $21 in profits.  $21 v. $67,500 v. $675,000; a shocking difference in an award for damages. While the $21 figure may be misleading as there are more factors to consider when deciding on an award for damages, the original $675,000 award given by the jury in the Tenenbaum case shocked Judge Gertner on constitutional grounds.

In what has been called by some a major setback to the recording industry, Judge Gertner held that the jury’s award of $675,000 was “unconstitutionally excessive,” “simply unprecedented and oppressive,” and could not hold its ground under the Due Process Clause of the 14^th amendment.  Initially, Judge Gertner’s reasoning may seem perplexing after analyzing the ‘Digital Theft Deterrence and Copyright Damages Improvement Act of 1999’ promulgated by Congress.  This Act allows statutory damages provisions of $150,000 per infringement if the violation is committed willfully (it was in fact held at trial that Tenenbaum was guilty of copyright infringement in a willful manner).  By doing the math, the jury awarded statutory damages of $67,500 for each infringement, which is clearly under the $150,000 maximum.  In deciding that the jury award was unconstitutional, Gertner first looked at the legislative history behind the Act.  As Napster was in its infancy at the time of the passage of the Act, Gertner reasoned that Congress never intended for the Act to subject ordinary people like Joel Tenenbaum to mammoth damages award for illegal file sharing without a financial motive.  However, most interestingly, Gertner struck a populist bell by using the same reasoning that has been used to protect corporations currently and in years past.   

With respect to large corporations, several cases involving parties such as BMW and State Farm have paved the way for the reduction of “grossly excessive punitive awards” on constitutional grounds.  After companies had argued against “out of control” jury awards for years, the courts started a trend of favoring corporations by looking to the Due Process Clause.  By using the same reasoning seen in these cases, Gertner delivered a strong message: the Due Process clause not only protects corporations, but also ordinary citizens such as Joel Tenenbaum.  In deciding to reduce the award by 90%, Gertner held that the jury’s award is far greater than needed to serve the government’s “legitimate interests” in protecting copyright owners and preventing infringement.

What does the future hold for the relationship between illegal file sharing committed by ordinary citizens and the high ceiling for possible statutory damages awards?  While the RIAA is pursuing illegal file sharers with a big stick, the US Copyright Group has similarly joined the hunt.  In fact, this group has sued more than 20,000 file sharers for illegally sharing indie movies.  These sort of mass campaigns targeting ordinary individuals have caught the attention of several judges across the country, such as Judge Gertner.  By attacking this excessive damages award on constitutional grounds, members of the judiciary have found a fair method to lessen the madness.  With the confusion created by the Joel Tenenbaum case, it is now time for Congress to step up and deal with this emerging phenomenon.

*Vlad Vidaeff is a second-year law student at Wake Forest University School of Law and is Vice President of the International Law Society.  He holds a Bachelor of Arts in Sport Management and a minor in French from the University of Michigan.  Upon graduation in May 2012, Mr. Vidaeff intends to either practice intellectual property law, international law, or sports and entertainment law.