The major record companies are very happy that an appeals court in the US recently upheld their $47 million legal win against internet service provider Grande Communications. But they are less happy about what the same appeals court said regarding the actual amount of damages Grande should pay, because that part of the judgement means they will now receive somewhat less than $47 million.
That’s because of the way the Fifth Circuit Appeals Court interpreted what US law says about calculating damages in copyright cases. That interpretation, the majors now argue, “has the potential to prevent copyright owners from obtaining proper compensation when their valuable intellectual property rights are infringed”. They want the Fifth Circuit to reconsider this question ‘en banc’, which means more judges would be involved.
Grande was one of numerous American ISPs sued by the record industry over their users illegally accessing and sharing music files. The major labels successfully argued that Grande did not do enough to deal with repeat copyright infringers among its user base and should therefore be held liable for contributory infringement.
Under US law, when someone has been found liable for wilful copyright infringement, the copyright owner can push for so called ‘statutory damages’ of up to $150,000 for each ‘work’ infringed. When, as in this case, hundreds of individual works have been infringed, that can result in mega-damages being awarded.
Although quite how mega depends on how you define ‘work’ in the context of music. The labels have usually assumed that each recording is a ‘work’, because each recording is separately protected by copyright.
So, in the Grande case, after the court decided to award the labels $33,333 per infringement, and because the majors had identified 1403 tracks that had been illegally shared by Grande customers, the court multiplied £33,333 by 1403 and reached a total damages amount not far off $47 million.
However, when the case reached the Fifth Circuit, Grande argued that was, in fact, the wrong approach, and that the damages should be calculated differently.
This, they said, was because US law says that, where works are “parts of a compilation or derivative work” they together “constitute one work”. Which in the context of music could mean that – if, say, ten tracks were released together on one album – they count as only one work, not ten. Greatly reducing the total number of works and, therefore, the total amount of damages.
The Fifth Circuit agreed with Grande on that point, ordering the lower court to recalculate the damages using that approach. But, say the majors in a new legal filing, the Fifth Circuit was wrong.
Setting out why, the majors point out that, although when Congress came up with the statutory damages system it didn’t define what was meant by ‘work’, various appeals courts around the US have ruled that, for the purposes of calculating statutory damages, a work counts as any “copyrightable unit of expression that was individually commercialised by its copyright owner”.
Which is a slightly confusing definition, but basically, because these days labels commercialise each track individually as streams or downloads – even if they are released as part of albums – each track should be treated as a work when calculating statutory damages.
The fact that the Fifth Circuit’s ruling contradicts the position taken by other appeal courts, the majors add, is why the court should reconsider the matter en banc.
In their new filing, the majors are very keen to stress that they don’t want the core copyright claim against Grande to be reviewed, given they got their way on that point and, presumably, they are worried that such a review could open up the entire case again. However, they say, there should be a narrow review of how the rules around statuary damages were interpreted.