It would seem statutory damages are a bittersweet pill for the record industry. On one hand they provide a handy battering ram for intimidating litigation targets into settling out of court, which is good for them. On the other, they can be used to turn a victory into a crushing defeat, which could be very bad.
Thus far, two US file-sharing cases involving individuals have gone to trial. Both resulted in victory for the recording industry, one of them twice.
In 2007, Jammie Thomas was sentenced to pay damages of $222,000 for 24 counts of infringement ($9,250 per infringement). Later, a retrial was granted, and in June 2009 a jury returned a similar decision, but with increased damages of $1.92 million ($80,000 per infringement).
Meanwhile, in July 2009, Joel Tenenbaum was also found to be willfully infringing, and a jury awarded damages of $675,000 ($22,500 per infringement).
On July 6th 2009, Thomas filed with the court that the damages were constitutionally excessive, and now Tenenbaum has too.
The central point of the case revolves around a US Supreme Court precedent, which is quoted in the filing as “few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”
Compensatory refers to an amount to make up for actual losses (the damages suffered) and the punitive damages are designed to act as a deterrent for others and to punish. In this case, states the filing, at best it’s in the low 5-digits (22,500:1), and could easily actually be in the upper-5 digits (65,000:1 or greater).
Other considerations are put forward as well, including that the DRM imposed on music until 2007 (and still imposed on audiobooks) encouraged the use of P2P economically; or that the ‘egregiousness’ of the offense is low in comparison to the penalties – that it’s at most as bad as shoplifting – but the constitutionality of the damages is the main thrust, as it is with the Thomas case.
Time will tell as to how the courts will decide, but it may be that the very success in gaining such large damages awards will lead to a great diluting of the power of statutory damages. Very much a case of winning the battle, but losing the war; not what was expected when the papers were first filed, all those years ago.