Statutory Damages: The Fuel of Copyright-based Censorship

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, and addressing what’s at stake, and what we need to do to make sure that copyright promotes creativity and innovation.

Imagine every post online came with a bounty of up to $150,000 paid to anyone who finds it violates opaque government rules—all out of the pocket of the platform. Smaller sites could be snuffed out, and big platforms would avoid crippling liability by aggressively blocking, taking down, and penalizing speech that even possibly violates these rules. In turn, users would self-censor, and opportunists would turn accusations into a profitable business.

This dystopia isn’t a fantasy, it’s close to how U.S. copyright’s broken statutory damages regime actually works.

Copyright includes “statutory damages,” which means letting a jury decide how big of a penalty the defendant will have to pay—anywhere from $200 to $150,000 per work—without the jury necessarily seeing any evidence of actual financial losses or illicit profits. In fact, the law gives judges and juries almost no guidelines on how to set damages. This is a huge problem for online speech.

One way or another, everyone builds on the speech of others when expressing themselves online: quoting posts, reposting memes, sharing images from the news. For some users, re-use is central to their online expression: parodists, journalists, researchers, and artists use others’ words, sounds, and images as part of making something new every day. Both these users and the online platforms they rely on risk unpredictable, potentially devastating penalties if a copyright holder objects to some re-use and a court disagrees with the user’s well-intentioned efforts.

On Copyright Week, we like to talk about ways to improve copyright law. One of the most important would be 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. Extremely large jury awards for fraud, for example, have been found to 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.

Massive, unpredictable damages awards for copyright infringement, such as a $222,000 penalty for sharing 24 music tracks online, are the fuel that drives overzealous or downright abusive takedowns of creative material from online platforms. Capricious and error-prone copyright enforcement bots, like YouTube’s Content ID, were created in part to avoid the threat of massive statutory damages against the platform. Those same damages create an ever-present bias in favor of major rightsholders and against innocent users in the platforms’ enforcement decisions. And they stop platforms from addressing the serious problems of careless and downright abusive copyright takedowns.

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.

“But wait”, you might say, “don’t legal protections like fair use and the safe harbors of the Digital Millennium Copyright Act protect users and platforms?” They do—but the threat of statutory damages makes that protection brittle. Fair use allows for many important re-uses of copyrighted works without permission. But fair use is heavily dependent on circumstances and can sometimes be difficult to predict when copyright is applied to new uses. Even well-intentioned and well-resourced users avoid experimenting at the boundaries of fair use when the cost of a court disagreeing is so high and unpredictable.

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 make statutory damages unavailable 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.