660 F.3d 487 (1st Cir. 2011), 10-1883, Sony BMG Music Entertainment v. Tenenbaum

Docket Nº:10-1883, 10-1947, 10-2052.
Citation:660 F.3d 487
Opinion Judge:LYNCH, Chief Judge.
Party Name:SONY BMG MUSIC ENTERTAINMENT, et al., Plaintiffs, Appellants/Cross-Appellees, v. Joel TENENBAUM, Defendant, Appellee/Cross-Appellant.
Attorney:Paul D. Clement, with whom Jeffrey S. Bucholtz, Erin E. Murphy, King & Spalding, LLP, Timothy M. Reynolds, Eve G. Burton, Holme, Roberts & Owen, LLP, Matthew J. Oppenheim, and Jennifer L. Pariser were on brief, for plaintiffs-appellants. Jeffrey Clair, with whom Tony West, Assistant Attorney Gene...
Judge Panel:Before LYNCH, Chief Judge, TORRUELLA and THOMPSON, Circuit Judges.
Case Date:September 16, 2011
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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660 F.3d 487 (1st Cir. 2011)

SONY BMG MUSIC ENTERTAINMENT, et al., Plaintiffs, Appellants/Cross-Appellees,

v.

Joel TENENBAUM, Defendant, Appellee/Cross-Appellant.

Nos. 10-1883, 10-1947, 10-2052.

United States Court of Appeals, First Circuit.

September 16, 2011

Heard April 4, 2011.

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[Copyrighted Material Omitted]

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Paul D. Clement, with whom Jeffrey S. Bucholtz, Erin E. Murphy, King & Spalding, LLP, Timothy M. Reynolds, Eve G. Burton, Holme, Roberts & Owen, LLP, Matthew J. Oppenheim, and Jennifer L. Pariser were on brief, for plaintiffs-appellants.

Jeffrey Clair, with whom Tony West, Assistant Attorney General, Carmen Ortiz, United States Attorney, and Scott R. McIntosh were on brief, for the United States as plaintiff-appellant.

Charles R. Nesson and Jason Harrow for defendant-appellee.

Julie A. Ahrens, with whom Anthony T. Falzone, Stanford Law School Center for Internet & Society, Michael Barclay, Corynne McSherry, Electronic Frontier Foundation, Jason M. Schultz, Samuelson Law, Technology & Public Policy Clinic, were on brief for Electronic Frontier Foundation, amicus curiae.

Before LYNCH, Chief Judge, TORRUELLA and THOMPSON, Circuit Judges.

LYNCH, Chief Judge.

Plaintiffs, the recording companies Sony BMG Music Entertainment, Warner Brothers Records Inc., Arista Records LLC, Atlantic Recording Corporation, and UMG Recordings, Inc. (together, " Sony" ), brought this action for statutory damages and injunctive relief under the Copyright Act, 17 U.S.C. § 101 et seq. Sony argued that the defendant, Joel Tenenbaum, willfully infringed the copyrights of thirty music recordings by using file-sharing software to download and distribute those recordings without authorization from the copyright owners.

The district court entered judgment against Tenenbaum as to liability. The jury found that Tenenbaum's infringement of the copyrights at issue was willful and awarded Sony statutory damages of $22,500 for each infringed recording, an award within the statutory range of $750 to $150,000 per infringement that Congress established for willful conduct. See 17 U.S.C. § 504(c).

Upon Tenenbaum's motion for a new trial or remittitur, the district court skipped over the question of remittitur and reached a constitutional issue. It reduced the damage award by a factor of ten, reasoning that the award was excessive in violation of Tenenbaum's due process rights. See Sony BMG Music Entm't v. Tenenbaum, 721 F.Supp.2d 85 (D.Mass.2010).

The parties have cross-appealed. Sony argues the district court erred, for a number of reasons, in reducing the jury's award of damages and seeks reinstatement of the full award. It defends the liability and willfulness determinations.

Tenenbaum challenges both liability and damages. He challenges the Copyright Act's constitutionality and the applicability of the Copyright Act and its statutory damages provision to his conduct. Tenenbaum also argues that the district court committed various errors that require a new trial, and that a further reduction of the damage award is required by the due process clause.

The United States, intervening to defend the constitutionality of the Copyright Act, argues that the district court erred in bypassing the question of common law remittitur to reach a constitutional issue.

We reject all of Tenenbaum's arguments and affirm the denial of Tenenbaum's motion for a new trial or remittitur based on claims of error as to the application of the Copyright Act and error as to the jury instructions. However, the court erred

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when it bypassed Tenenbaum's remittitur arguments based on excessiveness of the statutory damages award and reached the constitutional due process issue. We agree with the United States that the doctrine of constitutional avoidance requires consideration of common law remittitur before consideration of Tenenbaum's due process challenge to the jury's award. We reverse the reduction in damages, reinstate the original award, and remand for consideration of the common law remittitur question. We comment that this case raises concerns about application of the Copyright Act which Congress may wish to examine.

I.

Background

A. District Court Proceedings

Sony brought this action against Tenenbaum in August 2007, seeking statutory damages and injunctive relief pursuant to the Copyright Act. Sony pursued copyright claims against Tenenbaum for only thirty copyrighted works, even though it presented evidence that Tenenbaum illegally downloaded and distributed thousands of copyrighted materials.

Sony's complaint elected to seek statutory, not actual damages, pursuant to 17 U.S.C. § 504(c). For each act of infringement, § 504(c) establishes an award range of $750 to $30,000 for non-willful infringements, and a range of $750 to $150,000 for willful infringements.

Tenenbaum filed several pre-trial motions, including a motion to dismiss Sony's complaint on the ground that the Copyright Act is unconstitutional. 1 After the United States intervened to defend the constitutionality of the Act, the district court rejected Tenenbaum's motion without prejudice to allow Tenenbaum to challenge the constitutionality of any award ultimately issued by the jury. The district court also considered and rejected a fair use defense put forth by Tenenbaum.

A five-day jury trial was held from July 27 to July 31, 2009. Following the conclusion of testimony, the district court partially granted Sony's motion for judgment as a matter of law, holding that Sony owned the thirty copyrights at issue and that Tenenbaum infringed those copyrights through his downloading and distribution activities. The court left to the jury the questions of (1) whether Tenenbaum's infringement was willful and (2) the amount of statutory damages to be awarded. In instructing the jury, the court informed it of the statutory range Congress had established for willful and non-willful infringements and articulated a non-exhaustive list of factors it could consider in determining the damage award.

The jury found that Tenenbaum had willfully infringed each of Sony's thirty copyrighted works. The jury returned a damage award, within the statutory range, of $22,500 per infringement, which yielded a total award of $675,000.

Tenenbaum filed a post-trial motion seeking a new trial on various grounds 2 or

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a reduction of the jury's award. Tenenbaum argued that although the jury's award fell within the statutory range prescribed by Congress, (1) common law remittitur was both available to the court and appropriate in this case, and (2) the award was excessive such that it violated due process. The court rejected Tenenbaum's arguments for a new trial.

Regarding the size of the award, the court declined to decide the common law remittitur issue, based on its assumption that Sony would not agree to a reduction of the award and that remittitur would only necessitate a new trial on the issue of damages, and that even after a new trial the same issue of constitutional excessiveness would arise, so, in its view decision on the issue was inevitable. The court itself then found that the award violated due process, over objections that it utilized an impermissible standard, and reduced the award from $22,500 per infringement to $2,250 per infringement for a total award of $67,500.

B. Factual Background

We recite the underlying facts in the light most favorable to the jury's verdict. Analysis Grp., Inc. v. Cent. Fl. Invs., Inc., 629 F.3d 18, 20 (1st Cir.2010).

1. The Music Recording Industry and Peer-to-Peer Networks

Plaintiffs are several of the largest recording companies in the United States, and engage in discovering, developing, and marketing music recording artists and distributing the musical works those artists record. They hold exclusive rights to copy and distribute various music recordings under United States copyright law, including the thirty recordings at issue in this case, and their primary source of revenue is the sale of those recordings.

Plaintiffs only sell copies of their copyrighted recordings for profit. They never sell licenses to their copyrighted works that include rights to upload recordings to the internet for public consumption. The value of such a blanket license would be enormous, as the grant of such a license would deprive the companies of their source of income and profits and essentially drive them out of business.3

In the late 1990s, copyrighted music recordings, including those held by the plaintiffs, began to appear on file-sharing software called " peer-to-peer networks" without the authorization of the copyright holders.

Peer-to-peer networks enable individuals both to make digital files stored on their own computers available to other network users and to download such files from the computers of others. Files shared between users of these networks do not pass through a central computer, but are instead exchanged directly from one user's computer to another. Through the use of these peer-to-peer networks, the unauthorized and illegal downloading and distribution of copyrighted materials— especially music recordings— became commonplace. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 919-20, 923, 125 S.Ct. 2764, 162 L.Ed.2d 781 (2005) (describing operation of peer-to-peer networks and noting that

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their advent has likely resulted in copyright infringement on a " staggering" scale). Because music recordings are loaded onto peer-to-peer networks in digital form, recordings downloaded from peer-to-peer networks are virtually indistinguishable from recordings purchased through lawful means, making enforcement difficult.

The proliferation of these networks from 1999 onward and the piracy they enable has had a significant negative impact on the recording industry. Between 1999 and 2008, the recording industry as a whole suffered a fifty...

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