The "Lessigation" of Copyright Scholarship: A Review of Statutory Damages in Copyright Law: A Remedy in Need of Reform (Part I).

Another day, another absurd academic attack on copyrights. Today's entry in the Free-Culture-Movement's parade of sophistry is Pamela Samuelson and Tara Wheatland, Statutory Damages in Copyright Law: A Remedy in Need of Reform (2009) (available here).

The self-refuting "analysis" in this article warrants dissection for two reasons. First, it reveals the gruesome consequences of the "Lessigation," (i.e., "degeneration into shrill, dishonest demagoguery"), of much "scholarship" on intellectual-property law and policy. Second, this article focuses on statutory damages: a remedy that is critically important to copyright law--and thus the focus of the Free Cultist's latest attack on those awful creators who still refuse to embrace the give-it-away-and-pray "business model" that has worked oh-so-well for newspapers....

Naturally, Public Knowledge is already a-swooning over the "amazing depth" of the analysis in Statutory Damages in Copyright Law:

The article gives the reader an amazingly through understanding of copyright damages (primarily statutory but there's lots of background on actual damages, too) under US law as it's evolved.

* * *
This article will provide its readers an amazing depth of understanding of how we got here and useful guidance on how to address some of the problems. Kudos to its authors.

I have no kudos for the authors of Statutory Damages in Copyright Law--because it is self-destructively unhinged by errors and dishonesty. Indeed, that is why Statutory Damages in Copyright Law warrants analysis: when "scholarship" gets this bad, scholars should start thinking seriously about just how irrelevant they are choosing to become. Because if "scholars" are just underpaid bad lobbyists who need not disclose their clients, (and may have none), then no one should care what "scholars" think.

Moreover, the authors of Statutory Damages in Copyright Law chose to publish an unfinished work arguing that statutory-damage provisions of the Copyright Act have been unconstitutional as applied to a user of the file-sharing program KaZaA. And they did so just when the Godfather of the Free Culture Movement, Professor Charles Nesson, was arguing that the statutory-damage provisions of the Copyright Act are unconstitutional as applied to a user of the file-sharing program KaZaA. A result, their analysis could unfairly influence decisions with real-world consequences--unless its biases, errors, and omissions are quickly and bluntly exposed.

So here we go. And should the tone of this review ever seem a bit harsh or flippant, then I do apologize--while noting that such tones afford no real ground for complaint to scholars whose unduly harsh assessment of their subject seems to reflect a failure to study it seriously.

This will thus be the first of several posts on Statutory Damages in Copyright Law that I may later revise into a more formal paper. I plan to proceed as follows. First, I will describe Statutory Damages' overall thesis and the errors of fact, law, and economics that comprise its fictitious "history" of statutory damages in U.S. copyright law.

Next, I will refute its dead-wrong account of the Supreme Court's due-process jurisprudence. No matter what the authors of Statutory Damages may claim, the Supreme Court has not made it unconstitutional for civil damage awards to deter (or even punish) illegal activities.

Then, I will expose its laughably biased accounts of the few cases that allegedly support its call for reform of statutory-damages law. To summarize a longer story, its account of Thomas is incompetent, its account of Grokster is deranged, and its accounts of MP3.com and Legg Mason are reckless. Only its account of Free Republic seems fair.

Overview: When Imaginary Legal History Met Imaginary Due-Process Analysis

The central thesis of Statutory Damages in Copyright Law is, as Public Knowledge notes, that the copyright law's statutory-damages regime "has evolved in a manner that results in too many arbitrary, inconsistent, unprincipled, and grossly excessive awards and that reform is needed."

Now, statutory damages have been part of every U.S. copyright act enacted since 1790. So what evidence do the authors of Statutory Damages present to support this very serious accusation?

Five cases. Throughout the 219-year history of U.S. statutory damages, the authors of Statutory Damages purport to find five cases in which they perceive a statutory-damage award to have been unconstitutionally excessive. They also identify a sixth case, MGM Studios, Inc. v. Grokster, Ltd., in which they claim that a statutory-damage award could be excessive, and thus, too "chilling" to venture capitalists who might otherwise have funded StreamCast Network's scheme to "get all the music" and to "have no product costs to acquire music." See MGM Studios, Inc. v. Grokster, Ltd., 454 F. Supp. 2d 966 (C.D. Cal. 2006).

Granted, 5½ truly excessive statutory-damage awards in 219 years would be 5½ too many--though far too few to support any call for "reform" of existing corrective mechanisms, like post-trial motions to remit allegedly excessive awards. But before examining these individual cases, a more fundamental problem arises: all of the analyses in Statutory Damages in Copyright Law proceed from false premises.

Statutory Damages concluded that these 5½ awards were grossly excessive by conjoining a dead-wrong account of the history of statutory damages to a dead-wrong account of the Supreme Court's due-process jurisprudence. Its many errors were so fundamental as to invalidate any analysis predicated upon them.

Statutory Damages' account of "legal history" imagined that minimum statutory damages of $5814/infringement must have been purely "compensatory": Understanding the vacuity of Statutory Damages in Copyright Law requires only basic knowledge of the permissible purposes of civil damage awards under U.S. law. At least four such purposes exist:

• First, compensation is a valid purpose of almost all civil damage awards: laws should compensate persons for harm caused by infringements of their legal rights.

• Second, in the contexts of torts and property, deterrence is an equally valid purpose: awards exceeding those needed to compensate may be needed to deter socially destructive acts like shoplifting or the provision of dangerous toys to children.

• Third, in the contexts including torts and property, punishment can also be a valid purpose: if one person infringes copyrights in a way that jeopardizes only copyrights while another person infringes in a way that also jeopardizes personal and national security, the latter conduct could be punished more severely than the former.

• Fourth, rarely, U.S. civil statutes have also punished civil wrongs by imposing quasi-criminal civil penalties payable to the government, rather than to the owner of an infringed private right.

Naturally, the extent to which any of these four purposes should be reflected in the damage awards available to owners of a given federal civil right depends upon how heavily those owners must rely upon damage awards to deter its infringement. For example, damage awards tend to be more important in copyright cases than patent cases because injunctive relief is often a far more powerful remedy in the patent context, particularly against a practicing entity. Similarly, though a shoplifter could face punitive damages in a civil conversion lawsuit, such suits are rarely filed because state criminal laws usually punish and deter shoplifting.

But copyrights are federal rights that cannot be directly protected by the general police-powers of the States. Moreover, injunctions and forfeitures tend to be far more effective in the contexts of patents and counterfeiting than they are in the context of copyrights. Consequently, and more so than in almost any other area of law, copyright owners have always had to rely heavily upon civil damage awards to deter those who would otherwise infringe their exclusive federal rights.

Nevertheless, Statutory Damages in Copyright Law tried to pound the square peg of reality into the round hole of the standard Free-Culture-Movement explanation for the evolution of any aspect of copyright law, which goes like this:

Throughout most of our history, copyright law struck a sound balance between public and private interests. But recently, evil copyright-industry lobbyists conned a suddenly compliant Congress into re-writing copyright law to protect their private interests at the expense of the public, technological progress, and sound policy.

Statutory Damages in Copyright Law thus argued that historically, (since statutory damages in U.S. copyright law "began" until about 1999), "Congress intended for statutory damages to be mainly compensatory in nature," that statutory damages had only "modest compensatory roots and purposes," and that awards intended to deter and punish infringement would have been "inconsistent with sound copyright policy and with Congress' intent in adopting [statutory-damages]." Indeed, it claimed that the no-penalties clause in the statutory-damage provisions of the Copyright Act of 1909 proves that "[s]tatutory damages in U.S. copyright law began as a relatively modest back-up remedy to ensure that copyright owners could obtain at least some measure of compensation when it was difficult to prove how much damages they had suffered as a result of defendants' infringements."

And though Statutory Damages admitted that deterrence may have "perhaps" shaped the remedies available against willful infringers under the Copyright Act of 1976, it claimed that otherwise, "[n]othing in the statute or legislative history indicates any Congressional intent to abandon the long-standing compensatory goal of this unusual [statutory damages] remedy...."

Until recently, of course, when Statutory Damages argued that a suddenly compliant Congress doubled and then trebled the 1976 minimum and maximum statutory-damage awards--while decreeing that statutory damages served previously unknown deterrent and punitive purposes: "The legislative history of the 1999 amendments to Section 504(c) is peppered with statements about the need for 'stringent deterrents' and increased 'penalties' for infringement." Imagine the horror: "deterrents" and "penalties" against infringements of federal civil rights.

But while this analysis conforms perfectly to Free-Cultist theology, it raises some questions. For example, how could Statutory Damages in Copyright Law claim that "[s]tatutory damages in U.S. copyright law began as a relatively modest back-up remedy to ensure... some measure of compensation"? After all, its own analysis "began" with the Copyright Act of 1909, 118 years after U.S. statutory-damages law actually "began."

And, jinkies, Scooby Doo, while we are solving that mystery, here is another: Given the rarity of truly penal civil statutes, why would Congress have put a no-penalties clause in the statutory-damages provisions of the Copyright Act of 1909? Zoinks, Velma, it's almost like preceding U.S. copyright laws must have imposed actual civil penalties, isn't it?

So come on, gang, let's solve some mysteries. Let's actually think about what "sound copyright policy" toward damage awards ought to achieve. Let's discover how statutory damages in U.S. copyright law really "began." Let's accurately describe copyright law under the Copyright Act of 1909 and the Copyright Act of 1976. And let's try to make rational comparisons between historic and modern statutory-damage awards that could actually reveal something whether their purposes and effects have changed.

Sound copyright policy requires remedies for copyright infringement to be deterrent and punitive, not mostly compensatory: Statutory Damages in Copyright Law simply decreed that compensation and avoidance of unjust enrichment, not deterring or punishing infringement, should obviously be the central remedial goal of "sound copyright policy." Like many knee-jerk diktats, this one is dead wrong.

In the Constitution and every enacted U.S. copyright law, copyrights are meant to confer "exclusive rights," (a.k.a. "property rights"), in an author's original expression. Because copyrights are intangible property rights, they heighten all of the usual concerns about transaction costs, appropriability, etc., that are important to any system of property rights. Nevertheless, we grant property rights to producers of socially valuable resources--be they expression or chocolate--for similar reasons.

In both cases, producers of these resources have property rights in the resources that they produce because potential consumers of these resources have property rights in their money. Consequently, the opposing property rights of producers and consumers--if both are enforceable and enforced--can thus ensure that a given consumer's money will be consensually exchanged for a unit of a given producer's resource only upon terms that both the consumer and the producer deem mutually beneficial. This is the central goal of any "sound" copyright policy: encouraging mutually consensual, mutually beneficial exchanges.

Consequently, since the goal of sound policy is to encourage exchanges predicated upon mutual consent and mutual benefit, then the remedies available when someone acquires a socially valuable resource by force--by simply taking it without its producer's consent--must be far more than merely "compensatory."

For example, suppose that a merchant catches someone shoplifting a candy bar. If "sound policy" really dictated that remedies for infringements of property rights should only compensate an owner for harm and recoup any unjust enrichment, then the merchant should have to sue the shoplifter to recover the cost of the candy bar and any "unjust enrichment" resulting from either its resale or the gustatory pleasure of eating it. Under such a regime, shoplifting would become as economically rational and as rampant as copyright piracy would become under the regime of "sound copyright policy" imagined in Statutory Damages.

Consequently, in reality, the penalties for shoplifting are definitely NOT compensatory: they are, and they should be, deterrent and punitive. For similar reasons, the penalties for copyright infringement should also be deterrent and punitive--not just compensatory. Indeed, this will be particularly important as to copyrights because copyright infringement, unlike shoplifting, is very rarely deterred through criminal enforcement.

In conclusion, the "sound copyright policy" imagined by Statutory Damages is absurd and unsound. But no one need take my word for it: this is also the consistent verdict of the history of copyright law in the United States. Consequently, the account of copyright history presented in Statutory Damages had to relentlessly ignore, mischaracterize, or reverse history's actual teachings. Consider, for example, how statutory-damages in U.S. copyright law really "began."

Back in 1790, when U.S. statutory damages really "began," overtly penal statutory damages were the exclusive monetary remedy for copyright infringement: statutory damages in U.S. copyright law never "began," as "a relatively modest back-up remedy to ensure that copyright owners could obtain at least some measure of compensation...." To the contrary, in 1790, George Washington, James Madison and the other authors of the Constitution, the Copyright Clause, and the Due Process Clause imposed statutory damages for copyright infringement that were not just compensatory, deterrent and punitive, but penal in character. The Copyright Act of 1790 imposed statutory penalties for unauthorized copying of $0.50/sheet, an amount so high (at the time) that half of any resulting recovery was payable as a civil penalty to the United States. Nor were the 1790 Act's statutory damages even arguably a "back-up remedy": they were and they would remain the only monetary remedy for copyright infringement for over 65 years and the only monetary remedy for unauthorized copying and publishing for 118 years.

Later, U.S. copyright law created another statutory-damage remedy as it expanded to provide new rights relating to newer types of works. In 1856, Congress conferred a public-performance right upon owners of "dramatic compositions" and provided that courts could award "just" damages for the infringement of these rights "such damages in all cases to be ... not less than one hundred dollars for the first, and fifty dollars for every subsequent performance...."

Unlike the statutory-damage awards for unauthorized copying, these new statutory-damage awards were not expressly penal. But were they still intended to deter and punish? Well, to answer that question, imagine that someone makes 10 innocently infringing public performances of a play. In 2008, the minimum statutory-damage award for such conduct would be $200. By contrast, in 1856, the minimum statutory-damage award would have been about $13,750, in comparable 2008 CPI-adjusted dollars. Given that the 2008 award ranges are intended to deter and punish, the same conclusion follows as to the much higher 1856 awards.

Now that we have analyzed how statutory damages really "began," we can see why the drafters of the Copyright Act of 1909, (which consolidated these two preceding systems of statutory damages), contained a no-penalties clause: historically, most statutory-damage awards had been truly penal in character, so courts might have still treated them as such unless instructed to do otherwise. But that hardly means that competent, informed scholars can thus conclude that the 1909 Act's no-penalties clause also implicitly disavowed the deterrent and punitive purposes central to any genuinely "sound" policy for copyright damages.

In summary, Statutory Damages in Copyright Law provided a dead-wrong account of how "[s]tatutory damages in U.S. copyright law began...." In reality, they began as overt penal measures and even their later, more gentle, incarnations provided the deterrence and punishment dictated by sound copyright policy. Statutory Damages thus bungled its analyses of "sound policy" and how statutory damage law actually "began." Next, we can consider whether Statutory Damages provided a sound account of the purposes and effects of statutory-damage awards under the Copyright Act of 1909.

The $ 5,814/infringement minimum statutory-damage awards authorized by the Copyright Act of 1909 were not really just compensatory: Statutory Damages in Copyright Law offered a deeply flawed analysis of the purposes of statutory damages under the Copyright Act of 1909. Innumerate comparisons of how statutory-damage-award ranges evolved over time were conjoined with legal analysis that got the law backwards while "overlooking" copious contradictory evidence.

Statutory Damages repeatedly made unadjusted comparisons of the value of the statutory-damage-award ranges available in different decades or centuries. Such comparisons inevitably mislead. For example, on page 8 and note 53, the authors of Statutory Damages compared the ranges of the statutory damages available in 1909 and 2008: "[T]he range within awards can be made is so much wider under the 1976 Act than under the 1909 Act, in part because Congress has twice further raised statutory damage minima and maxima...." "The ratio of high to low awards under the 1909 Act was 20:1, with $50000 as the maximum. The ratio of high to low statutory damage awards under the 1976 Act is now 200:1...."

But the critical question is not whether the "ratio" of minimum-to-maximum awards has increased but how and why it has increased. Comparing unadjusted 1909 and 2008 statutory-damage ranges seem to reveal the potentially disturbing change reported in Statutory Damages: the minimum award seems to have decreased a bit (by 20%) but the maximum award seems to have soared by 3000%.

But we seem to see these changes because Statutory Damages compared apples to oranges by ignoring an obvious reality: The value of a dollar varies by orders of magnitude depending on whether it was obtained in 1909 or 2008.

Now, granted, economists could probably debate the best way, in this particular context, to adjust historic dollars for inflation so they can be compared to present dollars. Moreover, the outcome of such debates may depend upon whether we want to understand what an award would have meant to the legislators who authorized it, to the copyright owners who received it, or to the infringers who paid it. Nevertheless, the need to make some adjustment for inflation before comparing 1909 and 2008 statutory-damage awards should be inescapable to any scholar. Nor would making some adjustment unduly burden even math-challenged academes.

This can be proven by adjusting for inflation using the Consumer Price Index (CPI) compiled by the Bureau of Labor Statistics (BLS). (Official BLS CPI data only goes back to 1913, but unofficial sources compile U.S. CPI data back to the 1700s.) CPI data is the most common means to adjust for inflation, and using it seems sensible here: Statutory Damages focuses on questions of legislative intent, and CPI data should suggest how the average 1909 legislator would have understood the statutory-damage-award ranges in the Copyright Act of 1909.

But to be clear: I do not purport to have determined that CPI data provides the best means of adjusting for inflation in this context. Someday, Free-Cultist scholarship could recover from the Lessigation that has afflicted it with the intellectual equivalent of pancreatic cancer. If so, then questions about best adjustments could become relevant. Should such events transpire, I will analyze this matter more seriously, and, perhaps, reach a different conclusion.

But serious analysis is not needed to expose the folly of Statutory Damages. Consequently, I am using CPI data partly because doing so seems sensible, and partly because doing so proves how easily anyone could have made some adjustment for inflation when comparing 1909 and 2008 statutory-damage ranges. My adjustments of post-1912 dollars thus rely upon the math-phobic-friendly BLS Inflation Calculator, and my adjustments of pre-1913 dollars thus rely upon this unofficial table that shows how to make the required calculations. When these sources are used to express 1909 and 2008 statutory-damage awards in 2008 dollars, a different tale is told: