Remedying the statutory damages remedy for secondary copyright infringement liability: Balancing copyright and innovation in the digital age

Journal of the Copyright Society of the U.S.A.

Volumn 56, Issue 2-3, 2009, Pages 265-334

  Berg, Stephanie ^a  

^a Los Angeles office of Irell and Manella LLP ^*  (United States)

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EID: 67650149335     PISSN: 08863520     EISSN: None     Source Type: Journal    
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References (276)

1. Examples of multi-use technologies include, without limitation, VCRs, typewriters, tape recorders, photocopiers, computers, cassette players, compact disc burners, digital video recorders, MP3 players, Internet search engines, and peer-to-peer software.
2. Fred von Lohmann, Senior Staff Attorney with the Electronic Frontier Foundation and counsel to StreamCast in MGM v. Grokster through the Supreme Court appeal in 2005, wrote an article entitled Remedying Grokster in which he explains the current uncertain status of secondary liability of multi-use technologies and how this disturbs innovators and investors' business decisions. See Fred von Lohmann, Remedying Grokster, LAW.COM, July 25, 2005, http://www.law.com/jsp/article.jsp?id= 1122023112436, also available at http://www.eff.org/deeplinks/2005/07/ remedying-i-grokster-i. See also Jessica Litman, The Sony Paradox, 55 CASE W. RES. L. REV. 917, 957 (2005) ("[A] muddier standard could hardly threaten [emerging technologies] with more uncertainty than they face today.") (discussing the uncertainty of the scope of what has come to be known as the "Betamax Doctrine" or the "Betamax Defense" from the Supreme Court case of Sony Corp. v. Universal City Studios, that a maker or vendor of a device will not be held contributorily liable for the infringements made by third parties with the device if the product is "capable of substantial noninfringing uses." 464 U.S. 417, 442 (1984)).
3. As originally enacted in 1976, and modified in 1988 and 1999, under the Berne Implementation Act, Pub. L. No. 100-568,102 Stat. 2853 (1988),
4. and Copyright Damages Improvement Act, Pub. L. No. 106-160, 113 Stat. 1774 (1999).
5. Under 17 U.S.C. § 412, statutory damages are available only to plaintiffs who register their copyrights before bringing suit. In the context of popular music and movies of the large record labels and motion picture studios, it would be unlikely that a work is not registered.
6. 17 U.S.C. § 504(c)(1) (2006).
7. Id. § 504(c)(2). 17 U.S.C. § 504(c)(2) also states that if an "infringer sustains the burden of proving, and the court finds, that such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not less than $200." Id. § 504(c)(2). However, intermediaries held liable for the infringements of their users copying popular music, television shows, and movies will generally not be entitled to the lower statutory floor for innocent infringement. This is because sections 401 (d) and 402(d), added by the Berne Implementation Amendments to the 1976 Act, provide that if a work has a copyright notice, then no weight is given to the defendant's defense based on innocent infringement in mitigation of statutory damages. See id. §§ 401(d), 402(d). And it has now been held that even if the content was downloaded and the data lacked copyright notices, if the defendant had "access" to records bearing the proper notice or "readily could have learned" that the content was under copyright, the defendant will not be entitled to the lower statutory minimum. See also 2 PAUL GOLDSTEIN, GOLDSTEIN ON COPYRIGHT § 14.2.1, 14:51 (3d ed. 2005 & Supp. 2006) (citing BMG Music v. Gonzalez, 430 F.3d 888, 892 (7th Cir. 2005) (defendant "downloaded data rather than discs, and the data lacked copyright notices, but the statutory question is whether 'access' to legitimate works was available."). Thus, statutory damages for secondary infringement against intermediaries for end users copying, downloading and sharing music and movies, readily known to be copyright protected, will be $750 per work infringed at a minimum.
8. 545 U.S. 913 (2005).
9. Brief of Intel Corporation as Amicus Curiae Supporting Affirmance at 5, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (No. 04-480).
10. See A&M Records, Inc. v. Napster, Inc., 114 F. Supp. 2d 896 (N.D. Cal. 2000), affd in part, rev'd in part, 239 F.3d 1004 (2001);
11. In re Aimster Copyright Litig., 334 F.3d 643 (7th Cir. 2003);
12. Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd, 269 F. Supp. 2d 1213 (CD. Cal. 2003), rev'd, 380 F.3d 1154 (9th Cir. 2004),
13. cert, granted, 545 U.S. 913 (2005).
14. See Cahn v. Sony Corp, No. 90 Civ. 4537 (S.D.N.Y. filed July 9, 1990).
15. See Recording Indus. Ass'n of Am. v. Diamond Multimedia Sys, Inc., 29 F. Supp. 2d 624 (CD. Cal. 1998), aff'd, 180 F.3d 1072 (9th Cir. 1999).
16. See Motion Picture Ass'n of Am. v. Replay TV, Civ. No. 01-09801 (CD. Cal. filed Nov. 14, 2001).
17. Several companies producing multi-use technologies were liquidated or went bankrupt because they did not have the necessary funding to go through litigation. For example, neither Record TV.com, (a service that allowed consumers the ability to record TV shows and play them back online, sued by the Motion Picture Association of America (MPAA), see Metro-Gold-wyn-Mayer, Inc. v. Record TV.com, No. (C.D. Cal. filed June 15, 2000)), Scour.com, (a search engine for finding and sharing video, sued by the Recording Industry Association of America (RIAA), the Music Publishers Association (MPA) and the MPAA, see Twentieth Century Fox Film, Inc. v. Scour, Inc., No. 00 Civ. (S.D.N.Y. filed July 20, 2000)), nor ReplayTV (a digital video recorder (DVR), sued by the MPAA, see Motion Picture Ass'n of Am. v. Replay TV, Civ. No. 01-09801 (C.D. Cal. filed Nov. 14, 2001)), had enough funding to go through litigation and were forced to shut down. See Gwyndolyn Mariano, Record TV.com to Sell Assets, CNETNEWS.COM, May 23, 2001, http://www.news.com/RecordTV.com-to-sell-assets/ 2100-1023-3-258187.html ("We were kind of in a catch-22," said RecordTV Chief Executive David Simon. "We couldn't raise funding because of the legal issues⋯ but we also couldn't fight the lawsuit without raising funding."). ReplayTV and its parent SONICblue, Inc. could not afford to defend themselves and were forced into bankruptcy. Fearing a similar fate, the purchaser of the ReplayTV technology, Digital Networks North America, announced in June 2003 that it was removing the contentious "commercial advance" and "send show" features in all future ReplayTV models, to "address concerns of content copyright holders." See also Benny Evangelista, Piracy Suits Chill Valley, Moves Peril Profit, Techies Say, S.F. CHRON., Feb. 20, 2003, at Bl ("SONICblue Chief Executive Officer Greg Ballard said his company is spending $3 million per quarter on legal fees to defend itself [in the Replay case]. Ballard said the legal costs are in turn preventing SONICblue from hiring about 120 employees who could drive future innovations for the company.").
18. No. 00 Civ. 472 JSR, 2000 U.S. Dist. LEXIS 13293 (S.D.N.Y. Sept. 6, 2000).
19. *18.
20. 92 F. Supp. 2d 349, 350 (S.D.N.Y. 2000).
21. Id.
22. *17-18.
23. UMG Recordings, Inc. v. MP3.com, Inc., 00 Civ. 0472 (JSR), 2000 U.S. Dist. LEXIS 17907 (S.D.N.Y. Nov. 14, 2000).
24. In May 2001, Vivendi Universal, the parent corporation of Universal Music Group, Inc., acquired MP3.com. See John Carreyrou & Anna Wilde Matthews, Vivendi Universal to Buy MP3.com for $372 Million in Cash and Stock, WALL ST. J., May 21, 2001, at A3. See also Brief of Amici Curiae The Consumer Electronics Association, The Computer & Communications Industry Association, and The Home Recording Rights Coalition in Support of Affirmance at 9 n.8, Metro-Goldwyn-Mayer Studios, Inc. v. Grok-ster, Ltd, 545 U.S. 913 (2005) (No. 04-480) (citing Brad King, MP3.com Goes Universal, WIRED NEWS, May 25, 2001, http://www.wired.com/news/mp3/0,1285,43972,00.html); see also 4 MELVILLE B. NIMMER & DAVID NIM-MER, NIMMER ON COPYRIGHT § 14.04[E][1] (2007) ("Absent any nexus between damage to plaintiff and benefit to defendant at any magnitude even roughly comparable to that awarded, the result is to introduce randomness or worse into the litigation calculus⋯. Arguably, the result thus is to lose one's corporate existence from untenably huge statutory damages. Moreover, given that the "Beam-It" or "Instant Listening" services could have been launched to like effect with only a fraction of the 4,700 CDs that plaintiff actually utilized, it is hard to know what policy rationale justifies such a high multiplier. By any reasonable metric, the award in UMG v. MP3.com seems likewise disproportionate. Yet subsequent cases have replicated its disproportion. Others, however, are more circumspect.").
25. See infra Part I.F., notes 140-147 and accompanying text.
26. In corporate law the term "corporate veil" refers to the general principle that directors and officers of a corporation are immune from being held personally liable for the debts or liabilities of the corporation.
27. For example, Universal Music Group and EMI Recorded Music sued the cofounder and general partner of the venture capital firm Hummer Winblad for secondary copyright infringement for its role in funding Napster. See Mark A. Lemley & R. Anthony Reese, Reducing Digital Copyright Infringement Without Reducing Innovation, 56 STAN. L. REV. 1345, 1346 (2004). See also UMG Recordings, Inc. v. Hummer Winblad Venture Partners (In re Napster, Inc.), 377 F. Supp. 2d 796 (N.D. Cal. 2005);
28. In re Napster, Inc. Copyright Litig. v. Bertelsmann, No. C MDL-00-1369 MHP, 2005 U.S. Dist. LEXIS 11498 (N.D. Cal. May 31, 2005).
29. Brief of the National Venture Capital Association as Amicus Curiae in Support of Respondents at 17 n.14, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (No. 04-480) (citing John Healey, MP3.com Sues Former Copyright Counsel, L.A. TIMES, Jan. 19, 2002, at C2),.
30. Just as radio was feared by the music industry in the 1920s and 1930s, and the VCR was feared by motion picture studios as a threat to their business in the late 1970s and early 1980s when they sued Sony for the creation of the Betamax, content owners similarly see current technologies that have not had the opportunity to develop their full uses and potential as a threat to their businesses. Fortunately for the public and the motion picture studios, the Supreme Court rejected the music publishers' demand to stop the radio and the motion picture studios' demand to force the Betamax off the market. Today, video and DVD rentals and sales generate substantially more revenue for motion picture studios than movie theater releases. See Brief of the National Venture Capital Association as Amicus Curiae in Support of Respondents at 12, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (No. 04-480).
31. For clarity, statutory damages that set forth the amounts of damages in statute are different from actual damages that are based on the actual injury or economic loss of the plaintiff.
32. See generally U.S. COPYRIGHT OFFICE, COPYRIGHT LAWS OF THE UNITED STATES OF AMERICA, 1783-1862 (describing colonial statutes and evolution of the first federal copyright statute). Statutory damages were in the Statute of Anne of 1710, the British copyright law, and were imported into U.S. law. The Statute of Anne reads: "[I]f any other Bookseller, Printer, or other Person whatsoever, from and after the Tenth Day of April, One thousand seven hundred and ten, within the times Granted and Limited by this Act, as aforesaid, shall Print, Reprint, or Import, or cause to be Printed, Reprinted, or Imported any such Book or Books, without the Consent of the Proprietor or Proprietors thereof first had and obtained in Writing, Signed in the Presence of Two or more Credible Witnesses; or knowing the same to be so Printed or Reprinted, without the Consent of the Proprietors, shall Sell, Publish, or Expose to Sale, or cause to be Sold, Published, or Exposed to Sale, any such Book or Books, without such Consent first had and obtained, as aforesaid, Then such Offender or Offenders shall Forfeit such Book or Books, and all and every Sheet or Sheets, being part of such Book or Books, to the Proprietor or Proprietors of the Copy thereof, who shall forthwith Damask and make Waste-Paper of them: And further, That every such Offender or Offenders, shall Forfeit One Peny [sic] for every sheet which shall be found in his, her, or their Custody, either Printed or Printing, Published or Exposed to Sale, contrary to the true intent and meaning of this Act, the one Moiety thereof to the Queens [sic] most Excellent Majesty, Her Heirs and Successors, and the other Moiety thereof to any Person or Persons that shall Sue for the same, to be Recovered in any of Her Majesties [sic] Courts of Record at Westminster, by Action of Debt, Bill, Plaint, or Information, in which no Wager of Law, Essign, Privilege, or Protection, or more than one Imparlance, shall be allowed." KARL-ERIK TALLMO, THE HISTORY OF COPYRIGHT: A CRITICAL OVERVIEW WITH SOURCE TEXTS IN FIVE LANGUAGES (emphasis added) (forthcoming book to be published by Nisus Publishing), available at http://www. copyrighthistory.com/anne2.html.
33. LIBRARY OF CONGRESS, COPYRIGHT ENACTMENTS OF THE UNITED STATES, 1783-1906, at 11 (Thorvald Solberg, Register of Copyrights, ed., 1906) [hereinafter COPYRIGHT ENACTMENTS, 1783-1906]. A history of damage provisions can also be found in William S. Strauss, Study No. 22, The Damage Provisions of the Copyright Law, (Oct. 1956), as reprinted in 1 OMNIBUS COPYRIGHT REVISION LEGISLATIVE HISTORY ix-32 (George S. Grossman ed., 2001) [hereinafter OMNIBUS LEGISLATIVE HISTORY].
34. Under Massachusetts' copyright act, passed March 17, 1783, the penalty for infringing one of the exclusive rights during the copyright term was a "sum. not exceeding three thousand pounds, nor less than five pounds," COPYRIGHT ENACTMENTS, 1783-1906, supra note 28, at 14; under New Hampshire's act, passed November 7, 1783 an infringer "shall forfeit and pay a sum not exceeding one thousand pounds nor less than five founds," id. at 18; under Rhode Island's act, passed during its December Session 1783, an infringer "shall forfeit and pay a sum not exceeding three thousand pounds, lawful money, nor less than five pounds." Id. at 19.
35. Connecticut's act, passed in the January Session 1783, New Jersey's act, passed May 27, 1783, Pennsylvania's act, passed March 15, 1784, Virginia's act, passed in October 1785, North Carolina's act passed November 19, 1785, Georgia's act passed February 3, 1786, and New York's act passed April 29, 1786, all required offenders to forfeit double the value of all copies infringed (either printed, distributed, sold or exposed for sale). See id., supra note 28, at 11-30.
36. Maryland's act, passed on April 21, 1783, required the infringer to "forfeit twopence for every sheet which shall be found in his, her or their custody," and South Carolina's act, passed on March 26, 1784, required the infringer to "forfeit one shilling for every sheet found in his, her or their custody, either printed, published or exposed for sale." See id., supra note 28, at 11-30.
37. The original Copyright Act states: And be it further enacted, That if any their person or persons, from and after the recording the title of any map, chart, book or books, and publishing the same as aforesaid, and within the time limited and granted by this act, shall print, reprint, publish, or import or cause to be printed, reprinted, published or imported ⋯ any copy or copies of such map, chart, book or books, without the consent of the author or proprietor thereof, ⋯ then such offender or offenders shall forfeit all and every copy and copies of such map, chart, book or books, and all and every sheet and sheets ⋯ to the author or proprietor ⋯. And every such offender and offenders shall also forfeit and pay the sum of fifty cents for every sheet which shall be found in his or their possession, either printed or printing, published, imported or exposed to sale. Act of May 31, 1790, ch. 15,1 Stat. 124, as reprinted in COPYRIGHT ENACTMENTS, 1783-1906, supra note 28, at 33 (emphasis added).
38. The 1856 amendment to the Copyright Act states:. Any manager, actor, or other person acting, performing, or representing the said composition, without or against the consent of the said author or proprietor,⋯ shall be liable to damages to be sued for and recovered by action on the case or other equivalent remedy, with costs of suit⋯ such damages in all cases to be rated and assessed at such sum not less than one hundred dollars for the first, and fifty dollars for every subsequent performance, as the court having cognizance thereof shall appear to be just. Act of August 18, 1956, ch. 169,11 Stat. 138 (1856), as reprinted in id. at 43 (emphasis added).
39. Act of July 8, 1870, ch. 230, § 100, 16 Stat. 214, as reprinted in id. at 49.
40. The cap on the total sum that could be received for photographs that were not works of fine art was put in place because of a newspaper's particular experience with a photographer. The photographer concealed the copyright signature on his photograph but still had it there and then waited until the newspaper had printed thousands of copies of his photograph to sue the paper for immense damages. See 1 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, pt. C at 52 (Fulton Brylawski & Abe Goldman comps., 1976).
41. The 1895 Act states: If any person, after the recording of the title of any map, chart, dramatic or musical composition, print, cut, engraving, or photograph, or chromo, or of the description of any painting, drawing, statue, statuary, or model or design intended to be perfected and executed as a work of the fine arts, as provided by this act, shall, within the term limited, contrary to the provisions of this act, and without the consent of the proprietor of the copyright first obtained in writing, signed in presence of two or more witnesses, engrave, etch, work, copy, print, publish, dramatize, translate, or imprint, either in whole or in part, or by varying the main design, with intent to evade the law, or, knowing the same to be so printed, published, dramatized, translated, or imported, shall sell or expose to sale any copy of such map or other article, as aforesaid, he shall forfeit to the proprietor all the plates on which the same shall be copied, and every sheet thereof, either copied or printed, and shall further forfeit one dollar for every sheet of the same found in his possession, either printing, printed, copied, published, imported, or exposed for sale; and in the case of a painting, statue, or statuary, he shall forfeit ten dollars for every copy of the same hi his possession, or by him sold or exposed for sale: Provided, however, That in case of any such infringement of the copyright of a photograph made from any object not a work of fine arts, the sum to be recovered in any action brought under the provisions of this section shall be not less than one hundred dollars, nor more than five thousand dollars, and: Provided, further, That in case of any such infringement of the copyright of a painting, drawing, statue, engraving, etching, print, or model or design for a work of the fine arts of or a photograph of a work of the fine arts, the sum to be recovered in any action brought through the provisions of this section shall be not less than two hundred and fifty dollars, and not more than ten thousand dollars. Act of Mar. 2, 1895, ch. 194, § 4965, 28 Stat. 965, as reprinted in COPYRIGHT ENACTMENTS, 1783-1906, supra note 28, at 65-66.
42. Stenographic Report of the Proceedings of the Librarian's Conference on Copyright, 1st Sess, New York City, May 31-June 2, 1905. See 1 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, supra note 35, pt. C at vii-ix.
43. The associations invited to participate, in alphabetical order, included the American (Authors') Copyright League, American Bar Association, American Dramatists Club, American Institute of Architects, American Library Association, American Newspaper Publishers' Association, American Publishers' Copyright League, Architectural League of America, Association of American Directory Publishers, Association of Theatre Managers of Greater New York, International Advertising Association, International Typographical Union, Lithographers' Association, Manuscript Society, Music Publishers' Association of the United States, National Academy of Design, National Association of Photo-Engravers, National Educational Association, National Institute of Arts and Letters, National Sculpture Society, Periodical Publishers' Association of America, Photographers' Copyright League of America, Print Publishers' Association of America, Society of American Artists, The Sphinx Club, and the United Typothetae of America. See 1 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, supra note 35, pt. C at iii-vi.
44. See supra note 36. See also the Appendix for a chart listing the various bills and statutes concerning statutory damages for copyright infringement between 1895 and 1999.
45. See infra note 43 and accompanying text.
46. See infra note 49 and accompanying text.
47. See 2 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, supra note 35, pt. D at 246.
48. See id. at 248.
49. See id. at 248-51.
50. See id. at 251.
51. See 1 id. pt. C at 69-70.
52. See id. at 70-71 (emphasis added).
53. See id. at 72.
54. Stenographic Report of the Proceedings of the Librarian's Conference on Copyright, 2d Session, New York City, Nov. 1-4, 1905, as reprinted in 2 id. pt. D at 243.
55. See id. at 241-42.
56. Memorandum Draft of a Bill to Amend and Consolidate the Acts Respecting Copyright § 84, COPYRIGHT OFFICE BULLETIN NO. 10, at 42-43 (1906)
57. (as part of the Stenographic Report of the Proceedings of the Librarian's Conference on Copyright, 3d Session, at Library of Congress, Washington, D.C., March 13-16, 1906), as reprinted in 3 id. pt. E at lxiii-iv.
58. See id. at 235 (statutory damages were not meant to be "penal in any sense").
59. George Haven Putnam of the American Publishers' Copyright League explained why the publishers wanted the right to choose to receive actual damages and profits or statutory damages: We want to secure publishers, more particularly in connection with the increasing infringement by periodicals of copyrighted material. We want to secure the right or the privilege of proceeding under one of at least two headings. If the matter is in such shape that damages could be proven, and an accounting of profits could be secured, - to take the case of a piracy of a circular - we prefer that means of securing the copyright damages. If, on the other hand, the directors, for instance, of a daily paper issue installments daily of a pirated article, you cannot prove that the paper has gained anything therefrom, nor can you show how much the owner has lost. We want to be in a position to secure a fixed payment, whether you want to call it penalties or not, a fixed payment which shall be small enough to enable the jury to give us a verdict, that shall be high enough to deter similar piracies. The suggestion was for a payment of $1.00 a copy with a minimum of $100 and a possible maximum of $5,000. Id. at 235.
60. See id. at 228.
61. See id. at 243.
62. See id. at 229.
63. See id. at 258.
64. See id. at 232.
65. Id.
66. See id. at 240.
67. See id. at 241.
68. See id. at 244.
69. See S. 6330/H.R. 19853, 59th Cong, § 5 (1906), as reprinted in 1 id. pt. B at 12 (emphasis added).
70. S. 6330/H.R. 19853, 59th Cong. § 5 (1906), as reprinted in id. at 41-42.
71. A player piano is a mechanical piano designed to reproduce key actions. The way it works is that the piano hammers are made to touch the strings by air pressure on the keyboard (instead of someone's fingers). This air pressure is regulated by a roll of perforated paper that runs over a series of slits which correspond with the musical scale and then the air is released only where the holes momentarily pass over the slits.
72. S. 6330/H.R. 19853 § 1(g), 59th Cong. (1906), as reprinted in id. at 9-10.
73. S. 6330/H.R. 19853 § 23(b)(1), 59th Cong. (1906), as reprinted in id. at 41-42.
74. Arguments on the Bills S. 6330 and H.R. 19853 to Amend and Consolidate the Acts Respecting Copyright, Before the Joint Committees on Patents, 59th Cong. (June 6-9, 1906) (statement of Frederick W. Hedgeland, Kimball Company), as reprinted in 4 id. pt. H at 186.
75. Id.
76. Arguments on the Bills S. 6330 and H.R. 19853 to Amend and Consolidate the Acts Respecting Copyright, Before the Joint Committees on Patents, 59th Cong. (June 6-9, 1906) (statement of Charles S. Burton, Melville Clark Piano Co.), as reprinted in id. at 199-200.
77. Arguments on the Bills S. 6330 and H.R. 19853 to Amend and Consolidate the Acts Respecting Copyright, Before the Joint Committees on Patents, 59th Cong. (Dec. 7-11, 1906) (statement of Charles S. Burton, Melville Clark Piano Co.), in id. pt. J at 36 [hereinafter Dec. 1906 Hearings].
78. The Act stated: And provided further, and as a condition of extending the copyright control to such mechanical reproductions, That whenever the owner of a musical copyright has used or permitted or knowingly acquiesced in the use of the copyrighted work upon the parts of instruments serving to reproduce mechanically the musical work, any other person may make similar use of the copyrighted work upon the payment to the copyright proprietor of a royalty of two cents on each such part manufactured, to be paid by the manufacturer thereof.⋯" Act of March 4, 1909, § 1(e), 60th Cong. (1909) (enacted) (effective July 1, 1909), as reprinted in 6 id. pt. T at 138.
79. See Timothy Wu, Copyright's Communications Policy, 103 MICH. L. REV. 278, 303 (2004) (providing a history of the debate between music publishers and recording industry and mechanical devices and the resulting compulsory license).
80. 175 U.S. 148 (1899).
81. See Dec. 1906 Hearings, as reprinted in 4 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, supra note 35, pt. J at 106.
82. See id.
83. Brady, 175 U.S. at 154.
84. The House report stated: The provision that "in lieu of actual damages and profit such damages shall be awarded as shall appear to the court just, not exceeding the sum of $5,000," is a modification of existing law, decreasing instead of increasing the amount which may be obtained in this way. There have been actions brought under existing law where the penalty would have been $30,000. H.R. REP. NO. 59-7083 (with H.R. 25133 attached), as reprinted in 6 id., supra note 35, pt. N at 14.
85. See supra note 72 and accompanying text.
86. Act of March 4, 1909, 60th Cong. (1909) (effective July 1, 1909), as reprinted in 6 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, supra note 35, pt. T at T147-48 (emphasis added).
87. See 2 GOLDSTEIN, supra note 6, §§ 14.2.1,14:41;
88. see also 4 NIMMER & NIMMER, supra note 20, § 14.04[F][1].
89. See 4 NIMMER & NIMMER, supra note 20, § 14.04[F][1][a] (citing Washingto-nian Publ'g Co. v. Pearson, 140 F.2d 465 (D.C. Cir. 1944);
90. Rudolf Lesch Fine Arts, Inc. v. Metal, 51 F. Supp. 69 (S.D.N.Y. 1943)).
91. In Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390 (1940), the Supreme Court interpreted the "in lieu" clause of section 101(b) (then section 25(b) of the Copyright Act of 1909, 35 Stat. 1075 (1909)) to the effect that it was not applicable if profits were proved, and that in such cases statutory damages could not be recovered. See also 4 NIMMER & NIMMER, supra note 81, § 14:42 (citing Universal Pictures Co. v. Harold Lloyd Corp., 162 F.2d 354, 378 (9th Cir. 1947))
92. In F.W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228 (1952), the Supreme Court held that a trial judge is free to decide whether, as a matter of fairness, he prefers statutory damages to proven damages and/or profits.
93. H.R. REP. NO. 60-2222, at 15 (1909).
94. Douglas v. Cunningham, 294 U.S. 207, 209 (1935).
95. Act of Aug. 24, 1912, ch. 356 37 Stat. 489 (amending section 25 of the 1909 Act) (formerly codified at 17 U.S.C. § 101).
96. See Pub L. No. 576, 66. Stat. 752 (1952) (formerly codified at 17 U.S.C. § 101).
97. See Wu, supra note 73, at 308.
98. William S. Strauss, Study No. 22: The Damage Provisions of the Copyright Law 22 (Oct. 1956), in COPYRIGHT LAW REVISION: STUDIES PREPARED FOR THE SUBCOMMITTEE ON PATENTS, TRADEMARKS AND COPYRIGHTS OF THE COMMITTEE ON THE JUDICIARY PURSUANT TO S. RES. 240: STUDIES 22-25 (Comm. Print 1960) [hereinafter COPYRIGHT LAW REVISION STUDIES 22-25], as reprinted in 2.OMNIBUS LEGISLATIVE HISTORY, supra note 28.
99. S. 2465, 74 Cong. § 17 (1935). For a discussion of the Duffy bill, see Strauss, supra note 90, at 23-26.
100. See Strauss, supra note 90, at 25.
101. For reprints of these studies, see 1 & 2 OMNIBUS LEGISLATIVE HISTORY, supra note 28.
102. See Strauss, supra note 90.
103. See id. at 31-32.
104. See, e.g., Comments of Irwin Karp (Mar. 29, 1957), Comments and Views Submitted to the Copyright Office on the Damage Provisions of the Copyright Law, in COPYRIGHT LAW REVISION STUDIES 22-25, supra note 90, at 44, as reprinted in 2.OMNIBUS LEGISLATIVE HISTORY, supra note 28.
105. Comments of Melville B. Nimmer (June 4, 1958), Comments and Views Submitted to the Copyright Office on the Operation of the Damage Provisions of the Copyright Law, in COPYRIGHT LAW REVISION STUDIES 22-25, supra note 90, at 104, as reprinted in id.
106. COPYRIGHT LAW REVISION: REPORT OF THE REGISTER OF COPYRIGHTS ON THE REVISION OF THE U.S. COPYRIGHT LAW 106 (Comm. Print 1961), as reprinted in 3 id.
107. Comments of George E. Frost (Nov. 20, 1956), Comments and Views Submitted to the Copyright Office on the Damage Provisions of the Copyright Law, in COPYRIGHT LAW REVISION STUDIES 22-25, supra note 90, at 38, as reprinted in 2 id.
108. Comments of Joshua Binion Cahn (Nov. 20, 1956), Comments and Views Submitted to the Copyright Office on the Damage Provisions of the Copyright Law, in COPYRIGHT LAW REVISION STUDIES 22-25, supra note 90, at 39, as reprinted in id.
109. Comments of Elisha Hanson (June 24, 1957), Comments and Views Submitted to the Copyright Office on the Damage Provisions of the Copyright Law, in COPYRIGHT LAW REVISION STUDIES 22-25, supra note 90, at 57, as reprinted in id.
110. Comments of Robert Gibbon (Curtis Publishing Co.) (Oct. 24, 1958), Comments and Views Submitted to the Copyright Office on the Damage Provisions of the Copyright Law, in COPYRIGHT LAW REVISION STUDIES 22-25, supra note 90, at 58, as reprinted in id.
111. See, e.g., Robert Stigwod Group, Ltd. v. O'Reilley, 530 F.2d 1096 (2d Or. 1976), cert, denied, 429 U.S. 848 (1976) (separate statutory damages were awarded for each of forty-eight unauthorized performances of Jesus Christ Superstar).
112. Comments of Harry G. Henn (May 13, 1957), Comments and Views Submitted to the Copyright Office on the Damage Provisions of the Copyright Law, in 2 OMNIBUS LEGISLATIVE HISTORY, supra note 28, at 45.
113. Id.
114. CAMBRIDGE RESEARCH INSTITUTE, OMNIBUS COPYRIGHT REVISION: COMPARATIVE ANALYSIS OF THE ISSUES 143 (1973) [hereinafter OMNIBUS COPYRIGHT REVISION: COMPARATIVE ANALYSIS].
115. Id.
116. See National Commission on New Technological Uses of Copyrighted Works, Final Report 54-55 (July 31, 1978), available at http://digital-law-ordine.info/CONTU/contu2.html.
117. Pub. L. No. 93-573 § 201(b), 88 Stat. 1873 (1974).
118. Id. § 201(c).
119. See National Commission on New Technological Uses of Copyrighted Works, Final Report, supra note 108, ch. 4 (current version codified at 17 U.S.C. § 108 (2006)).
120. See id. ch. 3, available at http://digital-law-online.info/ CONTU/contu6.html (current version codified at 17 U.S.C. § 117 (2006)).
121. See OMNIBUS COPYRIGHT REVISION: COMPARATIVE ANALYSIS, supra note 106, at 145.
122. Id.
123. This section states: The court shall remit statutory damages in any case where an infringer believed and had reasonable grounds for believing that his or her use of the copyrighted work was a fair use under section 107, if the infringer was: (i) an employee or agent of a nonprofit educational institution, library, or archives acting within the scope of his or her employment who, or such institution, library, or archives itself, which infringed by reproducing the work in copies or phonorecords; or (ii) a public broadcasting entity which or a person who, as a regular part of the nonprofit activities of a public broadcasting entity (as defined in subsection (g) of section 118) infringed by performing a published nondramatic literary work or by reproducing a transmission program embodying a performance of such a work. 17 U.S.C. § 504(c)(2) (2006).
124. Pub. L. No. 94-553, § 504(c), 90 Stat. 2585 (1976),
125. as reprinted in 5 KAMINSTEIN LEGISLATIVE HISTORY PROJECT: A COMPENDIUM AND ANALYTICAL INDEX OF MATERIALS LEADING TO THE COPYRIGHT ACT OF 1976, at 163-64 (Alan Latman & James F. Lightstone eds., 1981).
126. Id. § 504(c)(1).
127. Id. § 504(c)(2).
128. Id.
129. Pub. L. No. 100-568, 102 Stat. 2853 (1988).
130. See 134 Cong. Rec. S14.565 (daily ed. Oct. 5, 1988) (statement of Sen. Patrick Leahy); see also 134 Cong. Rec. H10,094 (daily ed. Oct. 12, 1988) (statement of Rep. Robert Kastenmeier); see also 4 NIMMER & NIMMER, supra note 20, § 14.04[B][1][b].
131. S. REP. NO. 100-352, at 46-47 (1988).
132. The Copyright Damages Improvement Act, Pub. L. No. 106-160, 113 Stat. 1774 (1999).
133. See 145 Cong. Rec. H12,884 (daily ed. Nov. 18, 1999) (remarks of Rep. Howard Coble); H.R. REP. NO. 106-216, at 3 (1999).
134. Id. ("Courts and juries must be able to render awards that deter others from infringing intellectual property rights. It is important that the cost of infringement substantially exceed the costs of compliance.").
135. See 145 Cong. Rec. H12,884 (daily ed. Nov. 18, 1999) (remarks of Rep. Berman).
136. Id. (remarks of Rep. Coble) (emphasis added).
137. See 145 Cong. Rec. S7452 (daily ed. June 22, 1999) (remarks of Sen. Hatch); see also 145 Cong. Rec. S8190 (daily ed. July 1, 1999).
138. See Douglas v. Cunningham, 294 U.S. 207, 209 (1935) ("The phraseology of the section was adopted to avoid the strictness of construction incident to a law imposing penalties, and to give the owner of a copyright some recompense for injury done him, in a case where the rules of law render difficult or impossible proof of damages or discovery of profits.").
139. See Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101,113-14 (2d Cir. 2001) (approving jury award of $275,000 over defendant's objection that it bore "lit- tle relationship" to its $19,000 in profits because "statutory damages are not meant to be merely compensatory or restitutionary"); see also H.R. REP. No. 106-216, at 2 (1999). (This report accompanied H.R. 1761,106th Cong., (1999), which was not enacted but contained the same provisions increasing the amount of statutory damages as H.R. 1761,106th Cong. (1999), which was enacted as the Digital Theft Deterrence and Copyright Damages Improvement Act of 1999.) The section of the report on the purpose of the bill began with the statement: "The purpose of [the bill] is to provide more stringent deterrents to copyright infringement and stronger enforcement of the laws enacted to protect intellectual property rights." Id.
140. See 4 NIMMER & NIMMER, supra note 20, §14.04[A] (explaining that a copyright owner may elect to recover statutory damages "regardless of the adequacy of the evidence offered as to his actual damages" and "even if he has intentionally declined to offer such evidence although it was available.").
141. The statute clarifies that "an award of statutory damages [is] for all infringements involved in the action, with respect to any one work." 17 U.S.C. § 504(c)(1) (2006).
142. The House Report on the 1976 Act is emphatic that "[a] single infringer of a single work is liable for a single amount [within the statutory minimum and maximum] no matter how many acts of infringement are involved in the action and regardless of whether the acts were separate, isolated or occurred in a related series." H.R. REP. NO. 94-1476, at 167 (1976).
143. However as noted previously, § 504(c)(2) did provide for a remission of statutory damages for educational institutions and nonprofit public broadcasters. See supra notes 113, 115 and accompanying text.
144. 17 u.S.C. § 504(c)(1) (2006).
145. See Nintendo of Am., Inc. v. Dragon Pac. Int'l, 40 F.3d 1007, 1010 (9th Cir. 1994) ("The district court has wide discretion in setting the amount of statutory damages under the Copyright Act."); Harris v. Emus Records Corp., 734 F.2d 1329, 1335 (9th Cir. 1984) ("The court has wide discretion in determining the amount of statutory damages to be awarded, constrained only by the specified maxima and minima.") (citing L.A. Westermann Co. v. Dispatch Printing Co., 249 U.S. 100, 106-07 (1919)).
146. See GOLDSTEIN, supra note 6, §§ 14.2.1, at 14:43. In Columbia Pictures v. Krypton Broadcasting of Birmingham, the district court found Elvin Feltner vicariously and contributorily liable for the copyright infringement committed by the television stations he owned. The trial judge originally fixed statutory damages at $20,000 for each of the 440 works infringed for a total award of $8.8 million against Feltner. Feltner appealed, stating he had a right to a jury trial on the issue of statutory damages, and the Supreme Court held that if a party demands, a jury must determine the amount of statutory damages. Ironically, after Feltner fought for a jury trial on the issue of statutory damages, on remand to the district court for a jury trial on damages, the jury awarded $72,000 for each of the 440 works, totaling $31.68 million in statutory damages. Feltner then appealed this award as excessive. The appellate court affirmed the jury's verdict stating: "Although the jury's $31.6 million verdict is substantial, it is equal to a per work infringed award that is well within the statutory range for willful infringement." 259 F.3d 1186, 1195 (9th Cir. 2001).
147. See 4 NIMMER & NIMMER, supra note 20, § 14.04[C]; Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998).
148. BMG v. Gonzalez, 430 F.3d 888, 892-93 (7th Cir. 2005) (holding that a party is not entitled to a jury on the issue of statutory damages if the plaintiff is seeking only minimum statutory damages because of the absence of discretion).
149. See Tiffany (NJ), Inc. v. Luban, 282 F. Supp. 2d 123, 125 (S.D.N.Y. 2003) (citing Fitzgerald Publ'g Co., Inc. v. Baylor Publ'g Co., 807 F.2d 1110, 1117 (2d Cir. 1986));
150. see also King Records, Inc. v. Bennett, 438 F. Supp. 2d 812, 854 (M.D. Tenn. 2006) (listing similar factors and also looking at defendant's pre-lawsuit conduct);
151. *16-19 (S.D.N.Y. Sept. 6, 2000) (also looking at the size and scope of the defendant's copyright infringement and the defendant's size and financial assets).
152. See also Atl. Recording Corp. v. Chan, 325 B.R. 432, 436 (Bankr. N.D. Cal. 2005) (awarding a judgment in excess of $136 million where 1,514 recordings had been infringed).
153. 491 F.3d 574 (6th Cir. 2007).
154. Id. at 587-88.
155. 302 F. Supp. 2d 455, 458 & n.l (D. Md. 2004).
156. Id. at 459.
157. Id. at 459-60.
158. Id. at 460.
159. See Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101,113-14 (2d Cir. 2001) (approving jury award of $275,000 over defendant's objection that it bore "little relationship" to its $19,000 in profits because "statutory damages are not meant to be merely compensatory or restitutionary"); MCA Television, Ltd. v. Feltner, 89 F.3d 766 (11th Cir. 1996), cert, denied, 520 U.S. 1117 (1997) (awarding licensor of syndicated television programs $9 million in statutory damages based on $10,000 for each of 900 unauthorized broadcasts); Sony Music Entm't v. Cassette Prods., Inc., 41 U.S.P.Q.2d 1198 (D.NJ. 1996) (awarding statutory damages of $9.1 million representing $100,000 per work, the maximum amount at the time, for finding willful infringement of ninety-one sound recordings).
160. See In re Napster, Inc. Copyright Litig. v. Bertelsmann, Nos. C MDL-00-1369 MHP, C 04-1671 MHP, 2005 WL 1287611 (N.D. Cal. May 31, 2005). The court stated: [T]he court recognizes that under certain circumstances, large awards of statutory damages can raise due process concerns. It is how settled law that "grossly excessive" punitive damages awards violate the Due Process Clause. State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003);
161. *11.
162. See Blaine Evanson, Due Process in Statutory Damages, 3 GEO. J.L. & PUB. POL'Y 601, 602 (2005);
163. see also J. Cam Barker, Grossly Excessive Penalties in the Battle Against Illegal File-Sharing: The Troubling Effects of Aggregating Minimum Statutory Damages for Copyright Infringement, 83 TEX. L. REV. 525 (2004).
164. See Evanson, supra note 149, at 603.
165. This is a crucial issue as record companies are suing individuals for sharing songs on peer-to-peer (P2P) file-sharing networks in great numbers. The Electronic Frontier Foundation (EFF) notes that the recording industry has now filed, settled, or threatened, legal actions against well over 20,000 individuals. Electronic Freedom Foundation, RIAA v. The People, http://w2. eff.org/IP/P2P/riaa-v-thepeople.php (last visited Dec. 10, 2008). In a later report, it noted that the RIAA "shows no signs of slowing its lawsuit campaign, with the members of the Recording Industry Association of America (RIAA) filing hundreds of new lawsuits each month - including, most recently, 400 per month targeted against college students." Electronic Frontier Foundation, RIAA v. The People: Four Years Later 2 n.5 (Aug. 2007), http://w2.eff.org/IP/P2P/riaa-at-four.pdf (citing Eliot Van Buskirk, A Poison Pen from the RIAA, WIRED BLOG NETWORK, Feb. 28, 2007, http://www.wired.com/ politics/onlinerights/news/2007/02/72834), http://w2.eff.org/IP/P2P/riaa-at- four.pdf. And the constitutional issue around statutory damages has recently been brought to court again in a case of file sharing. In October 2007, in Capitol Records, Inc. v. Thomas, plaintiff record companies brought suit against a single mother for direct copyright infringement for having twenty-four songs in her Kazaa shared folder available for others to download. The plaintiff record companies elected statutory damages and the jury awarded $9,250 for each song infringed, for a total verdict of $222,000. The defendant has since successfully appealed this award as excessive and in violation of her due process rights. See Capitol Records, Inc. v. Thomas, 579 F. Supp. 2d 1210 (D. Minn. 2008).
166. See, e.g., Yurman Design, Inc. v. PAJ, Inc., 93 F. Supp. 2d 449, 462 (S.D.N.Y. 2000) (sustaining an award of statutory damages of $275,000 when the defendant had only earned $19,000 "as both a specific and general deterrent to future infringement"). Though it is a case of direct infringement, the recent award of statutory damages in Capital Records v. Thomas shows how both specific and general deterrence are taken into account when determining the amount of the award. The jury debated for five hours on the appropriate statutory damages award before settling on $9,250 for each of the twenty-four songs that were shared in the defendant's Kazaa folder, hoping to send a message to direct infringers that high damages would be awarded against them. According to an interview with one of the jurors, at least two jurors wanted to award the RIAA the maximum $150,000 for each of the songs, while one juror held out for hours for the $750 minimum for each violation of the Copyright Act. The interviewed juror stated: "We wanted to send a message that you don't do this, that you have been warned." See David Kravets, RIAA Juror: 'We Wanted to Send A Message', WIRED BLOG NETWORK, Oct. 9, 2007, http://blog.wired.com/27bstroke6/2007/10/riaa-ju-ror-we-w.html.
167. See Ronald J. Mann & Seth R. Belzley, The Promise of Internet Intermediary Liability, 47 WM. & MARY L. REV. 239,246-49,251 (2005) (arguing that the economic principle of identifying the least-cost avoider is more attractive in the context of Internet intermediary liability than in the traditional offline contexts because of the ease of identifying the intermediary, the ease of the intermediary monitoring end users and the difficulty of regulating the conduct of end users);
168. see also Douglas Lichtman & William Landes, Indirect Liability for Copyright Infringement: An Economic Perspective, 16 HARV. J. LAW & TECH. 395, 405-06 (2003).
169. These arguments seem to largely follow the treatment of Pigou in The Economics of Welfare in which he concludes that it is desirable to make the business firms that cause any external harm to others liable for all of the damage caused. See Ronald H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960).
170. Mark A. Lemley, Rationalizing Internet Safe Harbors, J. TELECOMM. & HIGH TECH L. 101, 111 (2007).
171. Lemley & Reese, supra note 23, at 1377-78, 1379 (noting that suing intermediaries differs in fundamental ways from suing counterfeiters).
172. Coase, supra note 153, at 34.
173. Wu, supra note 73, at 363.
174. Taking what Wu refers to as a highly "open position" to communications policy that is highly optimistic about the market, one could argue that despite the fact that infringement can be demonstrated to harm authorial incentives in the short term, it will not destroy them in the long term. (And consumer welfare will be serviced both in the short term (free content) and also the long term (cheaper content).) And authorial incentives can be restored by the demands of the market - the market will demand content and will have to provide a mechanism to pay the necessary amount to provide incentives for its creation. See id. at 363. The Ninth Circuit in MGM v. Grokster took just this position: The introduction of new technology is always disruptive to old markets, and particularly to those copyright owners whose works are sold through well-established distribution mechanisms. Yet, history has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player. 380 F.3d 1154, 1167 (9th Cir. 2004).
175. Brett M. Frischmann & Mark A. Lemley, Spillovers, 107 COLUM. L. REV. 257, 276 (2007).
176. Lemley & Reese, supra note 23, at 1350-51.
177. Mann & Belzley, supra note 153, at 266.
178. This is based on an analogy to products liability found in James A. Henderson, Jr. & Aaron D. Twerski, Closing the American Products Liability Frontier: The Rejection of Liability Without Defect, 66 N.Y.U. L. REV. 1263, 1291 (1991).
179. RIAA v. The People: Four Years Later, supra note 151, at 12 (noting that empirical data shows that P2P file sharing continues to increase). "The growth in P2P popularity has continued in 2006 and 2007. Big Champagne reports that the average number of simultaneous users on P2P networks had swelled to 9.35 million. The NPD Group, a marketing research firm, recently announced that 15 million U.S. households downloaded from P2P networks in 2006, with total P2P file sharing volume up 50% from 2005." Id. (citing John Boudreau, Illegal File Sharing Showing No Letup, SEATTLE TIMES BUS. & TECH., July 3, 2006, http://seattletimes.nwsource.com/html/businesstechnology/2003101281- btfilesharing03.html and Eric Bangeman, P2P Traffic Shifts Away from Music, Towards Movies, ARS TECHNICA, July 5, 2007, http://arstechnica.com/news.ars/post/20070705-p2p-traffic-shifts-away-from- music-towards-movies.html), also available at http://w2.eff.org/IP/P2P/ riaa-at-four.pdf).
180. Id. at 2 (citing John Borland, Peer to Peer: As the Revolution Recedes, CNET NEWS.COM, Dec. 31, 2001, http://news.com.com/2100- 1023-277478.html); see also John Borland, P2P Users Traveling by eDonkey, CNET NEWS.COM, Aug. 28, 2005, http://news.com.com/ P2P+users+traveling+by+eDonkey/2100-1025-3-5843859.html.
181. Lichtman & Landes, supra note 153, at 404-07.
182. Lemley, supra note 154, at 14.
183. Henderson & Twerski, supra note 162, at 1321.
184. Lichtman & Landes, supra note 153, at 405.
185. id. at 406.
186. Lemley & Reese, supra note 23, at 1391 (citing Gary S. Becker, Crime and Punishment, An Economic Approach, 76 J. POL. ECON. 169, 176-79 (1968)).
187. LAWRENCE LESSIG, FREE CULTURE: HOW BIG MEDIA USES TECHNOLOGY AND THE LAW TO LOCK DOWN CULTURE AND CONTROL CREATIVITY 192 (2004).
188. R. Anthony Reese, The Problems of Judging Young Technologies: A Comment on Sony, Tort Doctrines, and the Puzzle of Peer-to-Peer, 55 CASE W. RES. L. REV. 877, 894 (2005).
189. Frishchmann & Lemley, Spillovers, supra note 157.
190. Lemley & Reese, supra note 23, at 1388.
191. Id.
192. Wu, supra note 73, at 355 (citing The WIPO Copyright Treaties Implementation Act and Online Copyright Liability Limitation Act: Hearing Before the Sub-comm. on Courts and Intellectual Property, 105th Cong. (1997)).
193. Lemley, supra note 154, at 14.
194. See generally Michael J. Meurer, Controlling Opportunistic and Anti-Competitive Intellectual Property Litigation, AA B.C. L. REV. 509, 523-24 (2003) (observing the harms to emerging companies from the risks of lawsuits, including loss of investors, delayed market entry, and the abandonment of new products).
195. In re Napster, Inc. Copyright Litig., Nos. C-MDL-00-1369-MHP, C-04-1166-MHP, 2005 WL 273178 (N.D. Cal. Feb. 3, 2005).
196. Peter S. Menell, Can Our Current Conception of Copyright Law Survive the Internet Age?, 46 N.Y.L. SCH. L. REV. 63, 197 (2002).
197. Brief of the National Venture Capital Association as Amicus Curiae in Support of Respondents at 2, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (No. 04-480).
198. Id. at 4-5.
199. Id. at 30.
200. Recording Indus. Ass'n of Am. v. Diamond Multimedia Sys., Inc., 180 F.3d 1072, 1075 (9th Cir. 1999).
201. Id. at 1081.
202. See infra note 220 and accompanying text.
203. See infra note 220.
204. 17 U.S.C. § 512(a) (2006).
205. Id. § 512(b).
206. Id. § 512(c).
207. Id. § 512(d).
208. An "online service provider" is defined as "an entity offering transmission, routing, or providing connections for digital online communications, between or among points specified by a user, of material of the user's choos-ing, without modification to the content of the material as sent or received" or "a provider of online services or network access, or the operator of facilities thereof." Id. § 512(k)(1)(A-B).
209. Hendrickson v. eBay, Inc., 165 F. Supp. 2d 1082, 1087-88 (CD. Cal. 2001) (eBay qualifies as a service provider).
210. Corbis v. Amazon.com, 351F. Supp. 2d 1090 (W.D. Wash. 2004) (holding Amazon's zShops entitled to DMCA safe harbor); Hendrickson v. Ama-zon.Com, 298 F. Supp. 2d 914, 915 (CD. Cal. 2003) (holding that Amazon meets the DMCA's definition of a service provider).
211. CoStar v. LoopNet, 164 F. Supp. 2d 688 (D. Md. 2001), aff'd, 373 F.3d 544 (4th Cir. 2004).
212. ALS Scan, Inc. v. RemarQ Cmtys, Inc., 239 F.3d 619, 623 (4th Cir. 2001).
213. In re Aimster Copyright Litig., 334 F.3d 643, 655 (7th Cir. 2003).
214. There has been some uncertainty regarding the outer limits of the definition of "online service provider" as applied to those Internet services seeking protection under § 512(a) for transmitting, especially as applied to P2P systems where end-users do the transmitting, routing, or provision of connections, rather than the OSP. Compare Perfect 10 v. CCBill, 488 F.3d 1102, 1116 (9th Cir. 2007) ("We reject Perfect 10's argument that CCBill is not eligible for immunity under § 512(a) because it does not itself transmit the infringing material⋯. There is not requirement in the statute that the communications must themselves be infringing⋯.") with A&M Records v. Napster, No. C 99-05183 MHP, 2000 WL 573136 (N.D. Cal. 2000), affd, 239 F.3d 1004 (9th Cir. 2001) ("Napster enables or facilitates the initiation of connections, but these connections do not pass through the system within the meaning of § 512(a).").
215. Compare A&M Records, 2000 WL 573136 (rejecting section 512 immunity of Napster, a company that provided an indexing feature for infringing music supplied by others) with Hendrickson v. eBay, Inc., 165 F. Supp. 2d 1082 (CD. Cal. 2001) (online auction site qualified for safe harbor as to listings of allegedly infringing copies of movies) and Corbis Corp. v. Amazon.com, Inc., 351 F. Supp. 2d 1090 (W.D. Wash. 2004) (online marketplace immune from liability for copyright infringement by its vendors).
216. See Complaint for Declaratory and Injunctive Relief and Damages, Viacom Int'l, Inc. v. YouTube, Inc. (S.D.N.Y. Mar. 13, 2007), available at http://wendy.seltzer.org/media/ViacomYouTubeComplaint3-12-07.pdf.
217. Id. at 18.
218. Reese, supra note 172, at 887.
219. Id. at 887.
220. Id. at 896.
221. Lemley & Reese, supra note 23, at 1387.
222. Tim Wu, The Copyright Paradox, 2005 SUP. CT. REV. 229, 231 (2005).
223. Id. at 249.
224. See Reese, supra note 172, at 882.
225. Frischmann & Lemley, supra note 159, at 258.
226. See id. at 275; see also Lemley & Reese, supra note 23, at 1387.
227. See Mark S. Nadel, How Current Copyright Law Discourages Creative Output: The Overlooked Impact of Marketing, 19 BERKELEY TECH. L.J. 785, 823 (2004) ("By the 1990s, a film's income from videotapes dwarfed all other revenue streams.") (citations omitted); see Wu, supra note 73, at 347 (noting that VCRs became one of the most lucrative inventions for movie producers since the movie projector). Time Warner's senior intellectual property counsel even noted: [T]he film industry got together and brought the famous, or infamous, Betamax case thinking that these VCRs were going to destroy the economic basis of film distribution, particularly theatrical exhibition and profitable television distribution. What actually happened was just the opposite⋯. This has become one of the most profitable channels of distribution for the film industry. Conference: Digital Technology and Copyright: A Threat or a Promise?, 39 IDEA 291, 305 (1999) (remarks of Dean Marks).
228. Lemley & Reese, supra note 23, at 1350.
229. Frischmann & Lemley, supra note 159, at 258.
230. Id.
231. Another example of a technology that the content industry would like to shut down, but from which multiple beneficial noninfringing uses have developed, is the emergence of P2P as an alternative means of distributing files. P2P has brought increases in efficiency and substantial cost reductions. P2P represents a major advance in computing technology with many legitimate uses; it improves the efficient transfer of information by removing the middleman, which reduces Internet traffic bottlenecks and quickly connects users with the information they are looking for; it has spurred the music industry to increase efficiency, which adds to total consumer surplus; and it has spurred innovation in other areas such as Skype, a P2P program that allows users to speak to each other as they would on a phone for free over the Internet. See Seth Robert Belzley, Grokster and Efficiency in Music, 10 VA. J.L. & TECH. 10, 23-24 (2005).
232. See Wu, supra note 73, at 337.
233. See Randal C. Picker, Copyright as Entry Policy: The Case of Digital Distribution, 47 ANTITRUST BULL. 423 (2002).
234. See Wu, supra note 73, at 331.
235. Id.
236. See William R. Peterson, The Role of Consumer Preference Development in Incremental Innovation: How Diamond Multimedia Helped Create the iPod, 85 TEX. L. REV. 1553, 1558 (2007) (noting the positive externality of incremental innovation). Peterson also notes that consumer preferences are important to designing a useful product and such preferences often reveal themselves after the products are out in the market. Id. at 1558. In particular, this is the only way to allow consumers to gauge the value of network effects where the value of the product increases with the number of users. Id. at 1561. This cannot be predicted ahead of time by the innovators or the court. And again, particularly in the context of new technologies and innovative markets where there is not already a well-developed consumer demand, it is unclear how the product and its uses will develop. Id. at 1564. In addition to the well-known role that technological innovation plays in incremental innovation, the release of new products creates the positive externality of further developing consumer preferences which aid in the design of better products. Peterson also provides examples of how the market for and design of the VCR developed over time once consumer preferences were developed, and also how the first digital music players and portable mp3 players introduced in 1998 allowed to the development of consumer preferences, such that when Apple's iPod entered the market in 2001 building on these preferences and improving the past glitches, it became the dominant design. Id. at 1566.
237. See Wu, supra note 73, at 336.
238. Id. at 349.
239. Alfred C. Yen, Sony, Tort Doctrines, and the Puzzle of Peer-to-Peer, 55 CASE W. RES. L. REV. 815, 832 (2005).
240. A striking example of this would be the effect of radio technology. When first invented, radio was feared for facilitating copyright infringement by unlicensed broadcasts of music. From the basic technology of radio came radar, television, cellular telephones, and many other socially valuable inventions that could not have been foreseen if radio had been foreclosed in the early twentieth century. See Yen, supra note 223, at 832.
241. See Lemley & Reese, supra note 23, at 1389.
242. See id.
243. Wu, supra note 73, at 349.
244. Peter S. Menell & David Nimmer, Unwinding Sony, 95 CAL. L. REV. 941, 1023 (2007).
245. See supra note 211 and accompanying text.
246. 17 U.S.C. § 1002 (2006).
247. See supra Part II.B-C.
248. Peter S. Menell & David Nimmer, Legal Realism in Action: Indirect Copyright Liability's Continuing Tort Framework and Sony's De Facto Demise, 55 UCLA L. REV. 143, 155-56 (2007) (noting that design changes can unduly impair legitimate uses of a product without significantly reducing potential illegal uses).
249. Brief of Amici Curiae The Consumer Electronics Association, The Computer & Communications Industry Association and the Home Recording Rights Coalition in Support of Affirmance at 29, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (No. 04-480).
250. Brief of Amici Curiae Emerging Technology Companies in Support of Respondents at 23, Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 545 U.S. 913 (2005) (No. 04-480);
251. see also Lemley & Reese, supra note 23, at 1384-87 (discussing harms to innovators and the public caused by requiring companies to anticipate and block infringing uses of their products).
252. RIAA v. The People: Four Years Later, supra note 151, at 16; see also Electronic Frontier Foundation, A. Better Way Forward: Voluntary Collective Licensing of Music File Sharing, available at http://www.eff.org/files/eff-a-better-way-forward.pdf. Under EFF's proposal the music industry would form a collective society and individuals pay a monthly fee to share files. The money collected would then be divided among rights-holders based on the popularity of their music. See Electronic Frontier Foundation, RIAA v. People: Four Years Later, supra note 153, at 16; see also MGM v. Grokster: Balancing the Protection of Copyright and Technological Innovation: Hearing Before the S. Comm. on Commerce, Science & Transportation, 109th Cong. 9 (2005) (Prepared Testimony of P2P United, Inc., Adam M. Eisgrau, Executive Director and Electronic Frontier Foundation, Fred Von Loh-mann, Senior IP Attorney).
253. RIAA v. The People: Four Years Later, supra note 151, at 16.
254. Mark A. Lemley, Cultural Environmentalism @ 10: Should a Licensing Market Require Licensing?, 70 LAW & CONTEMP. PROB. 185, 198 (2007).
255. Lemley & Reese, supra note 23, at 1410.
256. Id. at 1407. Congress has already created a mandatory royalty system for electronic devices under the AHRA. Under the AHRA, importers and manufacturers pay royalties on "digital audio recording devices" and "digital audio recording media." Those who wish to import, manufacture and distribute must seek a statutory license from the Copyright Office (§ 1003) and the royalties are based on either the sale price or the price recorded for customs purposes in the case of importers (§ 1004). Then the royalties collected by the Copyright Office on digital recording devices and digital recording media are divided and distributed among the various rights holders according to the extent to which their recordings were sold. Congress could create a similar compulsory license regime for other multi-use technologies that end users employ to infringe. (§§ 1005, 1006).
257. Id. at 1407.
258. Lemley & Reese, supra note 23, at 1409;
259. see also supra notes 163-166 and accompanying text.
260. Lemley, Licensing Market, supra note 237, at 198-99.
261. Id. at 199.
262. Id.
263. Id. at 200-01.
264. H.R. 1201, 110th Cong. (2007).
265. 153 Cong. Rec. E407 (daily ed. Feb. 27, 2007) (remarks of Rep. Rick Boucher introducing bill).
266. Id.
267. See Electronic Frontier Foundation, Action Alert-Support the FAIR USE Act (Feb. 27, 2007), http://www.eff.org/deeplinks/2007/02/action-alert- support-fair-use-act.
268. 153 Cong. Rec., supra note 245, at E407-08.
269. See Wu, supra note 73, at 327.
270. See generally S. REP. NO. 59-6187, pt. 2 (1907),
271. reprinted in 6 LEGISLATIVE HISTORY OF THE 1909 COPYRIGHT ACT, supra note 35, pt. R at 1.
272. See id. at 3.
273. Id.
274. PAUL GOLDSTEIN, COPYRIGHT, PATENT, TRADEMARK AND RELATED STATE DOCTRINES: CASES AND MATERIALS ON THE LAW OF INTELLECTUAL PROPERTY 733 (5th ed. 2004).
275. Barbara Ringer, Copyright and the Future of Authorship, 101 LIBR. J. 229, 231 (1976).
276. GOLDSTEIN, supra note 255, at 733.