Why pay a $1.29 per song or for an album at all? Plenty of people pirate music without consequences, so why shouldn’t you?

Ask Joel Tenenbaum.

Tenenbaum was recently dubbed a courtroom “loser” and was cited as one of the Five Biggest Stories in the Music Business. Why? On Tuesday, June 23, the First Circuit affirmed a jury decision requiring Tenenbaum to pay $675,000 for illegally downloading and sharing 30 songs online.

Photo by Jamie McCall

The case began in 2007, when Sony BMG Music Entertainment, Warner Bros. Records, Arista Records, Atlantic Recording, and UMG Recordings sued Tenenbaum when he was a college student. At the time, the Recording Industry Association of America was directly suing individual file-sharers. Tenenbaum is one of two defendants who refused to settle.  Earlier this year, the Supreme Court denied cert to the other, Jammie Thomas-Rasset. She now owes $222,000 to companies in the recording industry for sharing 24 songs online.

Despite numerous other violations, Sony only took action against Tenenbaum on 30 songs. Accounts indicate that Tenenbaum lied during discovery, yet eventually admitted to illegally using over 5,000 songs.  At trial, a federal judge held based on the undisputed evidence that Tenenbaum violated the Copyright Act, and the jury determined that his actions were willful (leading to the possibility of additional damages). Under the Copyright Act, statutory damages can range from $750 and $150,000 per violation. The jury considered factors such as the nature of the infringement, Tenenbaum’s intent, his profits, and the revenues lost by the music companies. The jury valued each violation at $22,500, making the total fine $675,000 (15% of the maximum statutory fine).

Tenenbaum did have some success arguing that that the actual injury to the record labels was $450, the cost of the 30 albums had he bought them legally. In 2010, Judge Nancy Gertner reduced the fine to $ 67,500 (1/10 the jury’s award) because the original judgment was “unconstitutionally excessive” in light of the actual harm felt by the record labels. She relied on the Supreme Court holding in BMW of North America, Inc. v. Gore to find that the statutory damages award imposed on Tenenbaum violated due process.

Sony appealed, and eventually the First Circuit reinstated the jury’s initial award. Though Tenenbaum’s deception failure to heed the notices the record companies sent hurt his case, the First Circuit ultimately decided the issue on the validity of statutory damages. It reexamined the award based on Gore‘s holding that due process is only violated by a damages amount “where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” Congress designed the Copyright Act to deter piracy, so while $675,000 for 30 songs may seem facially disproportionate, Tenenbaum’s actions and Congressional intent allow the jury’s award to stand. Judge Howard explained, “[s]tatutory damages under the Copyright Act are designed not only to provide ‘reparation for injury,’ but also ‘to discourage wrongful conduct’ . . .” In Tenenbaum’s case, 15% of the maximum penalty was well within reason since he continued to pirate for years despite warnings; made thousands of songs available; and complicated discovery with tall tales.

Despite Tenenbaum’s attempts to tell his side of the story, it appears he has no further recourse: the Supreme Court has officially declined to hear his appeal.

So for all you music lovers: just pay the $1.29. It certainly beats $675,000.

–Amanda Nguyen

Image Source

Tagged with:

7 Responses to Seriously, Don’t Illegally Download Music!

  1. Veronica says:

    It is interesting to see how times have changed. Less than ten years ago, major record companies were battling against piracy by suing individuals and making examples out of certain downloaders. Now, it seems like they have shifted their strategy and focus more on lobbying Congress to change certain policies and add others. Yet, with the increase in popularity of programs like Pandora and Spotify, I wonder whether illegal downloading is as much of a problem anymore. These new programs essentially allow users to listen to their favorite music without paying for it (at least to a certain point). Certainly new legal issues arise from these kind of programs, but they seem to take the would-be-downloader out of the equation.

  2. Will Wojcik says:

    Great post Amanda.

    I used to make copies of my dad’s cassette tapes. My friends and I would makes lists of new CD’s we wanted and purchase them as a group and burn a copy for everyone. In college I downloaded a program that would let me access my classmates’ iTunes libraries and I would pick and choose the songs I wanted to download during lectures in class. All of these behaviors stopped well before 2008, so I hope I’m safe from being sued; but looking back on my checkered past, I wonder how many people have similar stories to mine.

  3. Kim Smith says:

    Great post, Amanda. I cannot help but wonder what the initial settlement offer was. I imagine it would have cost the defendant significantly less just to settle rather than to litigate.

  4. Amanda Nguyen says:

    J.P. and Jeff, thanks for your comments.

    There does seem to be a point where any deterrence is over-deterrence. And yet, like Jeff pointed out, these aren’t rational actors anyway. It seems like these fines are the most reasonable (and useful) when applied against industry competitors.

    Really any amount near what these two defendants received is going to seem excessive to the average person. I don’t know what the solution is but as J.P. mentioned, it’s a tough sell when juries deliver verdicts well under the minimum. Maybe re-framing the question–and asking what harm was really done–makes sense.

  5. Jeff Sheehan says:

    Taking J.P.’s question to the extreme, what if a jury assessed the maximum on all 5000 songs? Would $750,000,000 be excessive? It’s hard to argue that catastrophic fines are actually going to deter teenagers from doing stupid things. After all, we’re dealing with a kid here who apparently blamed his criminal enterprise on burglars and foster kids at one point (nice tall tale link, Amanda). This is not your quintessential rational actor.

    Still, I wonder how the math actually works. A rational actor who was committed to having a copy of “Blurred Lines” (if such a creature exists) might actually roll the dice on an illegal download if the odds of getting caught were low enough. Depending on the frequency, the math might work like the lottery–even a small up-front fee isn’t worth the tiny chance of a massive change of fortune to a risk-neutral actor.

    It seems more likely that the massive potential damages are designed to force people to settle rather than litigate.

  6. J.P. Urban says:

    I wonder if the due process argument would have been more successful if the the statutory damages for Thomas-Rasset and Tenenbaum would have been the $150k per infringement allowed by law (both juries chose decidedly less than that). The numbers would have been for approximately $1.5 million Thomas-Rasset and >$4 million for Tenenbaum.

    The arguments seem the same–the deterrent effect on future downloaders is obvious, but would the maximum numbers have made it “unconstitutionally excessive” in light of the actual harm felt?

  7. Jacob Schumer says:

    I buy all my music nowadays, though I definitely went through a pretty heavy pirating phase. It ended in about 2008. That was when I started using my school’s internet system, which stated a warning that they would report activity to the RIAA.

    It turns out I stopped at the exact wrong time, if I didn’t care about the morality of the thing. The RIAA hasn’t sued anyone for downloading music since 2008, according to Businessweek. Businessweek.