Brian Chau is a JD candidate at Osgoode Hall Law School.

In Canada and the United States, copyright owners may elect to recover an award of statutory damages for each work infringed instead of actual damages and profits. A wide range of statutory damages is possible and this has led to a series of troubling cases in the United States, where large damage awards were given and then substantially reduced in downstream court proceedings.  Sony v. Tenenbaum is indicative of the problems facing the current system as it relates to file-sharing.

The amount of statutory damages is set at a minimum of $500 to a maximum of $20,000 in Canada, and similarly from $750 to $30,000 in the United States. The determination of the exact number is set at an amount that the court considers “just”.

The range of damages is particularly troubling as it lends an air of uncertainty to every actor potentially affected by copyright law: for owners of copyright, the requirement to go through an expensive trial to recover damages which may or may not cover litigation costs; and for the public, not knowing whether one’s infringing actions would lead to a mere slap on the wrist, or in the worst case scenario, becoming bankrupt by a particularly large judgment from the Court.

In Sony v. Tenenbaum, a large statutory damage award was given at the trial level, reduced at the District Court level, and finally the reduction was overturned in the Court of Appeal only to be reconsidered again by the District Court.

Most recently, on September 16, 2011, the US Court of Appeals, First Circuit, reinstated a rather large award of $675,000 in statutory damages with respect to illegal usage of various peer to peer (P2P) file sharing networks to download and distribute 30 songs whose copyrights were owned by the plaintiffs in question.

Judge Nancy Gertner for the Federal District Court found the award was so “oppressive” that it was unconstitutional, and reduced it ten-fold to $67,500. The Court of Appeals overturned this decision and found that the district court erred by not considering the procedural issue of remittur (a ruling to reduce a jury-awarded amount of damages) before considering the issue of constitutionality. While the Court of Appeal did not discuss the specific constitutional issues raised, the Court found that the District Court should have first used the remittur process and ordered the District Court to reconsider this case with remittur in mind. In a remittur, the District Court considers the evidence and decides the maximum amount that the jury could have awarded under the facts presented. If the maximum amount is lower than the amount awarded by the jury, the District Court reduces the damage award and the plaintiffs would be able to elect whether they would (1) accept the reduced damages, or (2) request a new trial.

The challenges faced by the Court of Appeal and the District Court in this matter highlight significant issues with the current regime of statutory damages in the United States, a provision that is largely mirrored in Canadian law except in respect to the damage ranges. On Page 5 of its decision, the Court of Appeal noted that the case “raised concerns about the application of the Copyright Act which congress may wish to examine”.

It is this author’s opinion that this case, along with several others, is a clarion call for Parliament or the Cabinet to revisit the regime of statutory damages. The myriad of poly-centric concerns (economic, proprietary, authors, public) are beyond the expertise of the judicial branch - specific guidance is necessary from either the legislative or executive branches to outline the extent of liability for file-sharing, taking into account the particular interests of the affected stakeholders and the Canadian public.  The newly re-introduced Bill C-11 attempts to do this.

The current regime is broken – having judges and juries interpret statutory damage provisions with such a wide range of discretion comes at a significant deadweight cost to all parties involved, be they the general public or copyright owners. The mixed jurisprudence provides little to no guidance: an award of statutory damages ranges from mere slaps on the wrist to penalties so oppressively large that in most practical situations it will bankrupt the defendants.

Both of these scenarios are obviously undesirable: the music industry is not in the business of bankrupting potential customers, but conversely, without some form of legal protection, significant investments in the creative arts will not be supported by sound business sense. These issues are further compounded with the prohibitive costs, uncertainty and delays of litigation.

Either Parliament or the Cabinet needs to provide the judiciary with the necessary tools to decide these cases in a consistent and just manner. In my opinion, there are two approaches in which could be accomplished: (1) statutory reform of the Copyright Act, namely to provide for less discretion in the size of awards and enumerated considerations which may serve to vary damages in particularly egregious situations (Bill C-11 does not include such guidance); and/or (2) the establishment of an expedited / simplified process with specialized expertise similar to the CDRP procedure used by the CIRA to resolve domain name disputes. While this latter avenue requires further research, one possibility may be that a system analogous to traffic court should be implemented, borrowing the concept of graduated fines, non-monetary penalties such as suspension of service, mandated courses and/or a streamlined court process.