No Beer and No TV Makes Judge Levy $10M fine for Simpsons, Family Guy Streaming

Who controls the British Crown? Who keeps illegal streaming down? The Federal Court of Canada does! (May the pop-culture references commence.) The Federal Court of Canada made international news by handing down one of the harshest copyright sentences in its history, a fine of over $10M. The defendant is only 23 years old.

In Twentieth Century Fox Film Corp. v Hernandez et al. Justice Campbell found a clear infringement of the Copyright Act when the defendant Hernandez streamed and allowed for download an alleged 700 episodes between his two websites “Watch The Simpsons Online” and “Watch Family Guy Online.”

As the judge stated in his decisions, this fine is meant to release the hounds on illegal downloading and streaming communities.

Statutory damages, elected by Twentieth Century Fox in this case, would be insufficient to achieve the goal of punishment and deterrence of the offense of copyright infringement in this case. Hernandez’s repeated, unauthorized, blatant, high-handed and intentional misconduct, and his callous disregard for the Plaintiff’s copyright rights, is deserving of the penalty of punitive damages.

The damage award breaks down into $10M in statutory damages under s. 38.1 of the Copyright Act, $500,000 in punitive damages and $78,000 in costs.

Section 38.1 of the Copyright Act outlines that judges may consider three relevant factors in awarding statutory damages: the degree of good faith of the defendant, the conduct of the parties before and during the proceedings, and the need to deter other infringements in question. In addition to the deterrence motivation, the judge found that Hernandez violated the Copyright Act in bad faith and for commercial purposes through pay-per-click ads on the site. (And you don’t win friends with bad faith.)

As outlined in the judgment, Hernandez easily met the core technical requirements for infringement by doing the following with the video content: copying it onto a computer system, uploading it to a server, creating links to the server, and enabling the public to access the material through the internet.

For those saying, “What the deuce?” to this damage award, in my opinion, it is not completely outrageous on its face.

Justice Campbell provided a strong synopsis of copyright damage types, sizes and relevant factors in Adobe Systems Incorporated v Dale Thompson DBA Appletree Solutions. There he reminds that the Copyright Act dictates a fine of between $500 and $20,000 per infringed work depending on various considerations.

Pursuant to s. 38.1(1) of the Act statutory damages may be awarded “in a sum of not less than $500 or more than $20,000 as the court considers just”, with the proviso that, pursuant to s. 38.1(3), even the minimum amount can be lowered on the basis of proportionality of damages to the infringing activity, “as the court considers just”. Pursuant to s.38.1(5), the following factors are to be taken into consideration in awarding statutory damages: the good faith or bad faith of the defendant; the conduct of the parties before and during the proceedings; and the need to deter other infringements of the copyright in question.

At 700 episodes of evidence, a $10M statutory court awarded $14, 285 in damages per episode, is certainly within the legislatively prescribed range.

In an interesting approach, the plaintiff didn’t put forward a defence at trial. It doesn’t take a lawyer to know that this “If anyone needs me, I’ll be in my room” approach is a bad idea. Judging from this quirky and strange interview Vice did with Hernandez, it’s unlikely his thoughts on the issue – that he didn’t think he was doing anything wrong and also offered links to purchase Fox materials – would have mitigated damages significantly. I don’t think it would have hurt him much either.

Since Fernandez didn’t actively engage with the legal system, and seems to treat access to others’ creative works as a right, I’m not prepared to side with him. Nor am I prepared to side with the judge in this case or creators’ rights advocates. The extremism of this judgment reinforces the David versus Goliath archetype of copyright battles. Is it reasonable to expect a 23-year old to pay $10M in damages? I doubt it. Granted, it could be argued that the purpose of the statutory damages award in this case is to send a message rather than receive compensation. In my mind, awarding these symbolic damages sets a dangerous precedent. Without knowing how much money Hernandez made from the internet ads, or how much Twentieth Century Fox lost in sales, I think it would have been more reasonable to treat each season of each show as a breach. Perhaps I’ve been soured by the progressive decline of these shows in recent years.

Ultimately, there’s a bigger problem here. We have a generation of young people who are drastically out of step with the law as it stands. It seems most of them, like Hernandez, know some of the contours of the law but disagree with it. The law’s purpose is to protect creators – defending their income and sustaining their ability to create – but it is also to protect the interests of the public and further the public domain. When applying it against the interests of 23-year-old kids, it’s no wonder young people think Goliath writes the rules. Any damage award would have sufficiently sent the message that infringing copyright is wrong. In my opinion, awards this extreme make one wonder if we’re achieving the objectives of the Copyright Act and if we are, whether we need to rethink those objectives.

Denise Brunsdon is an IPilogue Editor, a Western University JD/MBA Candidate, and researcher for GRAND (Graphics, Research and New Media) Centre and Commercialization Engine. She is glad that bad cartoon puns aren’t a crime. 
3 Comments
  1. Thanks Denise for writing a really great piece.

    I found the Vice piece you linked to quite interesting and feel it raised a valid point. While Hernandez’s actions did infringe the copyright of the owners, there is a real problem in the limiting the availability of content based on a consumer’s jurisdiction. Yes, there will always be those who will seek to obtain and make available illegal copies of material. But the success of services such as iTunes and Netflix demonstrates that users are willing to pay for material when it is made available. Yet by locking down material in this manner rights-holders are inciting infringement unnecessarily.

    A lot of lobbying is done proclaiming how much money is being lost due to piracy and having laws drafted to combat it. However, if time, money and energy was instead put towards the ‘ease of use’ and making available of content for digital consumers worldwide, I believe the use of infringing material would change drastically. Instead of using an IP-address to restrict access why not use it for targeted ad-placement? There are a myriad of ways for the owners to earn a profit from such a venture.

    While I will not condone breaking the law I can appreciate efforts to make available what the public desires. The purpose of copyright is to grant a monopoly in exchange for the dissemination of works to the public. Is the rights-holder living up to the agreement envisaged by then restricting the public’s access to said material? The digital age has changed society greatly, yet industries seem slow in progressing and adapting to the ease in which material can be made available.

    Given all that, it’s sad to see a judgement such as the one handed down. It appears to be the use of general deterrence, yet will do very little to dissuade others or impact piracy in Canada and across the globe. The reality is when one website goes down another pops-up. The key to change is the consumer and addressing their needs and concerns.

    Kwaku Tabi
    JD Candidate 2015
    Osgoode Hall Law School

  2. Hi Kwaku – good comment. I agree that’s an aspect I could have highlighted better. Cross-border access is totally an issue. There are a lot of people in this world who would rather pay for a DVD box set than sit around illegally streaming – goodness knows our time/peace of mind is worth something. But overall we’re def on the same page – this judgment is too heavy-handed.

  3. Very interesting article, Denise!

    I think that this case illustrates quite well the issues that arise as a result of the tensions between the consumption habits of consumers in the digital era and the content industry trying maintain analog-world models of consumption in the digital realm.

    Young people, especially those who grew up with broadband Internet have always been able to access media essentially on an on-demand basis. This appears to be the new norm and is likely to be how we will all consume content in the future. The bottom line is that Fox is trying to limit online access to its content as though it was the “physical” world. A gap between supply and demand has appeared, and Hernandez simply stepped in and filled this gap. Unfortunately his actions necessarily results in copyright infringement.

    As Kwaku mentioned in his comment, instead of spending its money and efforts in prosecuting 23-year-old infringers, Fox should have taken the opportunity to address this demand for streaming content and monetize it. Consumers are willing to pay a nominal fee to access content legally because the paid-streaming model in which Hulu and Netflix operate is clearly viable and thriving. Fox would benefit from a larger audience by attracting viewers who enjoy the Simpsons but perhaps not enough to buy a DVD box sets by making the show available online. Diehard fans of the show will likely still buy DVDs and I believe that they will certainly appreciate the convenience of accessing episodes on-demand from any device capable of connecting the Internet.

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