What might Big Tobacco and copyright have in common? A decision by the Supreme Court on Tuesday, Philip Morris USA v. Estate of Williams, may prove the relationship to be this: where statutory damages are sought for willful infringement and deterrence is one of the purposes for the award, the deterrence better be for the acts of the specific defendant for the conduct in the specific suit, and not a desire to deter others not before the court. In other words, the Philip Morris decision may be the death knell for an approach taken in the first, somewhat infamous suit brought by Universal Music Group against Mp3.com.
In UMG Recordings, Inc. v. MP3. com, Inc., 56 USPQ2d 1376 (S.D.N.Y. 2000), the court adopted a theory of general deterrence:
[W]hile the difficult issue of general deterrence must always be approached with caution, there is no doubt in the Court’s mind that the potential for huge profits in the rapidly expanding world of the Internet is the lure that tempted an otherwise generally responsible company like MP3.com to break the law and that will also tempt others to do so if too low a level is set for the statutory damages in this case. Some of the evidence in this case strongly suggests that some companies operating in the area of the Internet may have a misconception that, because their technology is somewhat novel, they are somehow immune from the ordinary application of the laws of the United States, including copyright law. They need to understand that the law’s domain knows no such limits.
Relying in part on this belief (one made without any admissible or tested evidence concerning the “some companies operating in the area of Internet”), the court awarded $25,000 per CD in statutory damages. (I was involved in the case at a later stage on defendant's behalf). There are numerous serious flaws with this approach, beginning with the fact that in awarding $25,000 per CD, the court did not know how many works had been infringed (or which ones plaintiff owned rights in):
If defendant is right that there are no more than 4,700 CDs for which plaintiffs qualify for statutory damages, the total award will be approximately $118,000,000; but, of course, it could be considerably more or less depending on the number of qualifying CDs determined at the final phase of the trial scheduled for November of this year.
One hundred eighteen million dollars was hardly necessary as a deterrent for a defendant who had not made a penny in profits off its use, and where plaintiff had conceded it could not prove any actual damages (defendant’s service was designed to stream to individual’s CDs they verified they already owned). The court’s acknowledgment that the ultimate amount “could be more or less” than $118 million demonstrates that the $25,000 per CD figure was not directly tied to any real sense of deterrent effect: if defendant proved that plaintiff owned only one work, would that amount ($25,000) have been sufficient for the deterrence goal the court embraced? Would it be an equally effective deterrent at $118 million? The court did not know, and thus its award of $25,000 per CD was without any supportable basis.
Enter Big Tobacco, seeking to overturn a punitive damage award by a jury on behalf of the estate of a heavy smoker. The issue, as framed by Justice Breyer's majority opinion, was "whether the Constitution's Due Process Clause permits a jury to base [an] award in part upon its desire to punish the defendant for harming persons who are not before the court (e.g. victims whom the parties do not represent). We hold that such an award would amount to a taking of 'property' from the defendant without due process."
That sounds to me like what happened in the Mp3.com case. Indeed, in MP3.com, the court went further by punishing Mp3.com for the perceived acts other potential defendants, and not as in Philip Morris to punish defendant for conduct harming other potential plaintiffs.