Eliminate Statutory Damages for Secondary Infringers

Posted by Social Science Research Network

Eliminate Statutory Damages for Secondary Infringers – Michael A. Carrier (Rutgers University School of Law – Camden)

ABSTRACT: One of the areas of copyright law in most desperate need of reform is statutory damages. And while damages awards against direct infringers have received most of the attention, the effect on secondary infringers threatens to be far more detrimental for innovation.

This submission to the Department of Commerce’s Internet Policy Task Force consists of a 3-page outline, followed by a 15-page book chapter (Innovation for the 21st Century paperback, Oxford University Press, USA (2011)). It makes three points. First, applying statutory damages to secondary infringers is not necessary to fulfill the purposes for which the remedy was adopted. Statutory damages are not needed to ensure adequate compensation since copyright owners can show the amount of damages. And they are not needed to deter infringement since copyright owners are able to obtain actual damages. The submission also explains how statutory damages of as much as $150,000 for each infringed work threaten unique harm as applied to secondary infringers that are pushed into settlement or bankruptcy or that might not even be able to appeal given large bond requirements.

Second, statutory damages harm innovation. But these harms are extremely difficult, if not impossible, to discern. It is difficult to find precise evidence of stifled innovation when the innovation fails to reach the market, when observers cannot engage in counterfactual analysis, and when litigated cases are only the tip of the iceberg. In my article, “Copyright and Innovation: The Untold Story,” I documented harms to innovation from statutory damages, as exacerbated by secondary liability law and personal liability, but this evidence is available only from detailed interviews.

Third, Congress should exempt secondary infringers from statutory damages. Such a (long-overdue) revision would acknowledge that, in the context of secondary liability, statutory damages are not needed to assure adequate compensation, not needed to deter infringement, and harmful to innovation.