• by Wendy Davis  @wendyndavis, July 9, 2010

In a ruling that could put a crimp in content owners' attempts to convince downloaders to settle lawsuits, a federal judge in Boston has said it's unconstitutional to require a defendant who shared 30 tracks to pay damages of $675,000.

Calling such an award "wholly out of proportion with the government's legitimate interests in compensating the plaintiffs and deterring unlawful file-sharing," U.S. District Court Judge Nancy Gertner reduced the damages to $67,500.

In August, a jury found Tenenbaum liable for sharing 30 tracks when he was an undergraduate and ordered him to pay $22,000 per track. Although the statute provides for damages ranging from $750 to $150,000 per infringement, Gertner ruled that the jury's award was "grossly excessive," given that Tenenbaum was a non-commercial user.

She instead slashed damages to three times the minimum, or $2,250 a track. "Even as reduced," she wrote, the award "is unquestionably severe and is more than adequate to satisfy the statutory purposes and the plaintiffs' interests."

The RIAA said it disagreed with Gertner's analysis and will contest the ruling. "With this decision, the court has substituted its judgment for that of 10 jurors as well as Congress," the RIAA said in a statement. "The judge appropriately recognized the egregious conduct of the defendant, including lying to the court about his behavior, but then erroneously dismisses the profound economic and artistic harm caused when hundreds of songs are illegally distributed for free to millions of strangers on file-sharing networks."

Gertner's ruling could have an impact on a wide range of copyright infringement litigation now underway. Although the RIAA has stopped litigating against alleged file-sharers, other content owners such as independent filmmakers are attempting to sue thousands of BitTorrent users who allegedly downloaded movies like Uwe Boll's "Far Cry."

The filmmakers' law firm typically offer the downloaders an opportunity to settle for between $1,500 and $2,500 rather than face the prospect of an award as high as $150,000. But Gertner's decision, if followed by other courts, could diminish content owners' leverage against defendants.

For that reason, the opinion "puts at risk something that copyright holders have relied on," says Santa Clara University law professor Eric Goldman.

In the 62-page decision, Gertner said the $675,000 award "appears egregious" when compared to far lower damage awards that have been assessed against bars and restaurants that have not purchased licensing fees. "These defendants are arguably more culpable than Tenenbaum," she wrote. "Unlike Tenenbaum, who did not receive any direct pecuniary gain from his file-sharing, defendants in these cases play copyrighted music to create a more pleasurable atmosphere for their customers, thus generating more business and, consequently, more revenue." For instance, she wrote, in one case a company was awarded $40,000 in damages for the performance of 10 pieces without a license when the license would have cost around $25,000.

Gertner also said that other courts have ruled that large punitive damage awards imposed against businesses by juries violated the companies' rights to due process. "These decisions have underscored the fact that the Constitution protects not only criminal defendants from the imposition of 'cruel and unusual punishments,'" she wrote, "but also civil defendants facing arbitrarily high punitive awards."

Last year, a different federal judge in another file-sharing case also slashed a jury's damage award. U.S. District Court Judge Michael Davis reduced the award against Jammie Thomas-Rasset from $1.92 million to $54,000, but did so on different grounds than Gertner.

Rather than rule that the jury's verdict was unconstitutional, Davis said that he was cutting the award under the remittitur doctrine, or courts' historical power to slash verdicts.

But plaintiffs don't have to accept remittiturs, and after a failed attempt to negotiate with Thomas-Rasset, the RIAA rejected Davis' verdict. The court is expected to conduct a new trial in that case in October, solely to address damages.