Under the copyright infringement statute, it's not necessary for the record company to show actual damages or that the infringer profited from the work. It can seek statutory damages, which allow up to $150,000 for each infringement.
The remedies section of the Copyright Act, 17 U.S.C. 504, provides:
§ 504. Remedies for infringement: Damages
and profits
(a) In General. — Except as otherwise provided by this title, an infringer of copyright is liable for: either —
(1) the copyright owner’s actual damages and any additional profits of the infringer, as provided by subsection (b); or (2) statutory damages, as provided by subsection [c].
Under subsection [c]:
(2) In a case where the copyright owner sustains the burden of proving, and the court finds, that infringement was committed willfully, the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.
The innocence exception is very narrow (also section (2):
In a case where the infringer sustains the burden of proving, and the court finds, that such infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court in its discretion may reduce the award of statutory damages to a sum of not less than $200.
Thomas-Rasset claimed the statute was unconstitutional and violated her right to due process. In her petition for cert, her lawyers wrote:
Thomas–Rasset contends that the award of statutory damages against her violates the Due Process Clause because it is tied not to the actual injury that she caused or other features of her conduct, but to the injury caused by file sharing in general.
....Unable to show actual damages or profits on the part of the infringers, the recording companies have chosen to pursue statutory damages in this and every other file-sharing case against an individual defendant.
Statutory damages are an amount between $750 and $30,000 per work, “as the court considers just.” 17 U.S.C. 504[c](1). When the infringement is willful, the maximum is increased to $150,000 per work; when the infringement is innocent, the minimum is decreased to $200 per work. 17 U.S.C. 504[c](2). Thus, for willful infringement of the copyright in 24 songs, the statutory range is from $18,000 to $3,600,000.
When it comes to damages, the copyright act doesn't distinguish between different types of work:
It applies as much, for example, to
stealing and publishing the advance copy of a
presidential memoir, pirating and reselling copies of Microsoft Windows or Microsoft Office, exceeding the scope of a modern software license agreement, or staging a play as it does to downloading music using Napster or Kazaa.
Her lawyers argued:
It is the availability of music for free through file-sharing services like Kazaa that, the recording industry contends, was responsible for its collapse. But the uncontested evidence at trial was that (a) it is impossible, given the nature of filesharing networks, to determine whether any third party received a particular song from Thomas–Rasset as opposed to from another user of Kazaa and, more importantly, (b) even if Thomas–Rasset had never used Kazaa, the 24 popular songs at issue would nonetheless have been available, for free, from other Kazaa users.
Thomas–Rasset may have thrown one stick on the recording industry’s pyre, one stick out of tens of millions, but Napster, Kazaa, and the like were the ones who set it on fire.
As to why the case is important, they argued:
It is unfair, it is not due process, for an industry to sue 12,500 people and threaten to sue 5,000 more, wielding a statute for which they lobbied, under which they can threaten hundreds of thousands or millions of dollars in statutory damages, where the only way to resist is through modern, complex, expensive federal process, so that the only reasonable choice is to pay the settlement and be done. That’s extortion, not law. We cannot govern that way.
They also argued the case was of national importance because:
...copyright also governs software programs, and not just copying and distribution of those programs, but also their use — for the lower courts have held that exceeding the terms of a software license agreement can constitute copyright infringement.
By denying the Petition for Cert, the Supreme Court has let the judgment stand. Thomas-Rasset says if the music companies try to collect, she will file for bankruptcy.
But, in another copyright infringement case today, Kirtsaeng v. John Wiley & Sons, (opinion here) the Court threw out $600,000. verdict against a Thai student for reselling text books purchased abroad on E-Bay. The sales generated a $100,000. profit to the student.
the issue was whether U.S. copyright protection applies to items that are made abroad, purchased abroad and then resold in the U.S. without the permission of the manufacturer.
...Kirtsaeng sold $900,000 worth of books published abroad by Wiley and others and made about $100,000 in profit. The international editions of the textbooks were essentially the same as the more costly American editions. A jury in New York awarded Wiley $600,000 after deciding Kirtsaeng sold copies of eight Wiley textbooks without permission.
The explanation:
Justice Stephen Breyer said in his opinion for the court that once goods are sold lawfully, whether in the U.S. or elsewhere, publishers and manufacturers lose the protection of U.S. copyright law.
“We hold that the ‘first sale’ doctrine applies to copies of a copyrighted work lawfully made abroad,” Breyer said.
Reuters explains it this way:
By a 6-3 vote, the country's highest court said the "first sale doctrine" applies to copies of a copyrighted work lawfully made abroad.
The decision will provide support for the $63 billion gray market, in which third parties import brand-name goods protected by trademark or copyright into the United States.
Justices Ginsburg, Kagen and Alito dissented.
While the issues in the cases are different, the outcomes seem a bit contradictory to me. It is okay to bankrupt a music listener who shares 24 songs for personal enjoyment with no proven actual damages to the copyright holder, but E-Bay, Costco and other wholesalers can continue to make tens of billions off of copyrighted material in the "gray market", just so long as the work is not made or first sold in the U.S.
The Obama Administration backed the copyright holders in both cases.
