Commerce's IPTF Recommends Legislation on Statutory Damages, Supports CO's Small Claims Court

The IPTF's white paper expanded on issues the task force identified in a 2013 green paper as requiring additional study before the task force could make recommendations. The green paper supported legislative fixes to the Digital Millennium Copyright Act and to require royalties for music performances on terrestrial radio (see report in the Aug. 1, 2013, issue). Copyright interests generally praised the IPTF white paper’s recommendations, with several telling us they believe the recommended legislative fixes on statutory damages could inform the House Judiciary Committee’s ongoing copyright law review.

The IPTF recommended amending Copyright Act Section 504 to codify nine factors for courts and juries to consider when determining the amount of statutory damages in an infringement case to avoid "excessive and inconsistent" awards. The recommended factors include whether the infringement was willful, the amount of revenue believed lost as a result of the infringement and the nature of the infringement. The nine factors “are those that will most often be applicable” in a statutory damages determination but shouldn’t preclude courts “from considering other factors that may be relevant in a particular case,” the IPTF said. The task force also recommended amending Section 504 to allow courts discretion to “depart from the strict 'per work' calculus” for awarding statutory damages in cases involving nonwillful secondary liability by online services for large numbers of infringed works.

IPTF recommended expanding eligibility for lowered “innocent infringement” statutory damages awards in Copyright Act Sections 401(d) and 402(d) by saying the appearance of notice of infringement is a relevant factor in determining statutory damages but not an automatic bar to assertion of the innocent infringement defense. The IPTF declined to recommend expanding the mandatory remitter provision for innocent infringers to include additional types of defendants, saying “there has been insufficient opportunity for public comment” on the issue.

Public comments collected since 2013 haven’t “established a need to amend existing law to create a specific exception or a compulsory license for remix uses,” since there was “virtually no support” for either option, the IPTF said. But enhanced voluntary licensing options “should play a significant role in permitting remixes alongside fair use in appropriate cases,” the IPTF said. Additional voluntary licensing options are “an important alternative path, either for those remixes that do not qualify for fair use or those whose status is unclear,” the IPTF said. The task force said it’s still exploring how the federal government can aid in further developing the online licensing environment, which could “help further improved licensing of remixes.”

Extending the first-sale doctrine to include digital transmissions of copyrighted works is “not advisable at this time,” particularly because “the risks to copyright owners’ primary markets do not appear to have diminished,” the IPTF said. The task force recommended the creation of a multistakeholder process to create best practices on improving customers’ understanding of licensing terms and related restrictions in online transactions involving the download of copyrighted works. The IPTF said it’s reluctant to recommend intervention in the market for e-book loans. Licensing agreements between e-book publishers and libraries “are new and evolving, and early government intervention into the ebook market could skew the development of innovative and mutually beneficial arrangements,” the IPTF said. If those licensing terms are found to be hindering libraries’ ability to serve their patrons, “further action may be advisable,” the task force said.

It’s unclear how the IPTF’s recommended legislative fixes on statutory damages will factor into House Judiciary’s copyright law review, since the committee has revealed little about how they're prioritizing copyright issues within that review, said Copyright Alliance CEO Keith Kupferschmid. The statutory damages issue has been on House Judiciary’s radar in past hearings, so “they’re probably already at least considering” the issue, he said. Stakeholders testified on statutory damages at a July 2014 committee hearing (see report in the July 25, 2014, issue). Although the statutory damages issue “didn’t get as much attention as it deserved” during the House Judiciary hearing, it at least became part of House Judiciary’s record, said Computer & Communications Industry Association Vice President-Law and Policy Matthew Schruers, who testified at the hearing.

House Judiciary would be most likely to address statutory damages as part of an omnibus copyright bill, though “there’s not a lot of confidence that an omnibus bill could get across the finish line” in the near term, Schruers told us. “I don’t see statutory damages legislation moving independently” but would likely receive placement within an omnibus bill because major Internet and tech groups have raised significant interest in the issue, Schruers said. IPTF notified House Judiciary in advance of the task force’s release of the white paper and plans to brief committee members on the report, said PTO Chief Policy Officer Shira Perlmutter during a conference call with reporters. House Judiciary "welcomes the PTO’s thoughts on reforms to U.S. copyright law," an aide said. "As the House Judiciary Committee continues our comprehensive review of U.S. copyright law, we will continue examining" all of the issues addressed in the IPTF's white paper.

The IPTF’s recommended legislative fixes on statutory licenses are “about right,” providing a narrowly defined solution to stakeholders’ concerns about excessively high damages awards while also allowing copyright owners to effectively enforce their rights, Kupferschmid said. Schruers also praised the IPTF’s recommendation, noting that it takes a relatively moderate stance on statutory damages. Center for the Protection of Intellectual Property Director-Copyright Research and Policy Sandra Aistars said she doesn’t favor the IPTF’s recommendation on statutory fixes, noting that she’s concerned that moving away from the existing damages awards guidance to courts “will increase the hurdles for small businesses [and other small copyright owners] to overcome” in enforcing their IP rights.

Stakeholder groups praised the IPTF for its recommendations in statements Thursday. "After working with [PTO] extensively to prevent the creation of new compulsory licenses and exceptions for remixes, we are glad to see that the IPTF has agreed that these new regulations would be damaging to creators,” said National Music Publishers Association President David Israelite. “While we are concerned that the report’s recommendations on creating a framework to guide statutory damages could unnecessarily limit the proper damages awarded to rights holders, we are ultimately encouraged by the report’s findings and hope it leads policymakers to enhance protections for creators in the Digital Age.” The Software and Information Industry Association believes the IPTF white paper “confirms our view on the first sale doctrine: that legislative change runs the risk of harming a functioning and healthy copyright marketplace,” said General Counsel Chris Mohr. “The paper correctly takes the position that no amendment to existing law is necessary.” Although "we believe there’s much more to do on this and other copyright related issues, [Commerce's] recommendations to bring back a degree of economic rationality to damage awards and to provide greater protections to users who rely in good faith on exceptions like fair use are a promising first step towards much needed reform," said Public Knowledge Policy Counsel Raza Panjwani.