Court Hands LimeWire An Interesting Victory

Arista Records, LLC, et al. v. Lime Group, LLC, et al., No. 06 Civ. 5936 KMW (S.D.N.Y. March 10, 2011)

Last Thursday, Judge Kimbra Wood of the US District Court for the Southern District of New York handed Defendant Lime Group, LLC, operators of one of the more prominent post-Napster peer-to-peer sharing platforms, LimeWire, something of a moral victory in a lawsuit brought by the RIAA and five of the major labels.

The back story is that the RIAA and the major labels joined forces as plaintiffs to sue Lime Group in August 2006, fresh off the heels of the U.S. Supreme Court’s ruling in MGM Studios, Inc. v. Grokster, LTD., 545 U.S. 913 (2005).  Plaintiffs alleged of course that LimeWire committed secondary copyright infringement of its sound recordings – namely that it aided and encouraged its users to share copyright-protected music amongst themselves without paying for it.  In May 2010, Judge Wood agreed and granted summary judgment against Lime Group on Plaintiffs’ substantive claims.  Thus, there is no longer a question as to whether LimeWire committed secondary copyright infringement.  All that remains is a jury trial to determine the amount of damages Lime Group owes the majors.

This is where things get tricky.  In recognition of the fact that copyright holders frequently suffer insignificant actual damages when another party infringes their copyright, Section 504 of the U.S. Copyright Act allows a plaintiff to recover fixed statutory damages in certain situations.  The range of statutory damages extends from as little as $200 where the defendant can prove it was unaware its actions constituted infringement, all the way up to as much as $150,000 in the case of willful copyright infringement.  Importantly, the sum is multiplied by the number of infringing actions – for example, if you knowingly and willingly use two different copyright-protected photographs on your website, you could be looking at a bill for $300,000 unless you have a good defense.

Anyhow, you can probably guess what was coming next.  As Plaintiffs alleged that LimeWire was responsible for potentially thousands of users downloading approximately 9,715 copyrighted sound recordings, Plaintiffs filed for partial summary judgment requesting that the statutory damages be multiplied by the number of LimeWire users who downloaded any of those 9,715 songs.  Meaning, Plaintiffs sought statutory damages of somewhere between $750-150,000 for every LimeWire user that downloaded the song, not merely the same measure of statutory damages multiplied by the 9,715 individual songs.

Instead, Judge Wood allowed cooler heads to prevail and held that Lime Group could at most be saddled with a measure of statutory damages per work infringed, not per work infringed per user.  In addition to a close reading of Section 504′s requirement that a singular award be available where “any two or more infringers are jointly and severally liable,” the court wisely points out that Plaintiffs’ reading of Section 504 would likely lead to an utterly absurd result.  If you do the math real quick, you’ll realize what we’re talking about here.  Under the calculation urged by Defendants, they are at least looking at statutory damages in the fairly large neighborhood of $7.5 million – $1.5 billion.  Under Plaintiffs’ calculation however, Defendants could be staring at the barrel of statutory damages well into the trillions.  Judge Wood wisely considered this absurd for, as the Court pointed out, “Plaintiffs are suggesting an award that is more money than the entire music recording industry has made since Edison’s invention of the phonograph in 1877″.

* The joint and severally liable infringers in this case being LimeWire and the individual user who illegally downloaded the sound recording.

Yes, this is why I use the term “moral victory.”  A potential billion dollar damage award seems like a pretty hefty figure for any defendant to actually be hoping for, but I guess it’s better than a damages ranging well into the trillions of dollars.  All the same, definitely a victory for Lime Group on an interesting legal question that may very well be bound for the appellate courts.

The trial on the damages issue is set to begin on May 2nd.