Ballooning Statutory Damages in Copyright Law: Part 1 of 3

Over on the Freakonomics blog last week, Kal Raustiala and Chris Sprigman put up a post marking the ignominious end of the Jeffrey Koons "balloon dog" controversy. In case you missed it, a blogospheric hubbub erupted when Koons's firm, Jones Day, sent a cease and desist letter to Park Life, a San Francisco art gallery, for selling bookends that resembled Koons's "Balloon Dog" sculptures. The problem was that the bookends resembled Koons's sculptures mostly because they resembled balloon dogs, which are not copyrighted by anyone.

It was particularly ironic for Jeffrey Koons, of all people, to be making an expansive claim of copyright protection, given that Koons has been on the receiving end of a number of such claims over the course of his career, which he only recently began defeating. Park Life, represented by Fenwick & West, filed a declaratory action that began with the observation, "As virtually any clown can attest, no one owns the idea of making a balloon dog." The case quickly settled without so much as a hearing.

Raustiala and Sprigman believe there are larger lessons to be learned about copyright law from this episode; lessons beyond "clients do the craziest things." Specifically, they believe that the Koons letter illustrates the way in which copyright law allows meritless claims to succeed. This is a fairly common argument in copyright circles; the idea is that there is something about copyright law under which even claims that lose are evidence of some sort of problem with the law.

I am skeptical, at least of the idea that there is something particular about copyright law that causes overreaching claims like the Koons letter. You could tell much the same story about any number of areas of the law, such as personal injury claims, property disputes, defamation, securities fraud, employment discrimination, or heck even dry cleaning law. It could be the case that copyright is worse than all of those other areas, but anecdotes like the Koons case won't demonstrate that. And if the problem is more general, that means the solution is not at all obvious.

Here's the core of the Raustiala and Sprigman argument. After noting that ideas (such as balloon dogs) are unprotected, and that fair use limits rights even further, they write:

But that's the law on paper. The real world is different. As a result of lobbying by Hollywood and the recording industry, the law allows copyright owners — at least those who have registered their works with the Copyright Office — to win huge damages for successful copyright lawsuits. As a result, copyright owners have tremendous leverage to coerce potential defendants to stop engaging in conduct that may be perfectly legal. The cost of a lawsuit — even a lawsuit that seems unlikely to succeed — is just too great, unless the defendant is very, very sure they will win.

There's a few claims in here: statutory damages were the result of lobbying by Hollywood and the recording industry, the vagueness of copyright law encourages totally meritless cease and desist letters, and the prospect of statutory damages causes the recipients of such letters to fold. I'll tackle each of these in a separate post. (I began this as a brief response, but it now vastly exceeds the length of the original post, so really it's a series of reflections of my own occasioned by the Raustiala and Sprigman post.)

1. The history of statutory damages. Statutory damages were added to copyright law in their modern form in the Copyright Act of 1909. That act provided for damages for infringement of copyrighted works of between $250 and $5,000, or $6,109 and $122,186 in 2011 dollars. That's pretty much what we have now, even though statutory damages have been nominally tripled in the last 23 years. The current version of the Copyright Act permits statutory damages of between $750 and $30,000 for infringement, or up to $150,000 if the infringement is "willful." In fact, the 1909 Act damages were considerable higher at the low end, $6,109 versus $750 (or $200 if the infringement is found to be "innocent").

Copyright owners were obviously the most interested in 1909 in getting a more effective statutory damages award. But that wouldn't have been either Hollywood or the recording industry, both of which barely existed. This is more than a nitpick. Despite what you may have read, the lobbying battles over copyright legislation are more often than not battle royales between various competing groups. Certainly there are particular instances where the interests affected, or at least represented in the process, are more narrow. Citing Hollywood or recording industry lobbying as being the single cause of some change brings to mind the recent battles against individual or Internet infringers--Goliath vs. David, in other words. But even as late as 1976, when the current statutory damages provision was adopted, those battles were still in the future. The lobbying battle would therefore have been more complex. Statutory damages would have had as one of its primary targets those entities capable in 1909 or 1976 of committing infringements on a regular basis: that is to say, publishers themselves, as well as distributors. I don't know if there were any fractures on statutory damages in the lobbying battles before Congress but it doesn't strike me as something that would be strongly unilateral.

Congress in 1976 did change statutory damages in one very significant way that backfired: in an attempt to limit statutory damages, Congress specified that such damages be calculated "per work infringed." This was a limit at a time when infringement typically meant multiple copies of a single or small set of works. But now a typical, and unforeseen, infringement vector is the creation of a shared library of thousands of works. The statutory limitation now inflates statutory damages remedies in typical online infringement actions, with consequences I've noted elsewhere.

Of course all that has no impact on cases like Koons's. Koons was complaining about the infringement of one work, one of his balloon dog sculptures. His damages would max out at $30,000, or $150,000 if willful, both of which would have to be deemed unlikely, the latter particularly so. But perhaps the likelihood of getting damages is beside the point. Perhaps even the prospect of getting up to $150,000 for willful infringement of a single work encourages more cease-and-desist letters to be sent, or more to be complied with, or both. I'll start taking a look at that in my next post.