One substantial amendment proposed by the Copyright Modernization Act is to increase the upper limit of statutory damages for copyright infringement by allowing parts of a compilation to be deemed separate works:
“[T]he court in its discretion may determine that such parts are separate works if the court concludes that they are distinct works having independent economic value”
Currently, the maximum statutory damages that can be awarded under Title 17 §504(c) is $150,000 per compilation. Under the proposed bill, a court can award $150,000 per part of a compilation (or what we typically might call an “album” or CD). This means that damages could be $150,000 per song, or more than $1.5 million per CD.
This amendment is likely to have a chilling effect on innovation in media technology. It is difficult to determine whether a new product will run afoul of current copyright laws until precedent has been established. However, if the potential statutory damages for copyright infringement were to be increased, it is certain that companies would be even less willing to undertake innovative projects.
This amendment could also amplify errors in court decisions. Losing parties would be less willing to appeal a court holding against them because the statutory damages awarded could be even higher on appeal. Indeed, in the recent case of UMG Recordings, Inc. v. MP3.com, Inc., the court awarded statutory damages of $25,000 per CD. Appealing under the proposed amendment would mean risking damages of $1.5 million per CD (compared to $150,000 per CD under the current law) and would surely have further reduced MP3.com’s willingness to appeal.
Individual consumers are also adversely affected by the proposed amendment. People are as likely to be deterred by $150,000 per CD statutory damages as they would be by $1.5 million per CD statutory damages, so the deterrence effect of the amendment is likely to be negligible on most individuals. However, if the court erroneously rules that a consumer has infringed on copyrights, the social costs of this error (as measured by the cost to the consumer) are potentially magnified by this amendment.
The objective of statutory damages is to deter copyright infringement. This amendment seeks to bolster the deterrence effect, but its costs may just be too high.
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