It has been established that an excessive award of punitive damages may violate due process. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). To aid the lower courts in determining whether an award of punitive damages may be so excessive as to violate due process, the Supreme Court has announced punitive damages "guideposts." The Court, however, has never held that the punitive damages guideposts are applicable in the context of statutory damages. Among the statutes that authorize the recovery of statutory damages is the Copyright Act, 17 U.S.C. § 504(c). The recovery of statutory damages is authorized in cases of infringement, because proof of actual damages can be very difficult.
An illustrative case is Capitol Records, Inc. v. Thomas-Rasset, 692 F.3d 899 (8th Cir. 2012). There, the defendant used a computer file-sharing program to download and share copyrighted musical performances without the consent of the copyright owners. Using a forensic service, the owners located and identified the defendant as the person who had initiated the unauthorized copying and file-sharing of the recordings. At trial, the plaintiffs were awarded substantial statutory damages in an amount that was well within the limits of damages authorized by the statute. A prevailing copyright-infringement plaintiff can elect to recover either actual damages or statutory damages. In Capitol Records, the plaintiff elected to recover statutory damages. The defendant argued that the district court should apply a standard of due process to the award of statutory damages analogous to awards of punitive damages.
The court of appeals was unpersuaded for several reasons. First, as noted earlier, the Supreme Court has never applied the due process limitation on punitive damages awards to the recovery of statutory damages. Second, due process prohibits excessive punitive damages because elementary notions of fairness require that a defendant be made aware of the penalties to which he or she might be subjected if he or she engages in the unlawful conduct at issue. This concern about fair notice does not apply to statutory damages, because those damages are identified and constrained by the authorizing statute.
Finally, the guideposts for the award of punitive damages announced by the Supreme Court would be nonsensical if applied to statutory damages. It makes no sense to consider the disparity between "actual harm" and an award of statutory damages when statutory damages are designed precisely for instances where actual harm is difficult or impossible to calculate. The availability of statutory damages is intended to have much the same deterrent effect on unlawful conduct as do punitive damages in other contexts. The amount of the award of statutory damages is up to the jury, so long as the amount does not exceed the amount authorized by statute (not less than $750 nor more than $30,000 per infringement, except in the case of willful infringement, when the court may increase the award to up to $150,000 per infringement).
The appellate court in Capitol Records found that an award of $9,250 per infringement was well within the statutory allowance and thus should be affirmed. The court probably was not well disposed to the defendant's arguments when it was determined during discovery that the defendant, after having received a cease-and-desist letter, had replaced the hard drive on her computer with a new hard drive that did not contain the copyrighted files. In many, perhaps most, copyright infringement cases, proving actual damages is so difficult that plaintiffs elect to claim statutory damages. If willful infringement is proven, courts are often favorably disposed to augment the jury's award of damages by a substantial amount.