BMG Music v. Gonzalez, Cecilia ( 2005 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 05-1314
BMG MUSIC, et al.,
Plaintiffs-Appellees,
v.
CECILIA GONZALEZ,
Defendant-Appellant.
____________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 03 C 6276—Blanche M. Manning, Judge.
____________
ARGUED OCTOBER 27, 2005—DECIDED DECEMBER 9, 2005
____________
Before EASTERBROOK, EVANS, and WILLIAMS, Circuit
Judges.
EASTERBROOK, Circuit Judge. Last June the Supreme
Court held in MGM Studios, Inc. v. Grokster, Ltd., 125
S. Ct. 2764 (2005), that a distributed file-sharing system is
engaged in contributory copyright infringement when
its principal object is the dissemination of copyrighted
material. The foundation of this holding is a belief that
people who post or download music files are primary
infringers. In re Aimster Copyright Litigation, 334 F.3d 643,
645 (7th Cir. 2003), which anticipated Grokster, made the
same assumption. In this appeal Cecilia Gonzalez, who
downloaded copyrighted music through the KaZaA file-
sharing network, denies the premise of Grokster and
2 No. 05-1314
Aimster. She contends that her activities were fair use
rather than infringement. The district court disagreed
and granted summary judgment for the copyright propri-
etors (to which we refer collectively as BMG Music). 2005
U.S. Dist. LEXIS 910 (N.D. Ill. Jan. 7, 2005). The court en-
joined Gonzalez from further infringement and awarded
$22,500 in damages under 17 U.S.C. §504(c).
A “fair use” of copyrighted material is not infringement.
Gonzalez insists that she was engaged in fair use under the
terms of 17 U.S.C. §107—or at least that a material dispute
entitles her to a trial. It is undisputed, however, that she
downloaded more than 1,370 copyrighted songs during a
few weeks and kept them on her computer until she was
caught. Her position is that she was just sampling music to
determine what she liked enough to buy at retail. Because
this suit was resolved on summary judgment, we must
assume that Gonzalez is telling the truth when she says
that she owned compact discs containing some of the songs
before she downloaded them and that she purchased others
later. She concedes, however, that she has never owned
legitimate copies of 30 songs that she downloaded. (How
many of the remainder she owned is disputed.)
Instead of erasing songs that she decided not to buy,
she retained them. It is these 30 songs about which there is
no dispute concerning ownership that formed the basis of
the damages award. This is not a form of time-shifting,
along the lines of Sony Corp. of America v. Universal
Studios, Inc., 464 U.S. 417 (1984) (Betamax). A copy
downloaded, played, and retained on one’s hard drive for
future use is a direct substitute for a purchased copy—and
without the benefit of the license fee paid to
the broadcaster. The premise of Betamax is that the
broadcast was licensed for one transmission and thus one
viewing. Betamax held that shifting the time of this single
viewing is fair use. The files that Gonzalez obtained, by con-
trast, were posted in violation of copyright law; there was
No. 05-1314 3
no license covering a single transmission or hearing—and,
to repeat, Gonzalez kept the copies. Time-shifting by an
authorized recipient this is not. See William M. Landes &
Richard A. Posner, The Economic Structure of Intellectual
Property Law 117-22 (2003).
Section 107 provides that when considering a defense
of fair use the court must take into account “(1) the purpose
and character of the use, including whether such use is of
a commercial nature or is for nonprofit educational pur-
poses; (2) the nature of the copyrighted work; (3) the
amount and substantiality of the portion used in relation to
the copyrighted work as a whole; and (4) the effect of the
use upon the potential market for or value of the copy-
righted work.” Gonzalez was not engaged in a nonprofit use;
she downloaded (and kept) whole copyrighted songs (for
which, as with poetry, copying of more than a couplet or two
is deemed excessive); and she did this despite the fact that
these works often are sold per song as well as per album.
This leads her to concentrate on the fourth consideration:
“the effect of the use upon the potential market for or value
of the copyrighted work.”
As she tells the tale, downloading on a try-before-you-buy
basis is good advertising for copyright proprietors, expand-
ing the value of their inventory. The Supreme
Court thought otherwise in Grokster, with considerable
empirical support. As file sharing has increased over the
last four years, the sales of recorded music have dropped by
approximately 30%. Perhaps other economic factors contrib-
uted, but the events likely are related. Music downloaded
for free from the Internet is a close substitute for purchased
music; many people are bound to keep the downloaded files
without buying originals. That is exactly what Gonzalez did
for at least 30 songs. It is no surprise, therefore, that the
only appellate decision on point has held that downloading
copyrighted songs cannot be defended as fair use, whether
or not the recipient plans to buy songs she likes well enough
4 No. 05-1314
to spring for. See A&M Records, Inc. v. Napster, Inc., 239
F.3d 1004, 1014-19 (9th Cir. 2001). See also UMG Record-
ings, Inc. v. MP3.com, Inc., 92 F. Supp. 2d 349 (S.D.N.Y.
2000) (holding that downloads are not fair use even if the
downloader already owns one purchased copy).
Although BMG Music sought damages for only the 30
songs that Gonzalez concedes she has never purchased, all
1,000+ of her downloads violated the statute. All created
copies of an entire work. All undermined the means by
which authors seek to profit. Gonzalez proceeds as if the
authors’ only interest were in selling compact discs contain-
ing collections of works. Not so; there is also a market in
ways to introduce potential consumers to music.
Think of radio. Authors and publishers collect royalties on
the broadcast of recorded music, even though these broad-
casts may boost sales. See Broadcast Music, Inc. v. Colum-
bia Broadcasting System, Inc., 441 U.S. 1 (1979) (discussing
the licenses available from performing rights societies for
radio and television broadcasts). Downloads from peer-to-
peer networks such as KaZaA compete with licensed
broadcasts and hence undermine the income available to
authors. This is true even if a particular person never buys
recorded media. Cf. United States v. Slater, 348 F.3d 666(7th Cir. 2003). Many radio stations stream their content
over the Internet, paying a fee for the right to do so.
Gonzalez could have listened to this streaming music to
sample songs for purchase; had she done so, the authors
would have received royalties from the broadcasters (and
reduced the risk that files saved to disk would diminish the
urge to pay for the music in the end).
Licensed Internet sellers, such as the iTunes Music Store,
offer samples—but again they pay authors a fee for the
right to do so, and the teasers are just a portion of the
original. Other intermediaries (not only Yahoo! Music
Unlimited and Real Rhapsody but also the revived Napster,
No. 05-1314 5
with a new business model) offer licensed access to large
collections of music; customers may rent the whole library
by the month or year, sample them all, and purchase any
songs they want to keep. New technologies, such as SNOCAP,
enable authorized trials over peer-to-peer systems. See Saul
Hansell, Putting the Napster Genie Back in the Bottle,
New York Times (Nov. 20, 2005); see also
http://www.snocap.com.
Authorized previews share the feature of evanescence: if
a listener decides not to buy (or stops paying the rental fee),
no copy remains behind. With all of these means available
to consumers who want to choose where to spend their
money, downloading full copies of copyrighted material
without compensation to authors cannot be deemed “fair
use.” Copyright law lets authors make their own decisions
about how best to promote their works; copiers such as
Gonzalez cannot ask courts (and juries) to second-guess the
market and call wholesale copying “fair use” if they think
that authors err in understanding their own economic
interests or that Congress erred in granting authors the
rights in the copyright statute. Nor can she defend by
observing that other persons were greater offenders; Gonza-
lez’s theme that she obtained “only 30” (or “only 1,300”)
copyrighted songs is no more relevant than a thief’s
contention that he shoplifted “only 30” compact discs,
planning to listen to them at home and pay later for any he
liked.
BMG Music elected to seek statutory damages under 17
U.S.C. §504(c)(1) instead of proving actual injury. This
section provides that the author’s entitlement, per infringed
work, is “a sum of not less than $750 or more than $30,000
as the court considers just.” But if an “infringer sustains the
burden of proving, and the court finds, that such infringer
was not aware and had no reason to believe that his or her
acts constituted an infringement of copyright, the court in
its discretion may reduce the award of statutory damages
6 No. 05-1314
to a sum of not less than $200.” 17 U.S.C. §504(c)(2).
Gonzalez asked the district court to reduce the award under
this proviso, but the judge concluded that §402(d) bars any
reduction in the minimum award. This subsection provides:
“If a notice of copyright in the form and position specified by
this section appears on the published phonorecord or
phonorecords to which a defendant in a copyright infringe-
ment suit had access, then no weight shall be given to such
a defendant’s interposition of a defense based on innocent
infringement in mitigation of actual or statutory damages”.
It is undisputed that BMG Music gave copyright notice as
required—“on the surface of the phonorecord, or on the
phonorecord label or container” (§402(c)). It is likewise
undisputed that Gonzalez had “access” to records and
compact disks bearing the proper notice. She downloaded
data rather than discs, and the data lacked copyright
notices, but the statutory question is whether “access” to
legitimate works was available rather than whether
infringers earlier in the chain attached copyright notices to
the pirated works. Gonzalez readily could have learned, had
she inquired, that the music was under copyright.
If BMG Music had requested more than $750 per work,
then Gonzalez would have been entitled to a trial. See
Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340(1998). What number between $750 and $30,000 is “just”
recompense is a question for the jury, unless both sides
agree to decision by the court. But BMG Music was con-
tent with $750 per song, which the district judge awarded
on summary judgment. Gonzalez contends that this was
improper: Feltner, she contends, holds that a jury must
decide whether even the statutory minimum award will
be allowed.
Feltner holds that a claim for statutory damages under
§504(c) is a suit at law to which the seventh amendment
applies. This does not mean, however, that a jury must
resolve every dispute. When there are no disputes of
No. 05-1314 7
material fact, the court may enter summary judgment
without transgressing the Constitution. See Fidelity &
Deposit Co. v. United States, 187 U.S. 315 (1902). See also
Galloway v. United States, 319 U.S. 372 (1943); Gasoline
Products Co. v. Champlin Refining Co., 283 U.S. 494 (1931).
While acknowledging this proposition, Gonzalez insists that
copyright cases are different. She relies entirely on a single
passage from Feltner: “The right to a jury trial includes the
right to have a jury determine the amount of statutory
damages, if any, awarded to the copyright owner.” 523 U.S.
at 353 (emphasis in original). Gonzalez maintains that by
adding “if any” the Court allowed a jury to send an author
home empty handed, even if the statute makes $750 the
minimum. In other words, she contends that Feltner creates
a system of jury nullification unique to copyright litigation.
The Justices did not purport to give defendants in
copyright cases the right to ask jurors to return verdicts in
the teeth of the law. The sentence we have quoted is a
general description of the jury’s role, which the Court
drew from seventeenth-century English jurisprudence.
That’s hardly a plausible source for a rule unique to
American copyright law. In Feltner neither side had
sought summary judgment. We read Feltner as establishing
no more (and no less) than that cases under §504(c) are
normal civil actions subject to the normal allocation
of functions between judge and jury. When there is a
material dispute of fact to be resolved or discretion to be
exercised in selecting a financial award, then either
side is entitled to a jury; if there is no material dispute
and a rule of law eliminates discretion in selecting the
remedy, then summary judgment is permissible. See
Segrets, Inc. v. Gillman Knitwear Co., 207 F.3d 56, 65 n.7
(1st Cir. 2000).
Gonzalez says that the ninth circuit understood Feltner
differently on remand, but that’s mistaken. A jury trial was
held—for there were material factual disputes—and the
8 No. 05-1314
jury returned a verdict of $31.68 million in stat-
utory damages (or $72,000 per infringed work, an award
made possible by the jury’s conclusion that infringement
had been wilful). The defendant, ruing its Pyrrhic victory in
the Supreme Court (the judge’s original award, which the
Court vacated, had been $8.8 million), maintained
that §504(c) is unconstitutional, and that only actual
damages may be awarded, because §504(c) does not provide
for a jury trial. The court of appeals rejected that conten-
tion, noting that after the Supreme Court’s decision a jury
trial had been held. See Columbia Pictures Industries, Inc.
v. Krypton Broadcasting of Birmingham, Inc., 259 F.3d
1186, 1192-93 (9th Cir. 2001). Whether a jury resolves the
dispute because of statutory language or because of the
seventh amendment is all the same to the litigants. It is not
possible to find, in a decision affirming a jury’s verdict, a
rule of law that a jury is required even when there are no
factual disputes to resolve and no discretion to exercise.
As for the injunction: Gonzalez contends that this
should be vacated because she has learned her lesson, has
dropped her broadband access to the Internet, and is
unlikely to download copyrighted material again. A private
party’s discontinuation of unlawful conduct does not
make the dispute moot, however. An injunction remains
appropriate to ensure that the misconduct does not recur as
soon as the case ends. See United States v. W.T. Grant Co.,
345 U.S. 629 (1953). The district court did not abuse its
discretion in awarding prospective relief.
AFFIRMED
No. 05-1314 9
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-9-05