By: Caitlin McGowan
Summary
A single mother of two downloads twenty songs off of the Internet from a service provider. A record company sues her for willful copyright infringement alleging that she downloaded the music when she had reason to know that the songs were illegal downloads. Thus, the download of the songs was considered a willful copyright infringement under the Copyright Act and was subject to the maximum permissible statutory damages within the judge’s discretion. The download of each song was considered an infringement and was multiplied by the $150,000 in damages that could be awarded under the Act. The judge, within the limits of the Act, found for the plaintiffs, a large record company, and ordered that the defendant pay $3 million. Unfortunately, when the woman declared personal bankruptcy after the decision the damages were not subject to discharge because they were considered a willful and malicious injury. Thus, her infringement and the grossly excessive damages would follow her throughout the bankruptcy proceedings and for the rest of her life.
The Bankruptcy Act was enacted with the purpose of giving debtors a fresh start. So, in the hypothetical above, the single mother who downloaded a minimal twenty songs off the Internet, if done so without intent, would not be burdened for the rest of her life by the $3 million judgment against her if she declared bankruptcy. In fact, under the Bankruptcy Code, even the presumption is in favor of the debtor, meaning that the record company would have to prove that the single mother’s infringement was willful and malicious. Nevertheless, because of changing definitions of willful and malicious under the Bankruptcy Code, and various judicial interpretations of their definitions within the Copyright Act, the single mother above may be liable for the full judgment.
In my note, I will first look at the specific qualifications needed for dischargeability of debts in bankruptcy proceedings. One exception to discharge of debts is “willful and malicious injury,†which sets forth a bar denying discharge of debts resulting from any injury done in an intentional manner. This exception is applied in a two-step manner by courts: first, they determine whether the behavior was done willfully; second, they determine whether the conduct at issue was done maliciously. While the definition of willfulness has not been contested, maliciousness has been controversial.
Prior to the current standard, the definition of maliciousness included reckless behavior. This made its scope much broader than was intended, as evidenced by the case law and legislative history. The current standard, articulated by the Supreme Court in the landmark case of Kawaauhau v. Geiger, only includes actual knowledge rather than recklessness.
Nevertheless, the Copyright Act, which has implications for discharge in bankruptcy proceedings, still uses a recklessness standard in its definition of willful. Thus, if one infringes a copyright willfully, and such infringement is then potentially subject to discharge, a bankruptcy judge has to determine whether the willful infringement meets the copyright standard as well as the bankruptcy standard.
In the case of copyright infringement, a copyright owner may either elect to pursue actual damages or statutory damages provided for under the Copyright Act. Willful copyright infringement, under the Copyright Act, provides for the maximum of statutory damages at $150,000 per infringement within the court’s discretion. Such statutory damages have become increasingly problematic in intellectual property litigation. Although the courts have reformed their standard from a per-infringement scheme to a work-infringed scheme, an infringement can result in substantial statutory awards. Such damages, particularly those against individuals, can be unreasonably financially burdensome. If the court determines that the infringement was willful within the meaning of the Bankruptcy Code, resulting debts will not be discharged and that judgment will follow the individual indefinitely.