On June 18, 2009, a U.S. jury awarded $1.92 million in damages for downloading and distributing 24 songs over Kazaa’s peer-to-peer file-sharing network (Capitol Records v. Jammie Thomas-Rasset). This award was a result of a retrial, and was a significant jump from the vacated verdict, which awarded damages amounting to $220,000. Many have remarked that the current damage award is somewhat surprising, and the quantum is being appealed, and it appears that an appeal of the decision is imminent.

Chief Judge Michael J. Davis of the United States District Court for the District of Minnesota, who presided over the original trial, the motion for retrial and the retrial, had stated that an award of $220,000 was “oppressive” for the circumstances. In the motion for a new trial, Chief Judge Davis said that “[t]he Court does not condone Thomas’s actions, but it would be a farce to say that a single mother’s acts of using Kazaa are the equivalent, for example, to the acts of global financial firms illegally infringing on copyrights in order to profit in the securities market.”

Chief Judge Davis ordered a new trial in late 2008 because of his own erroneous jury instruction. That jury instruction stated that making copyrighted sound recordings available for electronic distribution on a peer-to-peer network, without a license from the copyright owners, violated the owner’s exclusive right of distribution, regardless of whether actual distribution had been shown. In the motion for a new trial, Chief Judge Davis held that evidence of actual dissemination was required by the U.S. Copyright Act in order to find a violation of the exclusive distribution right. Charged with amended jury instructions, the new jury deliberated for only 4 hours and 45 minutes. Interestingly, in the new jury instructions, there was no mention of the requirement for actual dissemination.

Canadian copyright laws, by comparison, do not presently grant “making available” or “distribution” rights in musical recordings per se. That said, on the right evidence, peer-to-peer file sharing could constitute copyright infringement in Canada. However, there would be significant evidentiary hurdles.

One such hurdle is determining the identity of the file sharer because of the anonymity of customers of Internet Service Providers (ISPs). Privacy interests can pose an obstacle to obtaining court ordered disclosure of a customer’s contact information. The following needs to be established in the Federal Court for the court to order disclosure: (1) a ‘bona fide’ case against the unknown alleged wrongdoer, (2) that the person under dispute is more than an innocent bystander, and (3) that the public interest in favour of disclosure outweighs the legitimate privacy concerns of the individual. The Federal Court Rules does not mandate disclosure, and a Federal Court Judge will order disclosure only if these conditions are met, which is difficult in copyright infringement matters. However, the Ontario Superior Court has interpreted the mandatory disclosure obligation in the Civil Rules of Procedure (applied in the provincial court) to facilitate disclosure of ISP customer contact information, and has also found there to be a lower expectation of privacy for ISP’s customers.

Another hurdle is that the Copyright Act provides that it is not an infringement if a copy of a musical work is made for personal use; however, that copy must be recorded onto an “audio recording medium”. Recent case law supports the argument that copying to a computer, or similar device, as in P2P networks, is not copying to an "audio recording medium". As such, there are good arguments that the exemption wouldn't apply in a P2P context. There are also other limitations that may prevent the exception from applying in a P2P context. For example, the exemption does not apply if there is distribution for the purpose of trade, or if there is communication to the public by telecommunication.

If the evidentiary hurdles are overcome, and infringement is found against a P2P file-sharer, Canadian damage awards are unlikely to parallel those in the U.S., especially without a jury (which will always be the case in the Federal Court). Under the Copyright Act, a plaintiff may elect to seek damages and an accounting of profits, or seek a statutory damage award. Irrespective of the election, under the current law, a successful plaintiff against a P2P file sharer should not expect an award comparable to that issued in the above-mentioned U.S. case. The maximum statutory damage award is set for no less than $500, and no more than $20,000 per work for which any one infringer is liable. As such, statutory damages for downloading five copyrighted works would not be more than $100,000. If, instead of statutory damages, the copyright owner elects to claim damages and an accounting of profits, the award is also likely to be modest. There is generally no profit motive for P2P file-sharers, and proving damages in any substantial amount will be challenging, especially since license fees tend to be awarded as damages. Even in a commercial context, Canadian courts have resisted applying a multiplier when calculating license fees.

Technological advances and new media have increased the complexities of applying copyright law and enforcing rights. Canadian law is ripe for reform, and many have called for legislative change. Last summer, a bill was proposed to reform the Copyright Act, which died in the house when an election was called. Had it passed, the bill would have limited statutory damages for all an individual defendant’s infringements that were done for the defendant’s private purposes to a maximum of $500, and minimum of $200. This would mean that for downloading five songs, a person could only be liable for a maximum of $500. This was limited to infringements for personal use, and the larger award (up to $20,000 per work) would be available for circumstances where someone uploaded copyright material to a peer-to-peer network, or sold a device that contained copyrighted material downloaded for personal use.