Joel Tenenbaum has seriously harmed the music industry. That, at least, is what Sony, Warner Brothers, Atlantic, Arista and Universal Music Group are saying. And that’s why these music industry giants are collectively suing Tenenbaum for copyright infringement damages that could exceed $1 million.

Tenenbaum allegedly used peer-to-peer software to download and share seven copyrighted songs.

Seven songs. Starting when he was 16.

Tenenbaum, a 25-year-old doctoral student in physics at Boston University, has tried to settle the copyright dispute several times, but he has never offered as much money as the music companies wanted. In 2003, when he was a college student, Tenenbaum offered $500 but the music companies demanded $3,500. After the companies sued in 2007, Tenenbaum offered $5,000 but they wanted $10,500 (Tenenbaum’s Web site).

That’s just a fraction of what the music companies could be entitled to under federal law. Section 504 of the Copyright Act allows a copyright owner to obtain statutory damages ranging from $750 to $150,000 for each copyrighted work that is willfully infringed. Thus, willfully infringing seven songs could produce up to $1.1 million in statutory damages.

That is unconstitutional, according to Charles Nesson, a Harvard Law School professor who took over Tenenbaum’s defense in late 2008. As part of a motion filed in October, Nesson argued that the Copyright Act’s statutory damages provision is so “grossly excessive” that it violates substantive due process limits imposed by the Fifth and Eighth Amendments to the Constitution.

If the court agrees with Nesson, it would create a major change in copyright law. “It would be undoing 100 years of jurisprudence on the Copyright Act,” says Jennifer Pariser, senior vice president of litigation and legal affairs for the Recording Industry Association of America (RIAA).

It also would be a huge blow to copyright owners. “[Those] who own copyrights depend a lot on statutory damages,” Pariser says. “It’s a fundamental aspect of the way copyright law works.”

Grossly Excessive

There’s a reason Congress gave copyright owners the option to collect statutory damages instead of actual damages. “Congress realized there would be a category of cases where it would be hard to prove the specific harm done to the copyright owner, even though there was specific harm. So Congress authorized statutory damages to make the copyright owner whole and to deter future copyright infringement,” says Douglas Lichtman, who teaches copyright law at UCLA.

Some experts believe, however, that Congress set statutory damages far too high. “Congress went way overboard in the statutory damage provisions of the Copyright Act,” says David Post, who teaches copyright and cyberspace law at Temple University in Philadelphia. “The damages are intentionally set to be way out of line compared to what the actual damages are in most copyright [infringement] cases.”

That’s unconstitutional, according to Nesson. He points to the Supreme Court’s 1996 decision, BMW v. Gore, where the plaintiff sued a car dealer because the dealer failed to disclose that the new car he sold to the plaintiff had been repainted. The jury found for the plaintiff, who received $4,000 in actual damages and $2 million in punitive damages. The court struck down the punitive award, holding it violated the Due Process Clause because it was “grossly excessive” in relation to the “legitimate interests in punishment and deterrence.” The court noted, “The most commonly cited indicium of an … excessive punitive damages award is its ratio to the actual harm inflicted on the plaintiff.”

When a file-sharer illegally downloads a song instead of buying it, the music company loses about 35 cents in profit–but can collect statutory damages of $750 to $150,000. This, according to critics, is clearly excessive.

The RIAA, however, argues that the amount of statutory damages is reasonable because a file-sharer such as Tenenbaum doesn’t simply make an unauthorized copy of a song. He also makes that song available to millions of other file-sharers. “That’s equal to the value of a license to distribute the work to millions of people,” Pariser says.

Clear Limit

Even if these statutory damages are excessive, it is unclear if they are unconstitutional under Gore. Because that case dealt with punitive damages, the Gore test may not apply to statutory damages.

Juries have almost unlimited discretion in deciding the amount of punitive damages. In Gore, the Supreme Court put an upper limit on these awards so people would have some idea what consequences they might face if they engage in wrongful actions. “Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice … of the severity of the penalty that a State may impose,” Justice John Paul Stevens wrote for the Court.

Statutory damages, by contrast, have clear upper limits. “Fair notice is not an issue because the numbers are in the statute,” says Aaron Moss, a copyright litigator at Greenberg Glusker.

Moreover, it is one thing for a court to limit a jury’s power to award punitive damages, but a very different thing for a court to restrict a statutory damages scheme that Congress created. Statutory damages, after all, are set by legislators to appropriately compensate an injured party in situations where it is difficult or impossible to determine the actual amount of harm a defendant’s actions have caused.

Uphill Battle

In recent years, however, several lower courts have indicated a willingness to hear arguments on whether the Copyright Act’s statutory damages run afoul of Gore. In Atlantic Recording Corp. v. Brennan, for instance, a federal district court in Connecticut stated in 2008 that an alleged file-sharer could challenge the record companies’ attempt to seek statutory damages against him: “The defenses which have possible merit include … whether the amount of statutory damages available under the Copyright Act, measured against the actual money damages suffered, is unconstitutionally excessive.”

In another example, UMG Recordings v. Lindor, a federal district court in Brooklyn ruled in 2006 that an alleged file-sharer could argue that the Copyright Act’s statutory damages provision was unconstitutional. The court noted that, according to some case law and law review articles, “in a proper case, a court may extend its current due process jurisprudence prohibiting grossly excessive punitive jury awards to prohibit the award of statutory damages mandated under the Copyright Act if they are grossly in excess of the actual damages suffered.”

While courts may be willing to hear the argument, they are unlikely to agree with it, according to most experts. “We’re definitely fighting an uphill battle,” Nesson admits.

But regardless of what happens in court, Nesson’s attack on statutory damages may wind up changing the law. “Lawsuits like this can lead to Congressional action by raising the profile of the issue,” Post says. “Even if they lose this lawsuit, this is a valuable way of putting some pressure on Congress to change statutory damages.”