How to calculate damages in filesharing cases?

Ehm ... not everybody may agree

This question has proved fairly controversial to address in a number of different jurisdictions. Via 1709 Blog friend Mirko Brüß (Rasch Rechtsanwälte) comes however the news that some guidance in this respect has been recently provided by the 

Bundesgerichtshof (BGH, the German Federal Court of Justice).

Here's what Mirko writes:

"To begin with, it should be noted that I am an attorney in the law firm that represented the plaintiffs in the three cases at hand.

Earlier this week the BGH dismissed the appeals of three DSL subscribers who were previously sued by major music labels EMI, Sony, Warner and Universal.

In short, the BGH confirmed that damages of EUR 200 per song are appropriate when music is communicated to the public via P2P-Filesharing. DSL subscribers were found liable as perpetrators for damages and attorneys’ fees when they did not present alternative facts that could explain why their IP was used for unlawful filesharing. They also had the burden of proof for such facts. When the filesharing was done by the subscriber’s children, they needed to prove they did not neglect their parental supervisory duties. With regards to filesharing, this means the parents need to explain the dangers of filesharing to their children and prohibit the use of such systems. Failure to do so results in full liability for damages and attorney’s fees.  

More in detail

All three cases date back to 2007, when the IP addresses of the defendants were found to be the sources of hundreds (in two cases: thousands) of MP3s made available for download (communication to the public, § 19a UrhG – German copyright code) via P2P-filesharing, using the now obsolete “Gnutella”-Network, which is technically similar to BitTorrent, because users who download files are also uploading them at the same time.

Since it is technically impossible to tell from the outside who is operating a PC that is using a certain IP-address, we approached the DSL subscribers with cease-and-desist letters and an offer for out-of-court settlement. When no agreement was found, the cases went to the district court of Cologne. The labels asked for damages of 3000 EUR (for 15 tracks, or 200 EUR per track) and for their out-of-court lawyer’s fees.

The BGH had previously decided on filesharing cases in 2010 (I ZR 121/08 “Sommer unseres Lebens”), 2012 (I ZR 74/12 “Morpheus”) and 2014 (I ZR 169/12 “BearShare”). In these cases, the BGH had ruled that when an IP is found to be the source of filesharing, this is prima facie evidence that the DSL subscriber was using the P2P client. The lower courts have ever since been very diverse when it came to what could be asked of the subscriber to counter the prima facie evidence. Positions ranged from “it is sufficient to claim that other persons had access (in general) to the subscribers internet” to “the subscriber needs to name the person who did it”.

Also, the BGH had never decided on the amount of damages that can be asked and lower courts’ decisions varied from 15 EUR per song to 300 EUR per song. Since there are thousands of cases similar to the ones at hand still pending at the lower courts, the three decisions were eagerly awaited by lawyers and the public alike.

Before the court, the defendants in our three cases used different arguments against their liability.

In the first case (I ZR 75/14), the defendant questioned the reliability of the investigations and the allocation of the IP-address to his DSL account. He claimed that neither he, nor his family had access to the internet via his account, stating the whole family was on vacation and they had cut the power for the PC and the router before leaving. The regional court of Cologne sided with the defendant and thus dismissed the case.

We appealed and the higher regional court of Cologne overturned the decision, sentencing the defendant to pay both damages and lawyers’ fees. This was after hearing the family as witnesses for the purported holiday. In short, the court did not believe the family was on vacation and all, disregarding these claims as a defensive lie.

In the second case (I ZR 19/14), the defendant also questioned the reliability of the investigations and the allocation of the IP-address to his DSL account. He argued that there was only one PC in the household and that his 17 year-old son had no access to this at all, while his wife did have access, but had very little knowledge of PCs and was not able to install any software due to lack of administrator’s rights. Both the regional court and the higher regional court of Cologne ordered the defendant pay damages and attorneys’ fees. The courts reasoned that since there was only one PC and the defendant had ruled out his wife and son as the perpetrators, it must have been him who used the filesharing network.

In the third case (I ZR 7/14), there had been a criminal investigation in which the defendant’s 14 year old daughter had admitted she was the one to use the filesharing network for downloading music. Both the regional court and the higher regional court of Cologne had sentenced the defendant to pay damages and attorney’s fees. She further appealed to the BGH, claiming that her daughter’s confession could not be used in civil proceedings, because the police had not advised her daughter that the criminal confession could be used in a civil case against her mother. Secondly, she claimed she had instructed her daughter on the illegality of uploading copyright-protected musical works and thus there was no neglect of parental supervisory duties.

EUR200 per song, to be more precise

The decisions

On June 11^th, the BGH dismissed the defendant’s appeals in all three cases and upheld the lower court’s rulings. All three defendants were sentenced to pay 3000 EUR of damages (200 EUR per song) and the out-of-court attorney’s fees of the major labels. With regards to the cases #1 and #2, the BGH followed the higher regional court of Cologne that the defendant did not present (and prove) facts that could explain why someone else other than the DSL subscriber could be the infringer. In both cases, the defendants themselves had rather ruled out that someone from their family had access to the internet at the time of the offence.

In the third case, the BGH found that the higher regional court was allowed to use the defendant’s daughter’s confession. The police did not have to explain to her the possible consequences of her confession for civil proceedings. Also, the daughter was heard as a witness by the regional court of Cologne, where she confirmed her confession. The BGH then decided the defendant had neglected her parental supervisory duties, because she failed to prove she had properly instructed her daughter about the dangers of filesharing.

Having found that all three defendants liable for the infringements, the BGH confirmed the rulings of the higher regional court of Cologne, granting the plaintiffs damages of EUR 200 for each of the 15 songs that were communicated to the public. The damages were estimated by the court using the licence analogy method. The higher regional court began its calculation at 50 cent per song, and further estimated that it was realistic to anticipate 400 downloads to be made from the plaintiffs PCs, thus totaling EUR 200 per song. This is in line with earlier judgments by the higher regional courts of Frankfurt and Hamburg.

We believe these judgments will make it easier for copyright owners to enforce their rights. Some of the lower courts made it easy for defendants to get away with stories that would shift the burden of proof to the plaintiffs when the latter actually had no means to prove what happened within the walls of the defendants’ homes. According to these recent rulings, when defendants claim they “didn’t do it”, they will have to present a credible alternative explanation for why their internet connection was the source of illegal uploading. A vacation that never actually happened is no such alternative. The BGH also put an end to a lengthy disagreement between various lower courts on how to calculate damages in filesharing cases."