Category: Communication Media & Internet

Are You Waiting to Make Valuable Investments for Your Law Firm?

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At the end of each year, most law firms balance their books and assess the dollars they have spent on advertising and marketing. Every year, many law firms are surprised to see that their returns from carefully planned marketing campaigns have only broken even or produced a minimal return on their investment.

Many lawyers are still pushing hundreds of thousands of dollars into obsolete advertising channels. For example, most law firms have realized that YellowPages advertising is no longer effective. Yet many lawyers continue to advertise in YellowPages directories. With the exception of some rural market areas, most of those yellow page advertising lawyers are continually disappointed that their office phones remain silent. A majority of our clients have virtually stopped all paid yellow page directory advertising.

Similarly, many lawyers have expressed dissatisfaction with their television advertising. The way consumers watch television has changed, especially in the past several years. This trend has been hastened by the advent of new technologies. Netflix and Hulu allow viewers to watch their favorite shows without tuning into a television station. DVR allows television viewers to fast-forward through commercials. According to Motorola’s recent Media Engagement study, more than one-third of weekly TV viewing by Americans is pre-recorded. Roughly three-quarters pre-record their shows to skip advertisements.

With these trends and technologies in place, many of your prospective clients will not see your law firm’s commercial spots. Additionally, most of our Consultwebs clients find that the cost per case for TV is typically four to six times higher than for SEO/organic marketing and fifty to one hundred percent higher than pay per click (PPC) or AdWords advertising.

Are you waiting to make valuable investments for your firm?

Armed with data to guide your decisions, you do not have to wait to invest in Web marketing.  Web marketing has a proven track record of strong ROI. To effectively manage your marketing dollars, your firm must know the return on investment (ROI) from each marketing effort you employ. By consulting the data, you will be poised to make the best decisions for your law firm’s marketing efforts.

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White House Previews List of Incentives to Support Adoption of its Cybersecurity Framework

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As its latest step in a broader effort to prioritize cybersecurity, the White House released last week a list of possible incentives that may be offered to companies that own or operate critical infrastructure systems and assets to encourage adoption of a national Cybersecurity Framework, scheduled for release in February 2014. The list of possible incentives—which the Departments of Homeland Security, Commerce, and Treasury identified in response to a February 12, 2013 Executive Order—includes grants, liability limitation, public recognition, and cybersecurity investment rate recovery, among others. Some of the identified incentives could be created from existing federal agency authorities, while others would require legislative action from Congress. Over the next few months, agencies will seek input from critical infrastructure stakeholders in examining their preliminary lists and determining which to implement and how.

In the same February 12, 2013 Executive Order, the President directed the National Institute of Standards and Technology (NIST), an agency of the Department of Commerce, to lead the development of a national Cybersecurity Framework to reduce cyber risks to critical infrastructure. The President called for the Framework to include a set of standards, methodologies, procedures, and processes that align policy, business, and technological approaches to address cyber risks, and directed NIST to incorporate voluntary consensus standards and industry best practices to the fullest extent possible. NIST released a draft outline of the Framework on July 1, 2013, and a full draft of the Framework is scheduled for release in October.

Exactly how the Cybersecurity Framework will interact with or complement the North American Reliability Corporation (NERC) Critical Infrastructure Protection (CIP) standards is unclear. The Cybersecurity Framework is intended to provide cross-sector security standards, while the NERC CIP standards were developed by, and for the use of, the electricity sub-sector. The Administration intends for NIST to consult its peers, as the President directed the Secretary of Homeland Security to “engage and consider the advice” of sector-specific and other relevant agencies. The Secretary must also identify areas for improvement that should be addressed through future collaboration with particular sectors and standards-developing organizations, which would presumably include NERC. Whether NERC has been consulted and how their input thus far has been considered is unclear.

In its draft outline of the Cybersecurity Framework, NIST indicates that the voluntary program is intended to complement rather than to conflict with current regulatory authorities, and the draft compendium, attached to the outline, includes reference to the NERC CIP Standards. In fact, NERC submitted comments in response to NIST’s February 26, 2013 Request for Information seeking input to help shape the draft Framework. However, the content of the Framework is still unknown, and until the draft is released in October, the exact relationship between the two sets of standards remains uncertain. In the meantime, as NERC stated in its comments to NIST, NERC feels strongly that a second set of potentially conflicting or redundant standards could create undue hardship on the electricity sub-sector. NERC also stated that, “while a framework of cybersecurity standards that is applicable to all sectors is possible, the framework may need flexibility to have certain common elements to be valuable or effective. Some sectors, such as the electricity sub-sector, are far more advanced in their cybersecurity efforts; other sectors may need time to meet minimum (voluntary) standards. The framework must build on existing standards and programs to develop a comprehensive approach to cybersecurity.”

As national-level cybersecurity efforts have progressed this year, so have NERC’s efforts to improve the CIP standards. NERC Reliability Standards are generally written as performance standards; that is, they prescribe a measurable end-state or goal, and attempt to remain technology- and method-neutral. However, utilities widely criticized earlier versions of the standards as being focused primarily on compliance documentation as opposed to security principles. With input from stakeholders, NERC significantly revised its CIP standards in Version 5, which were filed with FERC on January 31, 2013. Much of industry considers the revised CIP program to be an improved framework for critical asset cybersecurity protection, with a renewed risk-based focus on security. NERC stated that it stands ready to share its industry-driven approach with NIST as it endeavors to develop the Cybersecurity Framework.

Google, Yahoo, and Ad Networks Agrees to Set of Best Practices to Combat Online Piracy

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The United States Intellectual Property Enforcement Coordinator Victoria Espinel recently blogged about a new effort to combat online piracy of intellectual property.  The broad-based effort attempts to leverage the participation of several large internet/publishing companies (Google, Yahoo, Microsoft, AOL and Condé Nast), advertising networks (24/7 Media, Adtegrity) and the Interactive Advertising Bureau.  The parties have agreed to voluntarily adopt a set of best practices to remove advertising from websites that are primarily engaged in copyright piracy (movies, video games, music, books, etc.) or selling counterfeit goods.

In addition to efforts by companies to combat a similar problem using the Copyright Alert System, which we have previously covered, the current agreement takes aim at shutting down the profitability (and it is hoped, the major incentive) of these piracy websites to attenuate their proliferation.

The parties have agreed to implement these procedures and establish a system whereby a rights holder will send an initial informal complaint to one of the participating ad networks alleging that the website at issue is “principally dedicated to” engaging in copyright piracy and/or counterfeiting goods.  Further, the website must have no “substantially non-infringing uses.”  Upon receipt of a complaint, the ad networks will investigate and determine whether to take action, which can range from requesting the website cease from engaging in the alleged activity, to an embargo on advertisements placed by that ad network on the website until such time as the alleged violations are removed, or ultimately, removing the website from the ad network altogether.  While not required to, the ad network may also consider any evidence provided by the website owner that it is either not principally dedicated to counterfeiting or copyright piracy, or has substantial non-infringing uses.  Any such “counter notice” should include the content prescribed in the Digital Millennium Copyright Act (17 U.S.C. §512(g)(3)).  In addition, the participating ad networks will be certified by the Interactive Advertising Bureau’s Networks and Exchanges Quality Assurance Guidelines.

It is important to note that the burden to initiate the process is squarely on the rights holder, the guidelines explicitly noting that (i) there is no burden on the ad networks to police or actively monitor the websites on which their ads are placed; and (ii) by participating in this program, the ad networks do not prejudice their ability to maintain any “safe harbor” status they may otherwise be entitled to.

These best practices certainly have the critical mass to succeed.  The critical question, however, will be the quality of the analysis by the ad networks in response to allegations of piracy or counterfeiting, and the efficacy of this avenue of redress as perceived by the rights holders.  Regardless, this agreement, which may be refined going forward, is another step towards alleviating some of the pressure search engines have been under recently to take more proactive steps toward protecting intellectual property.

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How to Be Found by Prospects That Are Looking for a Lawyer

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Most people take a four-step approach when choosing an attorney, and this has been validated by recent research.

Savvy attorneys know they need to be accessible at each step in the decision process; here’s how:

Step 1: Information Gathering. Most people turn to the Internet to gather information and you need to be there to answer their questions via a blog or your website. You should have content that specifically addresses the type of situation that would lead someone to hire you and/or why they need legal counsel for their particular problem.

Step 2: Search. An active presence on social networking sites as well as your blog and website can help lead prospects to your door. Many may ask their Facebook friends for recommendations or turn to other social media sites for information about specific firms, so you need to be there.

Step 3: Validation. Having good reviews and posting testimonials (if your state bar allows it) on your website and blog will help put you front and center during the validation process. Don’t forget to beef up your profiles on Avvo, Lawyers.com and other directories as well as LinkedIn.

Step 4: Selection. Offer free consultations at every opportunity and when someone calls your office, return the call immediately. One attorney asked if two days was too long to return a call from a prospect – the answer is, definitely! Research shows that a hot lead can turn cold in as little as five minutes, so if you can’t get to them quickly, make sure someone else in your office can or that you have an automated system to follow up immediately.

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3 Ways to Raise Your Revenues In the Next Year

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1. Increase your Conversion Rates

One of the best ways to generate more revenue is by increasing your conversion rates at each stage. Conversion starts the moment an interested prospect contacts your law firm. How many of those people turn into appointments? That’s part of conversion. Start there by finding ways to increase the percentage of leads that turn into appointments. By increasing that number by just 10% you can radically improve your revenues!

The Rainmaker Institute builds customized lead conversion systems for law firms. These systems automate your conversion process and helps to increase your conversion rate at every stage. You can also get a clear picture of which types of leads are the most profitable for your firm.

2. Raise Your Rates

I understand we are still in a difficult economy. However, unless you are already charging near the top 20% of prices in your practice area, I find that most of the small practitioners I consult with can immediately increase their prices by 10-30%. I had a dozen clients who did that last year, including a criminal defense attorney who went from charging $275 per hour to $395 per hour! By the way, he now has more work than he can handle and has had to hire two more attorneys.

In our example above, by moving from an Average Client Worth of $2,000 per client to just $2,500 you would only need 1,015 leads per year, a 20% decrease. This is often the fastest way to get to your goals.

3. Increase Repeat Business

Yes, I know this is a mantra in the legal industry, but most law firms do not have any specific plans for doing so. On average, acquiring a new client will cost your law firm almost 10 times as much as obtaining repeat business from an existing client!

One of the most effective ways to do this is with a monthly e-Newsletter. Recently I asked a room of over 40 attorneys from small firms how many of them received newsletters, either electronic or print, from other professionals. Most of them raised their hands. Then I asked them, how many of you send out a newsletter to your prospects, clients, and referral sources?  Only 3 of them raised their hands!

One of the laws of marketing is “out of sight is out of mind.” If you don’t keep in touch with your prospects, clients and referral sources someone else will. The number one reason why you aren’t receiving more repeat business from your former clients is lack of connection-you haven’t stayed in touch with them. Make a commitment to change that!

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Zappos and It's Effect On "Browswrap" Agreements

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Key Takeaways For An Enforceable Terms of Use Agreement

In light of the recent Nevada federal district court decision In re Zappos.com, Inc., ‎Customer Data Security Breach Litigation, companies should review and update their ‎implementation of browsewrap agreements to ensure users are bound to its terms. MDL No. ‎‎2357, 2012 WL 4466660 (D.Nev. Sept. 27, 2012).

A browsewrap agreement refers to the online Terms of Use agreement that binds a web ‎user merely by his continued browsing of the site, even when he is not aware of it. Any ‎somewhat experienced web user is no stranger to the Terms of Use link that leads to the ‎browsewrap agreement. Yet, the users tend to ignore the link’s existence, and rarely think of it ‎as a “contract” with any practical effects. In Zappos, the court questioned the browsewrap ‎agreement’s validity particularly because of this tendency among web users. The court ruled the ‎arbitration clause in Zappos’ browsewrap Terms of Use was unenforceable because the users did ‎not agree to it and Zappos had the right to modify the terms at any time. ‎

Background of the Case

Founded in 1999, Zappos.com is a subsidiary of Amazon.com and one of the nation’s ‎biggest online retailers for footwear and apparel. Currently headquartered in Henderson, ‎Nevada, the company has more than 24 million customer accounts. In mid-January 2012, its ‎computer system experienced a security breach in which hackers attempted to access the ‎company’s customer accounts and personal information.

After Zappos notified its customers about the incident, customers from across the country ‎filed lawsuits against Zappos, seeking relief for damages arising from the breach. The cases were ‎transferred to and consolidated in Nevada. Zappos then sought to enforce the arbitration clause ‎contained in its Terms of Use, which would stay the litigation in federal court and compel the ‎case for arbitration. The court denied Zappos’ motion on two grounds: there was no valid ‎agreement to arbitrate due to the lack of assent by the plaintiffs and the contract was ‎unenforceable because it reserved to Zappos the right to modify the terms at any time and ‎without notice to its users.

Lessons Learned from the Browsewrap

Mutual Assent Must Be Clear 

Arbitration provisions are a matter of contract law, and the traditional elements of a ‎contract must be met even though Zappos’ Terms of Use was presented in electronic, ‎browsewrap form on the website. An essential element of contract formation is mutual assent by ‎the parties to the contract, which the court found was missing in this case as there was no ‎evidence of the plaintiffs’ assent.

The court compared the browsewrap agreement with another popular form of online terms ‎of use agreement, the “clickwrap” agreement. Clickwrap agreements require users to take ‎affirmative actions, such as clicking on an “I Accept” button, to expressly manifest their assent to ‎the terms and conditions.‎

Since Zappos’ browsewrap agreement did not require its users to take similar affirmative ‎action to show their assent to the terms and conditions, there was no direct evidence showing ‎that the plaintiffs consented to or even had actual knowledge of the agreement, including the ‎arbitration clause.‎

Link It Front and Center 

Furthermore, the court found Zappos’ Terms of Use hyperlink was inconspicuous and ‎thus did not provide reasonable notice to its users. The link was a) “buried” in the middle or ‎bottom of each page and became visible when a user scrolls down, b) appeared “in the same size, ‎font, and color as most other non-significant links,” and c) the website did not “direct a user to ‎the Terms of Use when creating an account, logging in to an existing account, or making a ‎purchase.” The court concluded that under ordinary circumstances, users would have no reason ‎to click on the link.‎

Unilateral Right to Modify or Terminate Won’t Work

Another problem with Zappos’ browsewrap agreement was that it was illusory and thus ‎unenforceable. In the agreement, the company “retain[ed] the unilateral, unrestricted right to ‎terminate the arbitration agreement” and had “no obligation to receive consent from, or even ‎notify, the other parties to the contract.” Users would unsuspectingly agree to the changes by ‎continuing to use the site. Under this provision, Zappos could seek to enforce the arbitration ‎clause, as it did here, or not enforce it by modifying the clause without notice to its users when it ‎was no longer in its interest to arbitrate. In either circumstance, the users would still be bound to ‎the agreement.

Implications for Companies

As a result of this decision, companies should carefully reassess the display and content ‎of the online terms of use they adopt to ensure their enforceability. In a narrow sense, the ‎decision means an arbitration clause in a browsewrap agreement similar to Zappos’ may be ‎deemed unenforceable. More broadly, this decision threatens the validity and enforceability of ‎other terms and conditions contained in a browsewrap agreement, which may deprive the ‎company of the agreement’s protection and favorable terms. ‎

Clickwrap agreements seem to provide the solution to Zappos’ problem. The court ‎suggested a clickwrap agreement could obtain a user’s assent to the terms and conditions. A ‎company may implement the clickwrap agreement through account registration or purchase ‎check-out, tailored to the nature of the company’s business and user interaction. The system may ‎require a user to click “I Accept” to secure the user’s assent to be bound by the agreement before ‎he can proceed further on the website. ‎

On the other hand, the court did not conclude that browsewrap agreements are never ‎enforceable. Other courts have held that browsewrap agreements are generally enforceable. ‎Enforceability largely depends on how the company presents the link and terms to the users such ‎that the users would have reasonable notice of the information. Accordingly, a browsewrap ‎agreement may be enforceable if the hyperlink is conspicuously located and displayed. ‎

In addition, companies should communicate and secure a user’s assent to any ‎modification when the user has previously accepted the terms and conditions. The user may ‎consent through another clickwrap agreement showing the modified terms. With a browsewrap ‎agreement, notice of the changes should, at the minimum, be conspicuously displayed on the ‎webpage. ‎

What This Means 

The Zappos decision reflects a change in the public policy on web activities, and users ‎who do not affirmatively agree to the online Terms of Use may no longer be bound. Consumers ‎are increasingly turning to the web for goods and services. In reaction, courts are beginning to ‎look closer into the transactions and resulting issues that occur online. In this process, courts are ‎testing and requiring new standards for these Terms of Use agreements. Companies should be ‎aware of the court’s evolving attitude towards the different types of agreements. You are ‎encouraged to seek legal guidance to properly adapt your implementation of Terms of Use ‎agreements. Failure to update your Terms of Use agreements may leave you exposed to ‎unfavorable terms that the Terms of Use is designed to prevent.‎

Legal Marketing Q and A

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Our session in San Diego last weekend yielded some good questions that are worth sharing here, with my answers:

When should I ask for testimonials?

  1. Right after the client is retained
  2. Anytime the client says thank you
  3. Anytime there is a “win” for the client
  4. After the case/matter is handled

Why do I need testimonials, can’t I just tell prospects that my clients love me?

You can do so, but it is far more compelling when someone else talks about their positive experience they had with you or the firm than if you simply say your clients are happy. Third party reviews are far more powerful than if you say it.

People are skeptical; they don’t always believe what individuals and companies say about themselves.

Lastly, people are deathly afraid of making mistakes, if they can see or read about others’ experiences with you or the firm they feel better about making the decision because others have had a positive experience with you and they believe they will have a similar experience!

What are a few major systems I should have in my law firm in regards to managing client experience?

1.     Intake system (what docs clients need to bring in, sign, initial, etc.). If the process is easy and systematized, the prospect will pick up on that and feel more comfortable about hiring you.

2.     Follow up system (If a prospect doesn’t hire you how frequently and persistently do you follow up? When you meet someone at a networking event that can refer you clients, how frequently and persistently do you follow up?) Improves the client experience because they see you follow up and care.

3.     Create a policy and procedure manual (so you are not held hostage by staff or find yourself totally crippled if someone leaves, gets sick or is no longer available). Improves client experience because each time they come in or call, the experience, language used etc. is consistent.

Why does it seem like my prospects only care about price?

If prospects only care about price, that means they believe you or your services are a commodity. And commodities are sold on price. You are most likely trying to be the shiniest apple in the barrel of apples…you must become the orange in the sea of apples so people understand why and how you are different and why paying a premium makes sense.

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Professional and Personal Aspects of Law Firm Social Media

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I’ve seen it far too many times: law firms are often concerned that any personal posts on their firm’s Social Media platforms may hinder their credibility as a professional legal practitioner.  That simply isn’t the case. In fact, if every post is of a professional nature, it may deter the average Facebook user from interacting with your content. You need a good balance of the two.

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If you keep your Social Media presence strictly business, you run the risk of scaring away followers – or at the very least losing their attention. We agree with Ken Hardison, Founder and President of the Personal Injury Lawyers Marketing and Management Association (PILMMA), who says that no more than 15 percent of your social content should be self-promotional. “People love to buy, but they don’t love to be sold to,” Hardison says.

More personal posts – such as employee birthdays and anniversaries, new hires, local news, a thoughtful quote, or even pictures that don’t directly relate to law – will show Social Media users a more approachable side of your firm. However, if you never post anything related to your law firm and practice areas, your Social Media platforms wouldn’t be much of a marketing effort.

So, what’s the perfect recipe for Social Media success?

The best way to promote your website, content and firm on Social Media is through your blog. Blogs often provide shareable information or news and thus lend themselves to Social Media sharing. Blogs bridge the gap between useful, shareable information and promoting your law firm. Combine a healthy flow of blog posts with a balanced blend of non-promotional posts and you just may see more users clicking your links and interacting with your Social Media posts.

Why Are Non-Business Posts Beneficial?

Posts that do not directly relate to law and your practice still serve a purpose. They’re not getting people onto your site. They’re not directly getting you cases. However, they are getting attention in the form of Likes, Shares, +1s and retweets – and therefore giving your brand attention. People are getting to know your firm through the content you share, some of which is business-oriented, some of which is more relatable to the average Facebook, Twitter or Google+ user. The goal should be to appear knowledgeable, professional and approachable. This blend of posts does just that.

Both types of posts serve a purpose. Professional posts receive a few likes and drive traffic to the firm’s website, while more personal posts spread the brand to far more Social Media users, increasing brand recognition and page visibility.

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Picture This: The National Labor Relations Board’s Division of Advice Wants to Sue Employer for Issuing Social Media Policy with Photo/Video Ban

Michael Best Logohe National Labor Relations Board’s Division of Advice (the Division) recently recommended that the Board issue a complaint against Giant Foods for implementing its social media policy without first bargaining with two unions, and for maintaining a social media policy that included unlawful provisions. Although the Division analyzed several social media policy provisions, its criticism of two provisions in particular—a ban on using photo and video of company premises, and restrictions on employees’ use of company logos and trademarks—makes it very difficult for employers to protect their brands while at the same time complying with federal labor laws.

Giant Foods’ social media policy forbade employees from using company logos, trademarks, or graphics without prior approval from the company. The policy also prohibited employees from using photographs or video of the “Company’s premises, processes, operations, or products” without prior approval as well.

The Division concluded that these provisions were unlawful under the National Labor Relations Act (NLRA) and that the National Labor Relations Board (the Board) should issue a complaint against Giant Foods for implementing them. As employers are becoming keenly aware, the NLRA safeguards employees’ right to engage in protected concerted activity. Such activity includes group discussions and some comments by individual employees that relate to their wages, hours, and other terms conditions of employment.

The Division concluded that banning employees from using company logos or trademarks was unlawful because: (1) employees should be allowed to use logos and trademarks in online communications, including electronic leaflets or pictures of picket signs with the employer’s logo; and (2) those labor-related interests did not raise the concerns that intellectual property laws were passed to protect, such as a business’ interest in guarding its trademarks from being used by competitors selling inferior products.

Additionally the Division concluded that restricting employees from using photo and video of company premises unlawfully prevented them from sharing information about participation in protected concerted activities, such as snapping a picture of a picket line.

Unfortunately, the Board’s expansive view will likely hamper companies’ ability to prevent damage to their brand and reputation.  Not allowing employers to ban the taking of videos and photos on their premises, or restricting the use of company logos/trademarks could lead to public relations nightmares such as the one Subway Foods recently endured after it was revealed that an employee posted a graphic picture on Instagram of his genitalia on a sub, with the tag line “I will be your sandwich artist today.”

Given the prevalence of cell phones with photo and video capabilities, and the ease of uploading photos and videos to the internet, a company that cannot control its employees’ use of those devices on their premises will be one bad employee decision away from public embarrassment.

What else can be gleaned from the Giant Foods Advice Memorandum? That the Board’s General Counsel will continue to prod employers to eliminate blanket bans on certain kinds of employee conduct from their social media policies and replace those bans with provisions that include specific examples of what employee conduct the policy prohibits. The Board and its General Counsel have previously found social media policies that restricted employee use of confidential information and complaints about an employer’s labor practices as unlawful; Giant Foods makes clear that the agency is also scrutinizing other kinds of policy provisions that potentially could infringe on an employee’s right to engage in protected concerted activities.

Accordingly, employers should review their policies with counsel so that they can tailor them to restrict employee conduct that will damage the company and its brand, but not be “reasonably” read to restrict employees’ rights to engage in protected concerted activities.

Next Time, Buy the CDs, Re: Illegal Music Download

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Following the lead of other courts addressing statutory penalties for illegal music downloading, the U.S. Court of Appeals for the First Circuit upheld a $675,000 fine for downloading and distributing 30 songs.  Sony BMG Music Entertainment  v. Tenenbaum, Case No. 12-2146 (1st Cir., June 25, 2013) (Howard, J.).

For over eight years, Tenenbaum ignored the warnings of his father, his college and the music industry and continued to download and distribute thousands of songs he knew were copyrighted.  In 2007 five record companies sued Tenenbaum under the Copyright Act for statutory damages and injunctive relief.  The record companies only pursued claims for 30 songs, though Tenenbaum admitted at trial he had distributed as many as 5,000 songs.  The trial court held as a matter of law that Tenenbaum had violated the Copyright Act and the jury found his violations were willful.  The jury awarded $22,500 for each of Tenenbaum’s thirty violations (15 percent of the statutory maximum), for a total award of $675,000.  The district court reduced the award to $67,500 finding that the jury’s award violated due process.  The First Circuit vacated the district court’s judgment holding that the principle of constitutional avoidance required the court to first address the issue of remittitur before determining the due process question.  On remand the district court determined remittitur was inappropriate and that the original $675,000 award comported with due process. Tenenbaum appealed the decision solely on due process grounds.

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The Court reviewed two questions: what is the correct standard for evaluating the constitutionality of an award of statutory damages under the Copyright Act; and (b) did the $675,000 award violate Tenenbaum’s right to due process?

The 1st Circuit looked to St. Louis, I.M. & S. Ry. Co. v. Williams, not BMW of North America, Inc. v. Gore, as the proper standard for reviewing the constitutionality of statutory damages under the Copyright Act, noting that Gore applies to punitive damages and the concerns regarding fair notice to the parties of the range of possible awards were “simply not present in a statutory damages case where the statute itself provides notice of the scope of the potential award.”  Under Williams, a statutory damage award only violates due process “where the penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.”

The 1st Circuit examined the purpose of the Copyright Act’s statutory damages and Tenenbaum’s behavior to determine if $675,000 metWilliams’ standard for constitutionality.  The 1st Circuit found that in 1999 Congress increased the Copyright Act’s minimum and maximum statutory awards specifically because of new technologies allowing illegal music downloading.  The record companies presented evidence that Tenenbaum’s activities had led to the loss of value of its copyrights and reduced its income and profits—precisely the harm Congress foresaw.  The Court went on to find that Tenenbaum’s conduct was egregious—he pirated thousands of songs for a number of years despite numerous warnings.  The Court held that “much of this behavior was exactly what Congress was trying to deter when it amended the Copyright Act.”  The 1st Circuit rejected Tenenbaum’s argument that the damages award had to be tied to the actual injury he caused, relying on Williams to find that the damages were imposed for a violation of the law and did not need to be proportional to the harm caused by the offender.

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