Judge Fogel of the federal district court in San Jose issued an order last week in which he rejected a due process challenge to a 31.5 million dollar statutory damages award. The facts of this case are not kind for OnlineNIC. Verizon obtained a default judgment against the company for cybersquatting. OnlineNIC eventually responded, seeking to set aside the default judgment.
The Court rejected the motion but required Verizon to prove the appropriate per-violation amount of statutory damages. It should also be noted that during the course of the proceedings, OnelineNIC was guilty of “numerous instances of sanctionable conduct” for “noncompliance with court orders, as well as its systematically deceptive behavior in evading service of process.”
OnlineNIC made (what the Court deemed) a “cursory” argument that Verizon’s award violated its substantive due process rights because the award was excessively disproportionate to any actual harm, or to profit it derived from the infringing domain names. The Court rejected the challenge:
There are numerous difficulties with OnlineNIC’s argument. First, the argument rests on OnlineNIC’s own assertion that it derived only $1,468.60 in profit from the use of the 663 infringing domain names. OnlineNIC’s reference to its alleged profit fails to take any account of the damages suffered by Verizon in the form of a likelihood of confusion surrounding Verizon’s marks and the diversion of internet traffic to websites selling rival products.
Moreover, OnlineNIC has made multiple false or misleadingly incomplete representations to Verizon and the Court over the course of this litigation, see, e.g., Order re. Relief from Judgment, at 16:6-9 (noting OnlineNIC’s provision of false addresses), 17:10-12 (same), 17:24-19:10 (noting Mr. Liu’s “demonstrably false representations in … sworn declarations); see also Verizon Opening Br., at 14 n. 12 (citing evidence of OnlineNIC’s repeated misrepresentations concerning the nature of its relationship with 35 Technology), making it exceedingly difficult to accept OnlineNIC’s present representations as credible.
Second, even if the figure offered by OnlineNIC were presumed to be accurate, the figure reflects only the profit purportedly derived by OnlineNIC, not by any of the numerous aliases that OnlineNIC used to register infringing domain names. See supra. Compare Bradley Decl., ¶¶ 9-28 (explaining OnlineNIC’s use of aliases and shell identities), with ShaoHong Decl., ¶ 4 (purporting to summarize “all revenues received by OnlineNIC from all monetization of the 663 domains in question”). Third, while OnlineNIC urges the Court to apply the single-digit multiplier principle endorsed in Campbell to this case, the result would wholly defeat the purpose of the statute, since the maximum available damages award would be $13,212.00, or only $19.92 per domain name. That is of course less than the statutory minimum prescribed by Congress. See 15 U.S.C. § 1117(d).
Finally, and most importantly, it is highly doubtful whether Gore and Campbell apply to statutory damages awards at all. Like the Sixth Circuit, this Court “know[s] of no case invalidating … an award of statutory damages under Gore or Campbell.” Zomba Enterprises, Inc. v. Panorama Records, Inc., 491 F.3d 574, 587 (6th Cir.2007). Under binding authority decided before Gore, “only where the [statutory] penalty prescribed is so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable” will it violate a defendant’s due process rights. United States v. Citrin, 972 F.2d 1044, 1051 (9th Cir. 1992) (quoting St. Louis, Iron Mt. & S. Ry. Co. v. Williams, 251 U.S. 63, 66-67, 40 S.Ct. 71, 64 L.Ed. 139 (1919)); see also Zomba Enterprises, Inc., 491 F.3d at 587 (“Regardless of the uncertainty regarding the application of Gore and Campbell to statutory-damage awards, we may review such awards under [ Williams ] to ensure they comport with due process.”); Arrez v. Kelly Services, Inc., 522 F.Supp.2d 997, 1008 (N.D.Ill.2007) (“In determining whether the penalty is grossly disproportionate, ‘the fine need only bear some relationship to the offense’s gravity; this is not a proportionality inquiry.’ ” (citation omitted)).
*7 It cannot be said that the $33.15 million award bears such an impermissible relationship to OnlineNIC’s outrageously blatant and willful violation of federal law. This is particularly true when “due regard [is given to] the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence” to the statute. Williams, 251 U.S. at 67; see also Centerline Equip. Corp. v. Banner Personnel Serv., Inc., 545 F.Supp.2d 768, 777 (N.D.Ill.2008) (rejecting defendant’s argument that 30,000:1 ratio between potential statutory damages and actual harm to plaintiff would violate due process, since “[t]here is no requirement that the statutory remedy be proportional to the plaintiff’s own injury [and] … Congress may choose an amount that reflects the injury to the public as well as to the individual” (citing Williams, 251 U.S. at 66)). FN3
FN3. Notably, OnlineNIC makes no argument under Williams, but states only that while “the State Farm constitutional analysis has not yet been adopted to limit statutory damages under U.S. intellectual property laws, nothing in State Farm suggest that its holding should not apply to such cases.” Opp., at 4:6-9.
With respect to whether Gore and Campbell imposed limitations beyond those found in Williams, at least one Court has concluded that since Gore and Campbell were designed essentially to constrain the otherwise “unregulated and arbitrary use of judicial power” inherent in punitive damages awards, their holdings are “not implicated [by] Congress’ carefully crafted and reasonably constrained” statutory damages regime under the copyright act and similar legislation. Lowry’s Reports, Inc. v. Legg Mason, Inc., 302 F.Supp.2d 455, 460 (D.Md.2004); see also Browning-Ferris Industries of Vermont, Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 281, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989) (Brennan, J., concurring) (noting that greater scrutiny is warranted over non-legislative punitive damages awards than over damages provided for by legislative enactment).
It is not difficult to see why Gore and Campbell have not been applied in the context of statutory damages awards. First, in the context of statutory damages, the Supreme Court has held expressly that “[t]he discretion of the [district] court is wide enough to permit a resort to statutory damages for [the purpose of deterrence,] [such that] …. [e]ven for uninjurious and unprofitable invasions of copyright [,] the court may, if it deems it just, impose a liability within statutory limits to sanction and vindicate the statutory policy.” F.W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228, 233, 73 S.Ct. 222, 97 L.Ed. 276 (1952) (emphasis). This suggests that ratios between actual or potential damages and punitive damages-ratios that are at the heart of Gore and Campbell-simply do not apply in the context of statutory damages.
Second, the very notion of “applying” Gore and Campbell to awards of statutory damages is problematic. Despite the use of the term “guideposts” to describe the relevant criteria for assessing the constitutionality of damages, Gore and Campbell prescribe a relatively rigid framework, one that results in considerable misalignment with the notions underlying statutory damages of the kind authorized by the ACPA and similar statutes. For example, in the context of the first guidepost-the degree of reprehensibility of the defendant’s conduct-“a court must consider several issues: (1) whether the harm caused was physical as opposed to economic; (2) whether the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; (3) whether the target of the conduct was financially vulnerable; (4) whether the conduct involved repeated actions or was an isolated incident; and (5) whether the harm was the result of intentional malice, trickery, or deceit, or mere accident.” Goldsmith v. Bagby Elevator Co., Inc., 513 F.3d 1261, 1283 (11th Cir.2008) (emphasis added). Yet in the context of a typical copyright of trademark case, at least the first three of these sub-factors will be conspicuously irrelevant.
*8 The second guidepost-“the disparity between the harm or potential harm suffered by [the plaintiff] and [the] punitive damages award”-seems equally out of place, since a primary purpose of statutory damages is to facilitate-within clearly delimited parameters-the “necessarily somewhat arbitrary estimat[ion]” of the proper award where actual damages-and even “potential” damages-are difficult or impossible to determine. F.W. Woolworth Co., 344 U.S. at 232 (noting that statutory damages are intended to allow “owner of a copyright some recompense for injury done him, in a case where the rules of law render difficult or impossible proof of damages or discovery of profits”); see also Lowry’s Reports, Inc., 302 F.Supp.2d at 460 (“The Gore guideposts do not limit the statutory damages here because of the difficulties in assessing compensatory damages in this case.”).
The third “guidepost”-the difference between the remedy at issue and the civil penalties authorized or imposed in comparable cases-appears to rest almost entirely on the “fair notice” aspect of the due process limitations on damages awards. As the Supreme Court noted in Campbell, “there are [both] procedural and substantive constitutional limitations” on damages awards that are punitive in nature. Campbell, 538 U.S. at 416. The procedural limitation inheres in the principle that “notions of fairness … dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose.” Gore, 517 U.S. at 574. That limitation clearly has no application in the field of statutory damages awards, where the text of federal legislation explicitly discloses the range of penalties that may be awarded on a per-violation basis. Even assuming that, in certain types of cases, courts typically awarded damages in a certain range within the statutory parameters, it is difficult to argue that a defendant lacks notice of the potential severity of damages when the law explicitly identifies a maximum per-violation penalty and commits the determination of the proper amount of such penalty to the discretion of the trial judge.
Notwithstanding the imperfect fit between the Gore/Campbell framework and several of the principles animating the ACPA’s statutory damages regime, it is not inconceivable that Gore and Campbell could “apply,” in some respect, in the present context. “Although statutory damages amounts might be calculated in part to compensate for actual losses that are difficult to quantify, they are often also motivated in part by a pseudo-punitive intention to ‘address and deter overall public harm.’ ” Parker v. Time Warner Entm’t Co., L.P., 331 F.3d 13, 26 (2d Cir.2003) (quoting Texas v. Am. Blastfax, Inc., 121 F.Supp.2d 1085, 1090 (W.D.Tex.2000)); see also Cass County Music Co., 88 F.3d at 643 (“[S]tatutory damages have evolved and now are intended not only to put the plaintiff in the position he would have been but for the infringement, but also, and arguably preeminently, to punish [and deter] the defendant.”). In that respect, while courts frequently do consider whether a defendant has engaged in a pattern of registering or using large numbers of domain names that infringe the rights of other parties, see supra Section II.B.3, the Supreme Court has explained that a defendant should not be punished “for being an unsavory individual or business,” and that “[d]ue process does not permit courts, in the calculation of punitive damages, to adjudicate the merits of other parties’ hypothetical claims against a defendant ….” Campbell, 538 U.S. at 423. Thus, while the defendant’s wrongful conduct against others certainly could be a relevant factor-for example, in assessing just how reprehensible the defendant’s conduct towards the plaintiff should be deemed under the circumstances-a court authorizing an award that reaches well into realm of punitive or deterrence-oriented damages must be careful not to punish the defendant for wrongful acts other than to those committed against the plaintiff.
*9 Among the material submitted by Verizon to support the original damages award of $50,000 per violation is evidence that OnlineNIC runs a “massive cybersquatting operation.” See supra Section III.B.3. Viewed in this light, OnlineNIC would appear to embody the notion of an “unsavory … business,” but that is something for which it may not be punished, as such, under Campbell. At the same time, however, it is clear that “a recidivist may be punished more severely than a first offender[,] [since] … repeated misconduct is more reprehensible than an individual instance of malfeasance.” Campbell, 538 U.S. at 423. In the context of civil damages, a court entering an essentially punitive award on the basis of “repeated misconduct” need only “ensure [that] the conduct in question replicates the prior transgressions.” Id. (quoting Gore, 517 U.S. at 577). Here, the wrongful conduct against other parties-the registration of many thousands of domain names that infringe those parties’ famous marks-is precisely the conduct that has harmed Verizon. To the extent that the original damages award reflects a recognition of the extent of OnlineNIC’s illegal activities, it does so not by “adjudicat[ing] the merits of other parties’ hypothetical claims,” id. at 423, but by placing a gloss of additional culpability on OnlineNIC’s conduct towards Verizon.
Finally, the original award furthers the important statutory goal of deterrence. Cf. St. Luke’s Cataract and Laser Institute, P.A. v. Sanderson, 573 F.3d 1186, 2009 WL 1955609, at *15 (11th Cir.2009) (observing that “the ACPA’s statutory damages provision to contain[s] a deterrence element similar to copyright law”); E. & J. Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 278 (5th Cir.2002) (noting that copyright statutory damages provision “is designed to discourage wrongful conduct” and affirming statutory damages award of $25,000 under the ACPA, even though plaintiff did not suffer any actual injury). Here, although evidence of actual deterrence is not required to support a statutory damages award designed to deter OnlineNIC and others from future misconduct, Verizon has represented to the Court that the number of domain names that infringe its famous marks has decreased substantially since the entry of the default judgment on December 19, 2008, and OnlineNIC admits that “publicity about the massive judgment against [it] … gain[ed] much attention” in Asia beginning in late December 2008. The judgment amount-which is fully supported by considerations relevant to the determination of statutory damages awards under the ACPA-thus also serves the important statutory goal of deterrence. Cf. Campbell, 538 U.S. at 417 (noting the unconstitutionality of awards that “further[ ] no legitimate purpose and [therefore] constitute[ ] an arbitrary deprivation of property”).
For all of the foregoing reasons, the Court concludes that the original $33.15 million damages award does not violate OnlineNIC’s due process rights.
Recent scholarship from the 
