The U.S. Department of Commerce’s Internet Policy Task Force has released a set of copyright reform proposals. The Government recommends Congress to implement various changes to avoid excessive damages awards and stresses that copyright trolling should not be tolerated.

Three years ago the Department of Commerce’s Internet Policy Task Force started to explore various ways that current copyright law could be improved.

Following extensive discussions and a public consultation process it finalized its recommendations this week, releasing a whitepaper (pdf) with several concrete proposals.

One of the main topics covers the ‘penalties’ for online piracy, which can currently reach $150,000 per copied work. These statutory damages can lead to excessive awards, as shown in two RIAA cases.

The Task Force notes that the award amount doesn’t have to be lowered, as it may be appropriate as a deterrent for online piracy in extreme cases. However, steps should be taken against disproportionate punishments and copyright trolling.

“It is important to avoid excessive and inconsistent awards that risk encouraging disrespect for copyright law or chilling investment in innovation. And the abusive enforcement campaigns reported by commenters should not be tolerated,” the paper reads.

Instead of changing the maximum statutory damages the Task Force recommends an update to current legislation with a list of factors for courts and juries to consider when determining the amount of a damages award.

Possible factors include the financial situation of the defendant. Someone who’s unemployed should not pay the same amount in damages as a billion dollar company for the same offense.

“The Task Force recognizes the concern that some awards of statutory damages can be far beyond the capacity of the defendant to pay – whether an individual or a start-up business. Requiring juries and judges to consider the defendant’s financial situation when assessing the level of the award will help address that concern,” the recommendation reads.

The value of the infringed work and the harm it causes the copyright holder should also be taken into account. This means that leaking a pre-release copy of a blockbuster movie should receive a higher punishment than sharing a B-film usually offered at a discount.

“An award that takes into account the likely heightened magnitude of harm to the market for a pre-release work may enable the copyright owner to receive a more appropriate level of compensation than an award of actual damages.”

Taking the value of the work into account may also help to deter copyright trolls, who generally sue people over adult content and other niche material.

“On the other hand, when the infringed work is of minimal commercial value, a lower award may be appropriate. This can help address concerns about holders of low-value copyrights … using the threat of statutory damages to turn litigation threats into a profit center,” the Task Force adds.

The paper further recognizes that the “abusive enforcement actions” of copyright trolls are harmful to the copyright system as well as the judicial system.

Some stakeholders suggested to tackle this problem by lowering the maximum of $150,000 in statutory damages, so copyright trolls can’t use it as a threat. However, the Task Force believes that the courts have other means to address these excesses, as they’ve done with Righthaven and Prenda Law.

“The unfair tactics used by certain litigants should be curbed without cutting back a remedy that serves legitimate purposes of compensation and deterrence. The courts are well positioned to evaluate such tactics and have sanctioned counsel and parties who pursue baseless, reckless, or vexatious claims,” the paper reads.

The Government’s proposed changes don’t leave statutory damages completely untouched though. In cases of non-willful secondary liability of online services, the paper proposes to move away from the strict “per work” rule.

This means that a court may issue a lower damages award against a site or service if the number of infringed works is very high, which now automatically results in hundreds of millions in potential damages.

Overall the proposals are well-balanced. The whitepaper strikes a careful balance between proponents and opponents of decreased statutory damages, reflected in positive comments from both sides.