A Primer on Statutory Damages in Copyright Litigation

Statutory damages are a range of damages set by Congress. The range to be awarded depends on the infringer’s conduct.

The Range of Damages

Section 504(c)(1) of the Copyright Act provides that non-willful infringers face statutory damages of between $750 and a maximum of $30,000 for each work infringed. Section 504(c)(2) states that willful infringers may be assessed damages of between $750 and $150,000 per work. Section 504(c)(2) also states that innocent infringers risk damages of not less than $200 per work. A defendant is rarely able to establish innocence; and if there is a copyright notice on the work, defendant cannot claim innocence. See 17 U.S.C. §401(d); Matthew Bender & Co. v. West Pub. Co., 240 F.3d 116, 123 (2d Cir. 2001).

Willfulness Defined

Willfulness is not defined in the Copyright Act. Courts have filled the gap, holding a defendant willfully infringed where it knew, had reason to know or recklessly disregarded that its conduct constituted copyright infringement. See Island Software & Computer Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 263 (2d Cir. 2005). Willfulness will almost certainly be found where defendant continued to infringe in defiance of court order. See Kepner-Tregoe, Inc. v. Vroom, 186 F.3d 283, 288-89 (2d Cir.1999) (Maximum statutory damages awarded where defendant “chose to ignore the injunction” [prohibiting continuing use of the infringing program]). Willfulness will also likely be found where defendant ignores a cease and desist letter. See Getaped.Com, Inc. v. Cangemi, 188 F. Supp.2d 398, 402-03 (S.D.N.Y. 2002) (“Moreover, defendants' infringing activities continued despite notice from Getaped. This evidence provides sufficient support for a finding that defendants' acted in reckless disregard of plaintiff's rights.”).

Statutory Damages Can Be Substantial

Statutory damages can be in the millions if the evidence indicates that defendant knew plaintiff was the copyright holder and nevertheless exploited plaintiff’s work without authorization. See Lowry’s Reports, Inc. v. Legg Mason, Inc., 302 F. Supp. 2d 455 (D. Md. 2004) (Jury award of statutory damages of $19.7 million); Columbia Pictures Television, Inc. v. Krypton Broad, Inc., 259 F.3d 1186, 1189 (9th Cir. 2001) (Statutory damages award of more than $31 million).

Further, the award does not have to be in proportion to plaintiff’s actual loss. See, e.g., Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 113 ($275,000 award sustained although defendant’s profits were only $19,000; “statutory damages are not meant to be merely compensatory or restitutionary”).

Statutory damages can be assessed in the absence of actual damages to deter wrongful conduct. See Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1337 (9th Cir. 1990). For example in Virtual Studios, Inc. v. Beaulieu Grp., LLC, 987 F. Supp. 2d 769 (E.D. Tenn. 2013), the jury assessed $150,000 in statutory damages for each of the 13 works infringed for a total of $1,950,000, stating, “[g]iven Beaulieu's [defendant’s] enormous resources, the Court simply finds it difficult to describe the jury's verdict in this case as severe or oppressive. This is particularly true given the nature of the Copyright Act's statutory damage provision, which is intended to discourage copyright violations.”

Negating Willfulness

A good faith belief that the use was fair may negate willfulness so long as that belief was formed before the unauthorized use began. See, e.g., Zomba Enters., Inc. v. Panorama Records, Inc., 491 F.3d 574, 584 n.9 (6th Cir. 2007)(Good faith belief will cancel willfulness if defendant took reasonable steps, such as obtaining advice of counsel, to determine fair use before infringing); Branch v. Ogilvy, 772 F. Supp. 1359, 1365 (S.D.N.Y. 1991)(“O & M has established that it held a reasonable and good faith belief that its actions did not infringe plaintiff copyright.”).

Limitations on Recovery

Further, the Copyright Act limits the number of grants of statutory damages that may be awarded and the parties against whom those grants will be individually assessed.

A Single Award for Multiple Infringements of One Work

Thus, §504(c)(1) provides that the copyright owner may only recover a single award of statutory damages “for all infringements involved in the action with respect to any one work,” regardless of the number of acts of infringement, whether they are separate, isolated or occurring over many years. As one commentator noted, “an infringer will be liable for a single statutory award whether it makes one copy of a copyrighted painting or one thousand and whether it performs the copyrighted work once or nightly over a period of months,” 3 Paul Goldstein, Goldstein On Copyright § But in fixing the award within the statutory range, the court or jury is likely to increase the amount in light of the number of individual infringements.

A Single Award Where Multiple Parties Collectively Infringe

Further, where multiple parties acting in concert infringe and are therefore jointly and severally liable, plaintiff is only entitled to one award against these parties. Section 504(c)(1) provides that a copyright owner “may elect … to recover … an award of statutory damages for all infringements involved in the action with respect to any one work…. for which any one infringer is liable individually or for which any two or more infringers are liable jointly or severally” (emphasis added).

This section relies on the common law to define joint and several liability. In determining that liability, it makes no difference whether defendants engaged in the same infringing act or demonstrated the same level of willfulness. The Act “is unconcerned about gradations of blameworthiness.” See Fitzgerald Pub. Co. v. Baylor Pub. Co., 807 F.2d 1110, 1117 (2d Cir. 1986) (“Consideration of these factors in setting the statutory damage award sometimes results-- on account of their several and joint liability-- in a less culpable defendant being held liable in an amount greater than otherwise would be the case had it appeared in the action alone. This possibility is not a fatal obstacle. … [T]he relevant faults of the defendants are irrelevant.”).

The One-Work Limitation in 504(c)(1)

Another limit is set forth in the last sentence of section 504(c)(1). It provides that “all the parts of a compilation[1] or derivative work constitute one work” (the “one-work limitation”). But the statute does not indicate whether the compilation is the one created by plaintiff (the copyrighted work) or the one created by the defendant (the infringing work). WB Music Corp. v. RTV Comm. Group, Inc., 445 F.3d 538, 541 (2d Cir. 2006) and Bryant v. Media Right Prods., Inc., 603 F.3d 135 (2d Cir. 2010), have now clarified at least in the Second Circuit. WB Music andBryant hold the one-work limitation in §504(c)(1) only applies where the plaintiff issues or makes available the collective work. Where the defendant creates the infringing work WB Music says:

[F]or purposes of statutory damages under 504(c), a compilation created without authorization from the owners of the separate, infringed copyrights in its constituent parts is not a compilation contemplated by the last sentence of 504(c)(1) 445 F.3d at 538.

But even if plaintiff created the compilation, plaintiff may be able to avoid the one-work limitation if plaintiff also issued or released the works individually. See Arista Records, LLC v. Lime Group LLC, 06 CV 5936, 2011 WL 1311771 (S.D.N.Y. Apr. 04, 2011), where Judge Wood, who also wrote the opinion in Bryant) stated:

Nothing in the Copyright Act bars a plaintiff from recovering a statutory damage award for a sound recording issued as an individual track, simply because that plaintiff, at some point in time, also included that sound recording as part of an album or other compilation. Although the Copyright Act states that "all parts of a compilation . . . constitute one work," it does not say that any work included in a compilation cannot also exist as a separate, independent work. Here, Plaintiffs contend that they issued many of their sound recordings as individual tracks. Therefore, Plaintiffs "issued [these] . . . works separately," and not only "together as a unit." Bryant, 603 F.3d at 141. Those individual tracks are thus "works" issued by Plaintiffs that were infringed on the LimeWire system, with respect to which Plaintiffs may seek to recover a statutory damage award.

Navigating through this thicket of rules and limitations can be difficult but careful attention to them will ease the way to a successful conclusion.

[1] 17 U.S.C. § 101 defines a compilation as “a work formed by the collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged in such a way that the resulting work as a whole constitutes an original work of authorship. The term ‘compilation’ includes collective works.”

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E-Alert is a quarterly newsletter that features the latest thinking from Tannenbaum Helpern's various departments.

05.01.2016  |  PUBLICATION: E-Alert  |  TOPICS: Intellectual Property, Litigation

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