CHAPTER 6 PAY HOW MUCH? P AR T 1: I N T R O D U C T I O N Now that we have covered what qualifies as “copying” and who is “on the hook” for one infringement, we must ask: how much will it cost? This chapter will detail the differences and advantages of the different forms of relief P a g e | 281
for copyright infringement, including: injunctions, actual damages, statutory damages, attorney fees, and finally criminal liability. TIP: This chapter will give you a background in the relief available for copyright infringement, but any decision about settlement or damages should be made with your attorney. While many copyright infringement cases are settled before going to trial, an understanding of the relief, or “damages,” available will also help with considering whether or not to settle a case or “take it to court,” as the People’s Court TV show popularly said.
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ON-LINE REFERENCES Trade Secrets Video (Seatt;e IP Law Firm)
Seattle PI (Copyright Infringement and the Free Press)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P AR T 2: I N J U N C T I O N S Usually the first remedy a copyright holder wants is to stop the infringer from continuing the infringing conduct. Courts have the authority under the Copyright Act to issue an P a g e | 284
order telling the infringer to stop the infringing conduct. This court order is called an “injunction.” “Injunction” means a court is telling someone to stop doing something. In the context of copyright infringement, an injunction is usually an order from the court requiring an infringer to stop making and selling copies of the infringing work. Judges are willing to grant injunctions before trial if: (1) the rights holder has suffered an injury that can’t be repaired; (2) available remedies like money damages are inadequate to compensate for the injury; (3) the remedy isn’t too much of a hardship to the defendant; (4) the injunction doesn’t go against the public interest. P a g e | 285
TIP: Injunctions are important because they allow a court to stop a party from committing infringement before the party has been found guilty at trial. The infamous Sarah Palin was involved in a case where the court thought an injunction was appropriate. HarperCollins Publishers had the exclusive right to publish Palin’s book America By Heart and planned to maintain strict control over the release of excerpts from the book. The website Gawker later obtained leaked excerpts of the book and posted them on their website without permission.
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Courts Can Issue Injunctions To Stop Infringement
The order from the federal judge is also known as an injunction
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The U.S. District Court determined that Palin’s publisher was likely to win in their copyright infringement trial. The court also held that the plaintiff would suffer a harm that can’t be repaired without the injunction because if the publisher can’t control the release of the book they lose a commercial advantage they can’t be compensated for. The only realistic remedy the court could use in this situation was to prevent Gawker from copying by using an injunction. In another famous copyright injunction case, the tattoo artist who tattooed Mike Tyson’s face sought an injunction to prevent release of the film “The Hangover Part II.” The artist S. Victor Whitmill had registered a copyright on the tattoo he did on Mike Tyson’s face and sued Warner Bros. Entertainment over the alleged use of an identical tattoo on a different actor’s face. P a g e | 288
Can A Copyright On A Tattoo Stop The Release Of A Film?
The court said an injunction was against the public interest
The court concluded that the harm to the public interest weighed against the injunction since granting it on the eve of the film’s release P a g e | 289
would have caused thousands of distributors, theater operators, and many others across the country to suffer major losses. If the judge grants an injunction, the person suing for infringement must post a bond in the amount determined by the judge. If the injunction is later found to have been wrongfully granted, the person being sued can recover damages and costs he experienced as a result of the injunction from the bond posted by the person who brought the infringement claim. In addition to an injunction, the Copyright Act also gives courts the authority to impound and destroy infringing materials. When the court issues an impoundment order, all infringing material and the equipment used to P a g e | 290
manufacture such material are collected and held until the court decides on the infringement claim. If the alleged infringer is found guilty of copyright infringement the court can also order the destruction of the impounded infringing material and the equipment used to make the infringing material.
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ON-LINE REFERENCES Trade Secrets Video (Trade Secrets Main Page)
Seattle PI (Blog Main Page)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P AR T 3: R E G I S T R A T I ON
As discussed in the “Did I Copy?” chapter, all creative works are protected by copyright law the very moment they are “fixed in a tangible medium of expression.” While you don’t have to register your work with the P a g e | 293
Copyright Office to get the protection of copyright law, it is a very good idea to register your work because the law gives more protection to registered work. First, if you want to bring a lawsuit against someone for infringing your copyright you will have to register the work before you are able to bring a lawsuit. Also, the earlier you register your work the better because if you register it within five years of the time it was published courts will treat the registration as evidence of a valid copyright in the work.
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Did You Register Within 3 Months of Publication Or Before Infringement?
Registration gives a rights holder more options
One way creators who register their work are given more protection under copyright law is they get to choose if they want to pursue actual damages or statutory damages. If the registration P a g e | 295
is made within three months of publication or any time before the work is infringed, the rights holder gets to choose what kind of damages they pursue. Having this option is critical because otherwise you can only get actual damages and statutory damages can be easier to prove. Courts have discretion to award attorney fees to the party that wins in copyright infringement actions, also called the prevailing party. An award of attorney fees is not automatic, it is always within the discretion of the court. Courts are most likely to award attorney fees to the winning party when the losing party brings claims that are objectively unreasonable.
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ON-LINE REFERENCES Trade Secrets Video (What is Copyright Infringement?) Seattle PI (“Post Greed” /”Pro IP)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P AR T 4: A C T U A L D A M A G E S
If you win a copyright infringement case, you usually have the right to collect money (damages) from the infringer. Actual damages attempt to put the copyright owner in a position as though the infringement had not happened. P a g e | 298
This includes money lost as a result of the infringement and any money the infringer made from the work. The purpose of an award of actual damages to the rights holder is compensate them for the loss and also to keep the infringer from unfairly making money from their unauthorized use of copyrighted material. One common method courts use to determine actual damages is to count the number of instances of infringement and then multiply that number by the price the rights holder would have received had she sold the copyrighted work instead of having it stolen. TIP: Actual damages are generally equal to the fair market value of the use made by the infringer.
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Many rights holders who sue for copyright infringement pursue statutory damages, instead of actual damages, if they have registered their work because statutory damages are usually easier to calculate and prove. Another reason most parties don’t pursue actual damages is because they have the burden of proving to the court that their amount for actual damages is correct. The rights holder has to prove in court that the alleged losses actually occurred. This often involves both parties having to hire lots of witnesses to testify that their damages amount is correct. Actual damage awards may also include compensation for injury to the rights holder’s reputation and also for lost business opportunities for the rights holder. Loss of a P a g e | 300
business opportunity is often difficult to prove but an example would be if a photographer lost an opportunity to publish a book of his photos because there was already an infringing book being sold. A 2003 case serves as a good example of how actual damages are calculated. MSI had a licensing agreement with Media 100, allowing Media 100 to sell MSI’s software for Macintosh computers. Media 100 later had another company translate MSI’s software to Windows, without MSI’s permission, and began selling the windows-compatible software immediately. MSI sued Media 100 in federal court, where a jury awarded MSI $1.2 million dollars in actual damages, $900,000 for lost profits, and $192,283 in attorney fees, which means the total P a g e | 301
award for $2,292,283!
copyright
infringement
was
Actual Damages For Copyright Infringement Can Be Very Costly
In this case actual damages were $1.2 million!
The court found that MSI did not need to demonstrate the actual value of the lost licensing fee, they only had to provide sufficient of the value, which MSI did with evidence of the P a g e | 302
hypothetical value of the license fee for its Windows-compatible software, evidence of Media 100’s actual sales, and evidence of MSI’s past agreements with Media 100. One of the major misconceptions people who commit copyright infringement seem to have is that they will only have to pay for the profit they made from infringement, or for the losses of the rights holder. The following section on statutory damages will show that damages awards can often go much further than these “actual damages.
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ON-LINE REFERENCES Trade Secrets Video (Trade Secrets Main Page) Seattle PI (Blog Main Page)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P AR T 5: S T A T U T O R Y D A M A GE S Statutory damages are different from actual damages because the damage amount is set by statute, and does not take into account the actual damages that were suffered by the rights P a g e | 305
holder. Statutory damages are set by the court within a range defined in the statute. TIP: Remember that you can only pursue statutory damages if you registered your work before the infringement began or within three months of publication. As we discussed in a previous chapter, copyright infringement is a strict liability offense, which means the infringer’s mindset doesn’t matter for determining if they are “on the hook.” The infringer’s state of mind does matter, however, for determining how much they have to pay in statutory damages.
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In order of least severe to most severe, the three different types of statutory damages are: innocent, regular, and willful infringement. The Three Kinds of Statutory Damages
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Each kind of statutory damages has a different range of damages
Courts decide based on the conduct and intent of the infringer which category of statutory damages the infringer’s conduct falls in. It is important which category a court determines the infringer’s conduct falls in because they have very different ranges the court uses to determine awards for damages.
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How Common Are The Different Types of Infringement?
Regular infringement is the most common, by far
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Sometimes when statutory damage awards are high they can seem excessive, but statutory damages are an important means for rights holders to enforce and protect their intellectual property rights. Statutory damages provide compensation and incentive for rights holders to bring lawsuits to enforce their rights in situations when actual damages are low. Congress also intended for potentially high statutory damage awards to serve as a powerful deterrent to keep people from infringing the copyrights of others. Copyright holders rely heavily on damages to deter infringement because copyrights are federal rights that cannot be protected by the policepowers of the States.
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The importance of deterrence can be illustrated in the context of burglary. If the law only compensated people for the value of things that are stolen from them, people would have incentive to steal constantly because the worst thing that could happen to them if caught is having to pay for what they stole. Penalties for burglary are high to deter people from stealing, and penalties for copyright infringement must do the same because infringement is rarely deterred through criminal enforcement. Statutory damages for copyright infringement were imposed for the first time in The Copyright Act of 1790. The founding fathers, including George Washington and James Madison, imposed statutory damages for unauthorized copying of $0.50/sheet, which were very high damages at the time. After inflation, P a g e | 311
.$0.50/sheet comes out to roughly $7/page in 2013 dollars. This means that the founding fathers authorized damages of $2,100 for someone committing copyright infringement of a 300 page book. Since that time Congress has raised the statutory damages threshold. Copying a book or a single copyrighted image willfully could cost up to $150,000!
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The Founding Fathers
They knew it was important to protect copyrights with statutory damages!
When parties have the option to choose between actual and statutory damages they will often pursue statutory damages. The following case is a good example of why. In 2009 a college student named Joel Tenenbaum was sued for downloading and distributing 30 songs. If the P a g e | 313
record companies suing him had gone after actual damages they probably would have gotten about $1 per song, or $30 total. Joel Tenenbaum
How much should downloading 30 copyrighted songs cost?
Instead the rights holders pursued statutory damages and were awarded $675,000, or $22,500 per song. Electing to go after statutory damages in this case got the rights P a g e | 314
holders what they would have gotten under actual damages, multiplied times 22,500! The difference between actual and statutory damages isn’t always as drastic as in this case, but statutory damages are often much larger than actual damages.
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Actual or Statutory Damages?
The difference is often substantial!
The Tenenbaum case shows the importance of statutory damages. If actual damages were the only available remedy there would be no incentive for anyone to follow the law. In Tenenbaum’s case, if he wouldn’t have P a g e | 316
been caught he would have gotten the music for free. If actual damages were the only remedy, he only would have had to pay the same amount he would have had to pay if he hadn’t decided to infringe (about $30). The risk/return would be completely tilted in favor of those who choose to break the law, because the worst thing that could happen to them if they get caught is being forced to pay the same amount as law-abiding citizens.
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ON-LINE REFERENCES Trade Secrets Video (Trade Secrets Main Page) Seattle PI (I Didn’t Know!)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P AR T 6: I NN O C E N T I N F R I N GE M E N T
Innocent infringement refers to situations where the infringer was not aware and had no reason to believe that what he did would qualify as copyright infringement. The old saying that P a g e | 319
innocence of the law excuses no one is applicable here. We do not want a legal system that incentivizes ignorance of the law by allowing someone who doesn’t know the law to escape liability. Innocent infringement also refers to someone who did know that his act might qualify as copyright infringement, and accordingly sought an opinion from a lawyer. If the legal opinion informed him that he was not committing copyright infringement, when in fact he was, he would be committing innocent copyright infringement. While it may seem extreme that someone who takes every precaution to avoid copyright infringement, including getting a legal opinion, can still be liable for copyright infringement, it P a g e | 320
goes to show that if you can’t get permission to use something you probably shouldn’t use it. Innocent infringement will result in lower damages than most forms of infringement, but it still counts as copyright infringement. TIP: You can still be liable when you have the most innocent intent because copyright infringement is a strict liability offense! If the court finds an infringer acted innocently, the court can reduce the damages amount as low as $200. While that may not sound very low, it’s much lower than the minimum amount of $750 for regular infringement.
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The 3 Varieties of Statutory Damages
Determining what category you fall in can have costly consequences!
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A. INNOCENT INFRINGEMENT IS RARE Innocent infringement is rare. Often this defense is limited to cases where the infringer contacted an attorney to get an “opinion of counsel” saying that the use was “okay” for example under the “fair use” doctrine detailed in the chapter on defenses. If you own copyrights in original works you should consider putting a copyright notice on your work so people know it’s copyrighted. One big advantage of having a copyright notice on your copyrighted work is that if someone infringes your work they cannot claim they committed innocent infringement. This means that if someone commits copyright infringement of your work, the lowest amount of statutory damages you could receive is $750 as a regular infringement. P a g e | 323
TIP: The absence of a copyright mark is not enough to establish innocent infringement if you had reason to believe the original work was copyrighted.
Copyright Infringement Hurts You- Even if You Didn’t See It! Copyright Notice
Does your work have a notice on it?
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The importance of copyright registration was shown in a case where a 16-year-old Texas cheerleader was sued for copyright infringement. Whitney Harper was found to have illegally downloaded 37 music files using P2P filesharing software. Harper argued that she was an innocent infringer because she believed listening to music from file-sharing networks was similar to listening to a non-infringing internet radio station, and also because unaware that copyright protections extended to sharing music online. The plaintiffs asked for the minimum regular statutory damages of $750 per infringed work. The U.S. District Court found that whether her infringement was innocent presented a disputed issue of material fact and entered a judgment of $200 for each infringed work, which P a g e | 325
is the minimum infringement.
amount
for
Whitney Harper
Even if you didn’t see the copyright notice, it may still not be innocent infringement!
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innocent
The Fifth Circuit Court of Appeals reversed the District Court, holding that since there was proper notice on the records the audio files were taken from before they were put on file-sharing networks, Harper could not rely on the innocent infringer defense. Under the Court of Appeals’ interpretation, it is not necessary that the infringer actually see the material object with the copyright notice. It is enough if the infringer could have ascertained that the work was copyrighted. Whitney Harper never saw any copyright notice, but because the songs she downloaded originally had notices the court ruled the innocent infringer defense was not available to her.
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TIP: If your copyrighted work has a copyright notice on it, it doesn’t matter if the infringer actually saw the notice. They still will not be able to claim innocent infringement! B. BATMAN: A CASE FINDING “INNOCENCE” In one case example of innocent infringement, retail store owners innocently infringed the copyright of “Batman.” All of the alleged infringers were recent immigrants from Asia who spoke little or no English. The district court decided the store owners had committed innocent infringement. The damages award however, was reduced. The court’s holding was based on the fact that the shop owners did not have the sophistication or P a g e | 328
level of understanding to determine whether or not they were violating copyright law. The quality of the counterfeit goods and the source were apparently hard to discern from legitimate goods.
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Batman
What is an innocent infringement?
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The Court of Appeals noted that one of the gift shop proprietors put all of his Batman merchandise in a back room after receiving a cease and desist letter. Since the owner didn’t know he was committing infringement, and then fully complied with the cease and desist letter, the court upheld the award of $200 per innocent infringement. TIP: The copyright holder could have sought actual damages, that would likely exceed the $200 statutory award in this case. It is useful to contrast this case with one that will be covered later in the willful infringement section. In that case, Korean immigrant shop owners were found guilty of willful infringement for failure to inquire if the P a g e | 331
items they were selling were counterfeit. That case shows that it is not enough to simply claim ignorance of copyright law to qualify as innocent infringement.
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ON-LINE REFERENCES Trade Secrets Video (Trade Secrets Main Page) Seattle PI (Derivative Works)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P AR T 7: R E G U L A R D A M A GE S
A regular infringement is one where the infringer did not act “willfully,” and also did not act “innocently.” A person in this situation knew their act may constitute copyright infringement, but did not know for certain their act was P a g e | 334
infringing someone’s copyrights. This level of culpability represents the middle ground between innocent infringement and willful infringement. The 3 Varieties of Statutory Damages
Determining what category you fall in can have costly consequences!
For a regular infringement the court can determine the appropriate damages are anywhere P a g e | 335
in the range of $750 to $30,000. The damage amount applies to all of the infringements by a single infringer of a single work, no matter how many times they infringed that work. If multiple works were infringed the court can award statutory damages for each separate work that was infringed. TIP: State of mind has no bearing on actual damages, it only matters when pursuing “statutory� damages An example of regular infringement would be if someone ran a business called Swan Lake Cupcakes and wanted to feature an image of a swan on their website. If they find an image of a swan on Google and download it to later feature it on their website, they have likely P a g e | 336
committed regular infringement against the photographer who took the original image. Swan Lake Cupcakes
How much will this infringement cost?
It is likely not innocent infringement because they didn’t have a reason to believe they weren’t infringing, and it is not likely to be P a g e | 337
willful infringement because they may not know they were committing infringement. It can be argued, however, that Swan Lake Cupcakes committed willful infringement because they knew or should have known they were infringing. We will cover the willful infringement standard more thoroughly in a later section. A real life case example of regular infringement came when a husband and wife owned a western jewelry store together and became competitors after their divorce. The husband sued his former wife for copyright infringement of his western jewelry designs.
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Western Jewelry
How much does regular infringement cost?
The U.S. District Court found that, despite the fact these two parties had sued each P a g e | 339
other multiple times for infringement, the wife was not a willful infringer because the parties divorce documents provided some basis for the wife’s belief that she was able to continue using the copyrighted designs. The court assessed damages against the wife for $2,000 for each copyrighted work. TIP: $2,000 per work is well within the statutory range of $750-$30,000. Note: This infringement was not “innocent.� In another case of copyright infringement where regular damages were awarded, music composers sued a country club for allowing their compositions to be performed without a license. The composers asked for $15,000 for each violation in order to deter future infringements. P a g e | 340
The court, however, awarded only $600 per violation because the composers delayed for eight months answering inquiries from the country club. There were five separate copyright violations, so the composers were awarded $3,000. The copyright infringement by the country club in this case was not “willful.�
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Maximum Statutory Damages Are Not Mandatory
Judges have a lot of discretion in determining damages!
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This case illustrates that just because you prove copyright infringement and ask the court for statutory damages, that does not mean you will get the statutory maximum. Courts have wide discretion when determining what amount of damages to grant in the statutory range, and they will consider all the facts of the case when doing so, including the conduct of the parties. TIP: In all areas of the law it is a good idea to be as prompt and punctual as possible.
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How Common Are The Different Types of Infringement?
Regular infringement is the most common, by far
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In another case where regular damages were awarded, a Texas barbeque restaurant chain was sued for infringing 13 musical compositions. The restaurant thought they were exempt from liability and received a legal opinion that this was true. The court did not, however, find the restaurant owners were “innocent infringers� because they previously subscribed to a background music service for over 10 years. The court held that the copyright holders to the musical compositions were entitled to $22,000 in statutory damages, which works out to about $1,700 per infringement. If the court would have awarded the statutory maximum for regular infringement, they would have awarded $30,000 per infringement, or $390,000 in total statutory damages. P a g e | 345
The court could have awarded over 17 times as much as they did in damages, so why didn’t they? Copyright Infringement Can be Costly!
Don’t “barbeque” your hard earned money!
The court in this case focused on the physical and financial size of the infringers’ P a g e | 346
restaurant chain, the possibility that the infringers had a good-faith belief that their performances of copyrighted material were exempt, and the fact that the infringers refused to obtain a license for their use because they thought their use was exempt from liability.
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ON-LINE REFERENCES Trade Secrets Video (Cease & Desist Letters)
Seattle PI (I Didn’t Know!)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 P ART
PAY HOW MUCH? 8: W ILLFUL I NFRINGEMENT
Willful infringement means the infringer acted with knowledge that he was infringing someone else’s copyrights without permission. Willful infringement is the highest level of culpability in copyright law, and can result in P a g e | 349
infringers having to pay $150,000 per infringement. The minimum amount of damages a court can award in situations of willful infringement is $750.
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The 3 Varieties of Statutory Damages
Determining what category you fall in can have costly consequences!
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Neither the Copyright Statute nor the United States Supreme Court has defined the term “willful� in the context of copyright infringement. The definition of willfulness has developed solely through decisions by lower courts. Courts determine willfulness on a very case-by-case basis, similar to how they determine what uses qualify as fair use. Continuum Of Willful Behavior
All of these types of conduct qualify as willful
There are different types of conduct that all qualify as willful infringement. The first type of behavior that qualifies as willful is continuing to make or sell infringing copies after you P a g e | 352
receive notice infringement.
that
you’re
committing
The second situation that qualifies as willful infringement is when someone acts with willful blindness. “Willful blindness” means someone goes out of their way to not find out that they are committing infringement. Essentially, willful blindness is when someone sticks their head in the sand to avoid finding out they’re committing infringement. The third situation that qualifies as willful infringement is when the infringer acts with reckless disregard for the law. “Reckless disregard” refers to someone who knows their conduct might qualify as infringement, but they do it anyway without trying to find out if they’re committing infringement. P a g e | 353
The fourth type of conduct that qualifies as willful is when people act with “constructive blindness,” which refers to situations where the infringer may not have actually had notice but the court says even if they didn’t know, they should have known. For example, if you’re an experienced publisher and you publish a book before making sure the author had permission to use portions of another book, the court will likely treat you as having constructive knowledge that you were committing infringement.
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What qualifies as willful infringement?
Even willful blindness is a form of willful infringement
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A. WILLFUL INFRINGEMENT The classic case of willful infringement occurs when someone is told they are committing copyright infringement and they continue the infringing behavior. The Ninth Circuit Court of Appeals identified an example of willful infringement in Peer International Corp. v. Puasa Records, Inc., 909 F.2d 1332 (9th Cir.1990), where the defendant continued making copies of copyrighted material after receiving notice that he did not have the right to do so. The court held that defendant knew or should have known that its continued conduct infringed plaintiff’s copyrights. In a more recent case, the Ninth Circuit suggested that continuing to sell infringing P a g e | 356
material after receiving notice of infringement is enough to qualify as willful infringement. In Washington Shoe Co. v. A-Z Sporting Goods, Inc., 704 F.3d 668 (9th Cir.2012), the seller of infringing rain boots sold the boots to a thrift store after receiving notice of infringement. Factoid: The author of this book was the attorney for the prevailing party in Washington Shoe v. A-Z. In another case example, Paramount Pictures sued a defendant for uploading Lemony Snicket’s: A Series of Unfortunate Events to a file-sharing network, making the film available for millions of people to download.
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The Infringed Film
How much for willful infringement?
The court awarded $50,000 in statutory damages in this case of willful infringement. Remember that in cases of willful infringement P a g e | 358
the court can award anywhere between $30,000 and $150,000 in damages. In explaining their $50,000 damages amount, the court noted the infringer acted willfully, was the first to post the film online for downloading, posted the film within a week of its release, and caused Paramount to lose significant profits. The court also noted that the damages award was intended to deter future infringers. TIP: Recklessness, willful blindness, and willful infringement should all be avoided at all costs because they result in the heaviest copyright penalties. B. WILLFUL BLINDNESS “Willful blindness,� is when someone deliberately makes an effort to avoid guilty P a g e | 359
knowledge. Courts have treated people who actively avoid finding out that they’re committing infringement the same as those who willfully commit infringement for the purposes of statutory damages. In another case, Korean immigrants selling counterfeit Louis Vuitton and Gucci items claimed they did not know the items they purchased from a traveling salesman out of the trunk of his car were fake. The immigrants had been in the United States for four years and were in the retail business the entire time.
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What is Willful Blindness?
It’s your responsibility to see if you’re infringing!
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The court held that the shop owners’ failure to inquire about whether the goods they sold were authentic qualified as willful infringement, because willful blindness is knowledge enough when a party fails to look into the applicable law because they’re afraid of what they will find. C. RECKLESS DISREGARD Another form of willful infringement occurs when someone recklessly disregards the possibility that his conduct represents infringement. In legal situations the term “reckless” refers to someone who knows the potential consequences of their action but does it anyway, exposing others to the risks of their action but not actually desiring for the victim to be injured. P a g e | 362
In a case example a jewelry dealer received samples of another jewelry maker’s work, but was not told who made the samples. The jewelry dealer did not investigate who made the samples at all, and embarked on a heavy advertising campaign to market the designs under its own label. What is Reckless Disregard?
Can’t avoid liability by not doing your research!
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The court found that the jewelry company committed willful copyright infringement, despite not knowing who held the copyright in the original samples. The court said the company recklessly disregarded the possibility that it was committing willful infringement because it knew its goods were similar to another jewelry dealer, and also because the head of the company had been in the jewelry business for 23 years. D. CONSTRUCTIVE BLINDNESS In one case a printing company printed a comic book with the copyright notices changed without permission. The publisher only had permission to reprint the comic book, not to alter the copyright notices. The publisher argued they had committed “innocent infringement.� P a g e | 364
What is Constructive Notice?
Experience in an industry can put you on constructive notice!
The court ruled that the printing company had constructive knowledge because, since it was an experienced publisher, it must have realized P a g e | 365
that the contract contained no authorization to change the copyright notice. The company’s position in the publishing market as an experienced publisher put it on constructive notice of its own willful copyright infringement.
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ON-LINE REFERENCES Trade Secrets Video (Cease & Desist Letters) Seattle PI (“Post Greed” /”Pro IP) Seattle PI ($88.5 Million Lawsuit)
***
http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P ART 9: A TTORNEY F EES In the United States, each party in a legal case typically pays for the fees their attorney charges for representing them. In some cases, however, courts can order the losing party to pay for the winning party’s attorney fees. P a g e | 368
The Copyright Act gives courts the ability to award reasonable attorney fees to the party that wins a copyright infringement suit. Attorney fees are awarded routinely and are the rule, rather than an exception. The right to recover attorney fees can be very important because copyright litigation can often cost tens of thousands of dollars. When all the copyright infringement claims are resolved in the favor of one party, this fact strongly supports an award of attorney fees to that party. Courts also consider frivolousness, motivation, and objective unreasonableness of the parties when deciding if they should award attorney fees. Finally, courts consider if the circumstances show one party deserves compensation, or if the losing party needs fees P a g e | 369
granted against infringement.
them
to
deter
future
It doesn’t matter if you’re the party suing or being sued, if you win the court can award you attorney fees. In a famous copyright infringement claim involving attorney fees, The Seventh Circuit Court of Appeals awarded the manufacturer of a farting doll $575,099 in attorney fees. The rights holder manufactured “Pull My Finger Fred,” a white, middle-aged, overweight man, sitting in an armchair wearing a white tank top and blue pants. When one squeezes the finger on Fred’s right hand, he farts and makes statements such as “silent but deadly.”
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Pull My Finger Fred
Attorney fees are no laughing matter
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The company being sued manufactured a doll named Fartman, who was also a white, middle-aged, overweight man sitting in an arm chair wearing a white tank top and blue pants. Fartman also farted when one squeezed his finger and cracked jokes. The court found that the manufacturer of Fartman was clearly committing infringement, which is why the court awarded attorney fees of $575,099. The damages awarded for copyright infringement were only $116,000, which means the attorney fees awarded by the court were almost 5 times as much as the damages! In possibly the most famous copyright case involving attorney fees, John Fogerty was sued for infringing John Fogerty. Fogerty was the lead singer of Creedence Clearwater Revival P a g e | 372
(CCR), one of the most popular rock groups of all time. In 1970 he wrote “Run Through the Jungle” and later sold the publishing rights to the famous song. Fogerty began a solo career a few years later and wrote the song “The Old Man Down the Road.” The company who acquired the rights to “Run Through the Jungle” sued Fogerty for copyright infringement, claiming “The Old Man Down The Road” was essentially “Run Through the Jungle” with new words.
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Creedence Clearwater Revival
Fogerty (the person all the way to the right) was not guilty of infringing himself
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Fogerty successfully defended the claim, and the court ruled he did not infringe the song he wrote earlier in his career. Defending the claim involved a lot of costly litigation and Fogerty owed his attorneys over $1 million for the work they did defending him. The Ninth Circuit Court of Appeals declined to award Fogerty his attorney fees so he appealed to the United States Supreme Court. The Supreme Court unanimously held the prevailing party is eligible for attorney fees, and Fogerty received over $1.3 million dollars in attorney fees in costs.
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ON-LINE REFERENCES Trade Secrets Video (Cease & Desist Letters)
Seattle PI (Infringement Letters)
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http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 P ART
PAY HOW MUCH? 10: C RIMINAL L IABILITY
From 1790, the year of the first federal copyright act, until 1897, copyright infringement only carried civil penalties. The first criminal provision to the copyright act required the P a g e | 377
infringement be done willfully, and also for profit, to be a criminal offense. First-time copyright infringement was a misdemeanor until 1982, when Congress designated certain categories of first-time infringements as felonies. Infringement still had to be committed willfully and for purposes of commercial gain.
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Criminal Copyright Liability
Infringement Can Be Costly!
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The U.S. No Electronic Theft Act (NET Act) is a federal law that provides for criminal prosecution of copyright infringers, even when the infringer does not profit from the infringement. Before the NET Act, an infringer could only be criminally prosecuted if their infringement was motivated by profit or commercial gain. The infringement must generally still be willful to qualify for criminal prosecution. The NET Act was enacted in response to a loophole in copyright law that was exposed in United States v. LaMacchia, 871 F.Supp. 535 (1994). In that case David LaMacchia, a 21-yearold student at the Massachusetts Institute of Technology, set up an electronic bulletin board and encouraged people to upload copyrighted P a g e | 380
material where it could be downloaded by anyone with a password. David LaMacchia
This case led to closing the “LaMacchia loophole� with the NET Act
The U.S. District Court ruled that, under the copyright and cybercrime laws effective at the time, committing copyright infringement for non-commercial purposes could not be prosecuted under criminal copyright law. The P a g e | 381
NET Act was a direct response to close this loophole by providing for criminal prosecution for copyright infringement even when there is no commercial benefit from the infringement. The infringer can be charged with a misdemeanor if the accumulated value of the copies is worth $1,000. If the copies have an accumulated value of $2,500 or more, the infringer can be charged with a felony. Maximum penalties can be five years in prison and up to $250,000 in fines. In an example of criminal liability of copyright infringement, a man who bought a copy of the film “X-Men Origins: Wolverine� on a street corner in the Bronx and uploaded it to a file-sharing website was sentenced to one year in federal prison. P a g e | 382
The Original Work
One act of infringement can result in federal jail time!
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The man uploaded his copy of the film about a month before the film was set to be released in theaters. Fox, the rights holder to the film, was able to get the film removed from the file-sharing site in about a day, but the damage was already done as the film had been downloaded millions of times. The U.S. District Court judge in this case described the infringer’s actions as “extremely serious” and sentenced him to one year in federal prison, as well as one year of supervised release and restrictions on computer use.
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ON-LINE REFERENCES Trade Secrets Video (Trade Secrets Main Page) Seattle PI (Book Review Bound By Law)
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http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 P ART
PAY HOW MUCH? 11: T HE M Y THS OF D AMAGES
Here are some of the myths of Damages de-bunked.
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Myth Busters No. 19
“If I’m “on the hook” I only have to pay for the profits I caused the artist to lose.” False. Under the statutory damages regime, courts often issue awards for damages that have very little to do with the actual money lost by the artist.
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Myth Busters No. 20
“I can still get statutory damages even if I didn’t register in time.” False. If you didn’t register in time with the U.S. Copyright Office you are only able to ask for actual damages. Without proper registration you generally can’t ask for statutory damages, but only one work needs to be registered to ask for statutory damages.
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Myth Busters No. 21
“They won’t be able to stop me from selling infringing copies until the trial is over anyway.” False. Through the use of a preliminary injunction, rights holders are often able to get the court to stop an infringement before a verdict if the four factors covered in this chapter weigh in their favor.
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Myth Busters No. 22
“If I copy lots of different works by one author, I can only be “on the hook” for one damages judgment.” False. You are liable for a damages judgment for each work that you copy. If you copy one work many times you are only liable for one judgment, but if you copy many works one time each you are liable for your infringement of each work.
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Myth Busters No. 23
“The statutory damages amount you’re requesting seems wholly disproportionate to the alleged infringement.” False. Statutory damage ranges are set by statute and they do not need to be proportionate to the alleged infringement. The case examples in this chapter show that statutory damages often far exceed actual damages.
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Myth Busters No. 24
“If damages are awarded, it’s the fair market value of a license for that work that will determine damages.� False. Fair market value only applies to actual damages. Even when it comes to actual damages, what the copyright holder has charged in the past can be more important than fair market value for determining damages.
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ON-LINE REFERENCES Trade Secrets Video (Trade Secrets Main Page) Seattle PI (Seattle Copyright Lawyer)
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http://thetradesecretsofintellectualproperty.com/
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CHAPTER 6 PAY HOW MUCH? P AR T 12: J U S T T HE E S S E N T I A L S D A M A GE S
OF
Here are the “essentials” of Damages.
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Just the Essentials
Injunctions: “Bite Sized” Judges are willing to grant injunctions before the end of the trial if (1) the rights holder has suffered an injury that can’t be repaired; (2) available remedies like money damages are inadequate to compensate for the injury; (3) the remedy isn’t too much of a hardship to the defendant; (4) the injunction doesn’t go against the public interest.
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Just the Essentials
Actual Damages: “Bite Sized”
Actual damages pay the rights holder for money she lost as a result of the infringement and for any money the infringer made from her work. Actual damages may also include compensation for injury to the rights holder’s reputation and for lost business opportunities.
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Just the Essentials
Statutory Damages: “Bite Sized�
Statutory damage amounts are set by a court within a range defined by the statute. There is a different damages range for each type of statutory damages: innocent, regular, and willful infringement. Statutory damages are often much higher than actual damages.
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Just the Essentials
Innocent Infringement: “Bite Sized� Innocent infringement refers to situations where the infringer was not aware and had no reason to believe
he
was
committing
copyright
infringement. Innocent infringement also refers to infringers relying on an incorrect legal opinion. Courts can order as low as $200 for damages in cases of innocent infringement. It is very rare for a case to fall into this category.
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