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Calculating Damages for Copyright Infringement

November 5, 2010 by · Comments Off
Filed under: Copyright Articles, law 

Calculating potential damages for copyright infringement is critical in determining your legal strategy.  The analysis is the same regardless of whether you’re the one suing (the copyright owner/plaintiff), or the one being sued (the infringer/defendant).

The first question to ask is: ‘Has the infringed work been registered with the copyright office?’  The answer to this question will have a large impact on damages.  All creative works are automatically protected by copyright law (check out this page for a background on copyright law), but registered works are afforded much greater protection.  Copyright registration records are held in a free online database that you can access from the Copyright Office website.

There are 2 types of damages for copyright infringement: Statutory Damages and Actual Damages.  For a copyrighted work that has been registered prior to infringement the plaintiff may choose to claim Statutory Damages or Actual Damages (in addition to claiming for attorney’s fees).  A plaintiff who is claiming infringement for an unregistered work may only make a claim for Actual Damages.

Statutory Damages

The vast majority of plaintiffs in copyright infringement cases will choose to pursue Statutory Damages (if they can) because they are easier to calculate and will often be higher than Actual Damages.  Illegal file sharing cases, for example, will choose Statutory Damages because while their Actual Damages may be around $1 per illegally copied song, they are entitled to much higher damages through the use of Statutory Damages.  (This case awarded the RIAA $9,250 for each song, while this case awarded $22,500 for each song.)
Statutory Damages get their name because the amount of damages is set by law, regardless of the actual damages suffered by the plaintiff (17 USC § 504).  They usually range from $750-$30,000 per infringement, though awards can go as low as $200 per infringement for ‘innocent infringers’ and up to $150,000 per infringement when the court determines that the defendant acted ‘willfully’.  The court may not award damages outside of this range.
While a plaintiff will always ask for the maximum amount of damages, it is at the court’s discretion how much to award within the defined damages range.  Some factors the courts consider are:

1.      The purpose of the infringing use.  (e.g. – were you selling bootleg CDs on the street, or did you copy a CD for your Mom?)

2.      The value of the work that was infringed.  (e.g. – was it a $1 song or a $5,000 computer program?)

3.      The infringer’s state of mind or intent.  (e.g. – did you download a picture off the web unaware that it constituted copyright infringement, or did you know it was illegal and decided to copy it anyway?)

Statutory Damages are a powerful tool for the plaintiff in copyright litigation and infringers of registered copyrights should beware.

Plaintiffs for copyright infringement of registered copyrights are also allowed to ask the court for attorney’s fees (17 USC § 505).  If awarded, the defendant will owe all or part of the plaintiff’s legal fees, in addition to the fees for the defendant’s own lawyer.  When litigation costs can run upwards of tens of thousands of dollars this is another big stick that the plaintiff can hold over the defendant’s head.  While the awarding of attorney’s fees is at the courts discretion, the plaintiff of an unregistered copyright is never allowed to ask for attorney’s fees (17 USC § 412).

Actual Damages

This is the type of damages pursued by people who have had their work infringed, but didn’t have their work registered prior to the infringement (and in rare cases a registered copyright holder may also select to pursue Actual Damages over Statutory Damages).

Actual Damages is the quantifiable monetary loss the plaintiff has suffered, or the profit the infringer has gained, from infringing your copyrights.

There are 2 general ways courts determine Actual Damages.  One method involves seeing what the plaintiff’s average income from their copyrighted work was before (and after) the infringement and compare it to the income from when their work was being infringed.  The difference is the Actual Damages.  This method is useful when there are extensive financial records backing up average sales and clear evidence that the dip in sales was due to the infringing activity.

The other method looks at how many instances of infringement took place and awards damages based on what the copyright owner would have received had she sold or licensed the work instead of having it stolen.  This method is easier to use when the plaintiff does not have extensive sales records, because the only numbers that need to be determined are the number of infringements and the value of the work.  This still may be difficult, however, because of the problems associated with pricing a work if it has not been commercially sold (e.g. – a piece of original art from an artist’s private collection).

What makes claiming Actual Damages more difficult, however, is that the plaintiff must prove to the court that their amount for Actual Damages is accurate.  The plaintiff will likely have to have a forensic accountant testify as their expert witness, and often the opposing party will have their own forensic accountant testify that the damages are lower than the plaintiff claims.  To reach these conclusions the forensic accountants and the opposing party will take an in-depth look into the plaintiff’s financial records and many records may become a part of the public record.  It is possible to have the plaintiff’s financial records kept private from the general public (if the court is convinced there is good cause to do so), but the plaintiff will have no choice in turning over financial records to the opposing party.  As all of this arguing in court over damages takes more time, it will also result in increased legal fees (not to mention the fees for your expert witnesses).  As litigation costs are so high and there is no option to recover attorney’s fees, often a claim that would have been pursued if Statutory Damages were available will not be pursued if all the plaintiff is entitled to is Actual Damages.

The more documentation the plaintiff has for showing lost profits the stronger the case becomes. Historical sales records are very important for showing expected sales. As you can only claim lost profits (not revenue), you are going to have to be able to document the average profit you receive the sale of your work. While the plaintiff is going to claim that lost sales are the result of the infringing activity, the defendant is going to do their best to show other factors that caused the reduced profits.  Any documentation that was done in the normal course of business will carry more weight than documents generated specifically for the infringement claim.

Conclusion

The vast majority of copyright cases will never get to trial.  Many will never even leave the pre-litigation stages before there is a settlement.  With the large costs of litigation many clients will choose to settle before their legal fees grow too large.

So why does it matter how damages will be assessed in court?  It’s because the parties will always be assessing the strength of their own and their opponent’s case.  If the plaintiff can claim a large amount in damages, then the plaintiff is in a more powerful position for negotiating a settlement.

Doing a proper analysis of potential damages from copyright infringement will allow you to get a better understanding of your case’s strength, which plays an integral role in determining a legal strategy.

While this article will hopefully give you a basic understanding of calculating damages for copyright infringement, there is much more involved when determining a person’s rights or liability under copyright law.  If you feel that your work is being infringed, or you have been contacted for infringing another’s work, it is strongly recommended that you contact a lawyer.  The individual specifics of every case play a role in determining your best legal actions, and a lawyer will be able to help you determine your best course of action based on your unique circumstance.

Twilight New Moon Saga – Infringement or Real?

September 12, 2009 by · Comments Off
Filed under: U Decide 

At least twenty people have asked me today (Saturday, September 12) if this is real or if it is copyright infringement of the New Moon trailers.  Take a look and you decide.

http://www.youtube.com/v/8Ak4tILIu0M&hl=en&fs=1&

A Balancing Act: The Movie Industry, Consumers’ Rights, and Fair Use.

August 19, 2009 by · Comments Off
Filed under: Copyright Articles 

When an author creates an original work in a tangible medium of expression they generally have a copyright in their work that prevents others from using it without the author’s permission.  The notable exception to this rule is the Fair Use Doctrine, where certain types of uses of copyrighted material do not create liability.

The following examples are generally considered Fair Use:

  • Criticism and Comment,
  • News Reporting,
  • Research and Scholarship,
  • Teaching, and
  • Parody

The line between what is Fair Use and what is infringement will often be uncertain, and while judges must decide each copyright infringement case on its own merits, copyright law is very closely tied to public policy.

New Law Suit over the Same Problems

In a landmark decision in intellectual property the Supreme Court in Sony Corp. of America v. University City Studios, Inc. ruled that the production of the Sony Betamax player does not make Sony liable for indirect copyright infringement.  Even though the device allowed home users to make copies of TV programs, the court found that home users were using the device to record shows so that they could watch them at a time other than when they aired.  They also held this ‘time shifting’ was Fair Use even though consumers were making copies of the programs.  This holding not only allowed users to take advantage of technological innovation but it also laid the groundwork for the purchase and rental of movies, actually increasing the market for the companies that tried to put a stop to this new technology.

What does this history lesson have to do with today?  A federal Judge in California has just issued a preliminary injunction against Real Networks preventing them from distributing their newest technological innovation: software that will allow users to easily transfer their DVDs onto their computer.  Real Networks is being sued by virtually all the big names in the movie industry under the claim that Real Networks software is in violation of its license agreement with the DVD Copy Control Association, and is thus violating the “Circumvention of copyright protection systems” section of the DMCA.  While this case has mostly been framed as a contractual dispute, it raises important questions about Fair Use and about the right for consumers to space shift (transfer their movie from one medium, the DVD, to another, the hard drive).  As intellectual property becomes a more and more valuable component of people’s lives the issue of what rights people have in regards to this property will become of increasing importance.

Tangible vs. Intellectual Property

There is one primary difference between intellectual and tangible property that has numerous repercussions in the way we can use each type of property.  When a person buys a piece of tangible property they own the physical object without restriction, generally.  When a person buys intellectual property, however, they don’t buy the song, or the movie, they are actually just buying a license and entering into a contract to use the intellectual property.  For example, even though you buy a song, you are not free to make copies of the song and distribute it to your friends.  Because you are entering into a contract when you buy intellectual property you may be agreeing to specific conditions about how you can use the property, such as only using software for personal, non-business use.  This sale through licensing agreements gives copyright holders a lot more control over how you can use your intellectual property.

Competing Interests

The arguments are compelling for both sides of the issue of copying DVDs.  If Real Networks is allowed to sell its DVD-ripping software users will be able to rent or borrow DVDs and make a movie library on their computer of films they never purchased.  An increase in movies available through illicit file sharing networks also seems conceivable.

On the other hand, computers are becoming a central part of people’s home entertainment.  As home theater computers increase in popularity and people begin to use computers more and more for entertainment that was traditionally viewed on the television set, the product Real Networks is selling has the potential to be an excellent tool for legitimate movie watchers.  After all, a person buys a DVD so they can watch a movie, not out of a desire to use their DVD player.  The medium they use to watch the movie is a matter of convenience, and is generally not substantive to the purchase of the movie.

The Real Networks and Betamax cases are strikingly similar, as they are both the result of the movie and television industry lagging behind the technological innovations used to view their products.  This case, like the Betamax case, is about record industries wanting to control how people can view their media.  The movie industry is using legal remedies to hold off technology until they create a business model that will allow them to effectively profit from this new technology.

As the cost of digital storage space declines, internet connection speeds increase, and the television and computer merge into a single device the idea of tying movies to a DVD is going to become as antiquated as the idea that music should only be listened to from a CD.  From a technological perspective the DVD and the CD are excellent comparisons.  However, from a legal standpoint the DVD is much more securely protected under the DMCA.  Under 17 U.S.C. § 1201 it is illegal for someone to circumvent a technological measure designed to protect a copyrighted work.  What this means is that anyone who wishes to create a device that can read a DVD must buy a license from the DVD Copy Control Association.  It is this method of licensing the right to decode DVDs that has made it so that the average consumer can’t create backups of their legally purchased DVDs.

The Balancing Act

Copyright is designed to balance two competing interests: the incentivizing of authors to create new works, and the value the public receives from freely using those works.  Right now, for DVDs the equation is stacked in favor of the copyright holders.  This makes sense as the interest of the public in having copies of movies on their hard drive is still relatively low.  But the public’s value in this technology is growing, and because of this the balance will shift toward the consumers and so will the law (hopefully).  Unfortunately, for now consumers will just have to wait until the balance of Fair Use shifts in their favor.

ASCAP — Ringtones Infringe Copyrights

July 4, 2009 by · Comments Off
Filed under: Copyright Articles 

Millions of Americans have bought musical ringtones, often clips from favorite popular songs, for their cellular phones.  Cell phone carriers (e.g., AT&T, Verizon, etc.) pay royalties to song owners for the right to sell these snippets to their customers.  However, the American Society of Composers, Authors, and Publishers (ASCAP) alleges that each time a phone rings in a public place, the playing of that ringtone violates copyright law.   Accordingly, ASCAP asserts, communications carriers must pay additional royalties or face legal liability for contributing to what they claim is cell phone users’ copyright infringement.  In an amicus brief filed July 1, 2009, the Electronic Frontier Foundation (EFF) urges the Court to consider that copyright law does not reach public performances “without any purpose of direct or indirect commercial advantage”.  That is, a cell phone user does not intend for the distinctive ringtone to serve as a commercial advantage.  Accordingly, if individual phone users are not infringing copyright law, then communications service providers are not contributing to any infringement.

ASCAP’s position is that it does not plan to charge cell phone users, rather ASCAP seeks payments from communications providers who sell or otherwise provide access to use of the distinctive ringtones.

EFF asserts that such a finding might have a chilling effect, and if ASCAP prevails, then consumers could find themselves targeted by other copyright owners for “public performances.”

For more information, see EFF’s brief or go to the PACER, the on-line access to U.S. Appellate, District, and Bankruptcy court records and documents nationwide and find all pleadings under the Southern District of New York, Civil Action No. 41-1395.

Press Release – NC Lawsuit Against YouTube

June 14, 2009 by · Comments Off
Filed under: Business, Copyright Articles, Online Privacy, Press release, Trademark Articles 

In2Focus Films, Inc. et al. (In2Focus) filed a counterclaim in federal court on June 5, 2009, against Champboat Racing, LLC (Champboat), as well as asserted claims against numerous other parties including: Michael Schriefer, owner of Champboat Racing; Speedway Group, Inc. (Speedway), which is affiliated with Schriefer and Champboat; Seebold Racing, Inc. (Seebold), which is affiliated with Seebold Sports, Inc. and Tim Seebold, a driver in the F1 Champboat Racing Series; Amsoil, Inc. (Amsoil), the 2009 F1 Champboat Racing Series Sponsor; Singha International, Inc. (Singha), a Thailand-based sponsor of the F1 Champboat Racing Series; and Youtube, Inc. (Youtube).

After violating several contractual agreements, ChampBoat distributed In2Focus’s copyrighted video without permission. When In2Focus demanded the removal of these copyright protected video clips, ChampBoat sued In2Focus for tortious interference of contract, among other things. During the law suit, ChampBoat admitted that all multimedia works were owned by In2Focus. The counterclaim alleges that ChampBoat never received payment for the vast majority
of the work performed, due in part to at least one check bouncing due to insufficient funds. The Third Parties published, distributed, and hosted unauthorized copies of In2Focus’s videos.

YouTube, often used as a host for illegal copies of popular videos, provides a streamlined process for content owners to request that videos be taken down. Yet, according to In2Focus, YouTube failed to remove all infringing videos despite notification. In2Focus further claims that Seebold, Amsoil, Singha, and ChampBoat all posted In2Focus’s videos to their web sites knowing that the videos were owned by In2Focus and that their posting of the videos was in violation of In2Focus’s
copyrights.

In2Focus seeks to recover outstanding payments in excess of $100,000 for creative works performed during the 2008 F1 Champboat Racing Series, as well as recovery of actual damages associated with the infringement. The damages include reasonable attorneys’ fees incurred in defending the original suit filed by Champboat. A trial date has not yet been set. In2Focus is represented by the law firm of Bambi Faivre Walters, PC. Champboat is represented by The Bray Law Firm.