Print This Post
One Award to Rule Them All
Second Circuit Addresses What Constitutes a “Work” For Statutory Damages Purposes
Section 504(c) of the Copyright Act allows a plaintiff to elect statutory damages instead of actual damages and profits “for all infringements involved in the action, with respect to any one work . . .” For purposes of that subsection, “all the parts of a compilation or derivative work constitute one work.” The Copyright Act does not define “work,” though it 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.” In litigation involving a work with multiple components, then, the question arises whether it is a single “work” or multiple “works” for purposes of assessing statutory damages.
A recent Second Circuit opinion illustrates the problem. Bryant v. Media Right Prodns., __ F.3d __ (2d Cir. 2010). In Bryant, two songwriters created and produced two albums – “Songs for Dogs” and “Songs for Cats” – and registered both the albums and, separately, at least some of the individual songs with the Copyright Office. They then authorized defendant Media Right to market the albums. Media Right in turn granted co-defendant Orchard Enterprises the right to distribute the albums “by any and all means and media,” including by digital download. Initially, Orchard only sold physical copies of the albums. In early 2004, however, Orchard began making the albums and the individual songs available for sale through Internet retailers like iTunes. Orchard recognized $578.91 from downloads of digital copies of the albums and the individual songs on the albums. The songwriters sued, alleging that their initial agreement with Media Right did not include the right to make copies of the albums, which Orchard did in order to enable digital sales.
The district court (ruling on competing summary judgments motions which the parties agreed to treat as a case stated, thus allowing the court rather than a jury to determine statutory damages) held that each album was a compilation and constituted a single work for purposes of computing statutory damages. The court found that Orchard’s infringement was innocent and imposed the minimum amount of statutory damages on Orchard, $200 per album for a total of $400. The court found that Media Right’s conduct was neither innocent nor willful, and imposed statutory damages on the company and its president, jointly and severally, for $1000 per album for a total of $2000. The plaintiffs’ entire award thus amounted to $2400. The court denied the plaintiffs’ request for attorney’s fees.
The Second Circuit affirmed, finding that the plain language of the Act established that the albums were compilations since each album is a “collection of preexisting materials – songs – that are selected and arranged by the author in a way that results in an original work of authorship – the album.” It concluded that the fact that certain songs had been registered separately was irrelevant, relying on the Conference Report that accompanied the final Copyright Act, which explains many of its provisions. The Report states that a “compilation” “results from a process of selecting, bringing together, organizing, and arranging previously existing material of all kinds, regardless of whether . . . the individual items in the material have been or ever could have been subject to copyright.”
Bryant represents the third occasion upon which the Second Circuit has construed Section 504’s one-award restriction. In Twin Peaks Prodns., Inc. v Publ’ns, Int’l Ltd., 996 F.2d 1366 (2d Cir. 1993), the court awarded the plaintiff one statutory damages award for each of 8 episodes of a television series. Rather than explaining why each episode constituted a single work, the court stated its conclusion in the converse: “The author of eight scripts for eight television episodes is not limited to one award of statutory damages just because he or she can continue the plot line from one episode to the next and hold the viewers’ interest without furnishing a resolution. . . . [O]urs is the easy case of infringement of eight separate works that warrants eight statutory awards, whether the registrations apply to the teleplays or the televised episodes.” Though the opinion did not explicitly say so, it appeared to turn on the fact that each television episode aired independently. In WB Music Corp. v. TRV Communication Group, Inc., 445 F.3d 538 (2d Cir. 2006), the court awarded thirteen statutory damages awards for thirteen infringed songs because the songs themselves had been released separately and not as part of an album. The Bryant court thus found its opinion in harmony with both Twin Peaks and WB Music because the plaintiffs’ songs were issued as part of CD compilations and not individually, like the Twin Peaks episodes but unlike the songs in WB Music.
The Second Circuit also rejected the “independent economic value” approach adopted by the First, Ninth, Eleventh and D.C. Circuits. This approach looks at whether each element of a work has “independent economic value” and can live its own copyright life. Following this approach, the First Circuit, for example, allowed multiple statutory damages awards for individual television episodes that were released collectively on videotape as part of a complete series. Gamma Audio & Video, Inc. v. Each-Chea, 11 F.3d 1106 (1st Cir. 1993).
Practice tip: statutory damages and the plaintiff’s choice of forum
Now that the Second Circuit has squarely rejected the “independent economic value” approach, plaintiffs have an additional consideration when deciding where to sue for infringement. If a plaintiff issued the components of a multi-part work as part of a collection and not singly, and is considering seeking statutory damages rather than actual damages and profits, it may be better off suing in a circuit that will look at whether those parts have independent economic value rather than in the Second Circuit.
Attorney’s fees and offers of judgment
An interesting side note to the case involves the court’s denial of the plaintiffs’ request for attorney’s fees. Copyright Act Section 505 allows a court, in its discretion, to award a “reasonable attorney’s fee to the prevailing party” in a copyright case. Though some commentators argue that such awards seem virtually guaranteed to prevailing parties, here the court exercised its discretion to deny the award to the prevailing plaintiffs.
The denial boiled down to the reasonableness of the parties’ conduct in the litigation. The Second Circuit found that the defendants’ arguments were objectively reasonable, and the defendants prevailed on several important issues. Moreover, the defendants “also were reasonable in trying to resolve the case short of trial: [Defendants] made an Offer of Judgment in the amount of $3000, which [Plainitffs] rejected, in favor of continuing to demand over $1 million in damages, notwithstanding the evidence that [Defendants] had received less than $600 in revenues from infringing sales.”
This portion of the opinion, tacked on to the end in just a few sentences, is interesting for a couple of reasons. First, it illustrates that the prevailing party’s conduct in the course of the litigation retains relevance in the attorney’s fees analysis. Second, it highlights a thorny question at the intersection of civil procedure and copyright that remains unresolved.
Federal Rule of Civil Procedure 68 governs offers of judgment, and provides that a party defending against a claim may offer to the opposing party to allow judgment on specified terms. If the opposing party fails to accept the offer within 14 days, and later obtains a judgment that is less favorable than the offer, then “the offeree must pay the [offeror’s] costs incurred after the offer was made.” But “costs,” at least in the sense of true, out-of-pocket costs, are dwarfed by attorney’s fees in typical litigation. Do Rule 68 “costs” include attorney’s fees? In Marek v. Chesney, 473 U.S. 1 (1985), the Supreme Court held that Rule 68 “costs” include attorney’s fees if the underlying statute so prescribes. Because attorney’s fees can amount to substantial sums, the offer of judgment can be a powerful tool in a defendant’s arsenal in settlement negotiations where such fees are included as costs.
If there is no settlement and the parties proceed to judgment in a copyright case, how do Rule 68 and Section 505 interact? Section 505 defines costs as including attorney’s fees, thus bringing Rule 68 into play. The rules differ from each other in important ways, however. While Section 505 allows an award of attorney’s fees to any prevailing party, whether plaintiff or defendant, Rule 68 only shifts costs to a party “defending against a claim” – usually the defendant, though the rule would seem to apply equally to a counterclaim defendant. Moreover, Section 505 gives the court discretion to award attorney’s fees, while Rule 68 is phrased in mandatory terms. Relying on Rule 68’s mandatory language, the Eleventh Circuit, in Jordan v. Time, Inc., 111 F.3d 102 (11th Cir. 1997), awarded costs (including attorney’s fees) to the defendant even though the plaintiff prevailed, because the plaintiff recovered less than the amount of the offer of judgment – a traditional application of Rule 68. In contrast, the Seventh Circuit, in Harbor Motor Co. v. Arnell, 265 F.3d 638 (7th Cir. 2001), held that in copyright cases, only prevailing parties can receive attorney’s fees under Rule 68 because the Supreme Court in Marek tied the award of Rule 68 fees to those costs that are “properly awardable under the substantive statute at issue,” and Section 505 only awards fees to prevailing parties. The Seventh Circuit thus reads Section 505 as a limitation on Rule 68.
The Bryant court makes no reference to a request for attorney’s fees by the defendants. Presumably, the defendants made no such request, and there is nothing in the opinion suggesting how the court might have ruled had they done so. I believe the Eleventh Circuit view is the better one. Marek v. Chesney instructs us to look to the underlying statute to determine whether it defines costs as including fees, not the circumstances under which fees are to be awarded: “where the underlying statute defines ‘costs’ to include attorney’s fees, we are satisfied such fees are to be included as costs for purposes of Rule 68.” Moreover, the Eleventh Circuit approach is consistent with the policy, emphasized by the Supreme Court in Marek, in favor of encouraging settlement of disputes. It will be interesting to see how case law develops in this area.
Print This Post
Berne, Baby Berne
Court upholds registration requirement as prerequisite for statutory damages and attorney’s fees
The United States became a member of the Berne Convention for the Protection of Literary and Artistic Works effective March 1, 1989. The Berne Convention is the foremost multilateral copyright treaty in effect today; most of the economically significant countries in the world adhere to it. The most significant accomplishment of the Berne Convention was to eliminate the requirement of any “formalities” as a prerequisite to copyright protection. I’ve always thought of this as the “black tie optional” rule for copyright; works are protected by copyright in Berne member countries even if they are published without a copyright notice and if they are never registered for copyright protection. Before the U.S. signed onto Berne, works published without a copyright notice risked injection into the public domain. Today, works are protected from the moment they are fixed in a tangible medium of expression, without need for notice or registration.
Registration remains essential, however, for the enforcement of copyright in domestic works and for the availability of certain remedies. Under Section 412 of the Copyright Act, in order to be eligible to recover statutory damages for infringement and attorney’s fees, a copyright owner must have registered the work before the infringement began (or within three months of first publication of the work). Statutory damages are critical in cases where it is difficult to prove actual damages, and provide copyright owners with significant leverage in settlement negotiations. Thus, Section 412 acts as a powerful incentive for authors and owners to register their works promptly.
In Elsevier B.V. v. UnitedHealth Group, Inc., 2010 U.S. Dist. LEXIS 3261 (S.D.N.Y. Jan. 14, 2010), the Southern District of New York addressed the question whether, by virtue of the Supremacy Clause, the Berne Convention supersedes Section 412 with respect to unregistered foreign works. In other words, may plaintiffs suing to enforce copyrights in unregistered foreign works recover statutory damages and attorney’s fees? The answer hinged on whether Berne was a “self-executing” treaty under U.S. law – that is, a treaty which becomes law upon ratification. By contrast, Congress must affirmatively enact treaties which are not self-executing in order for their provisions to take effect under domestic law.
The court concluded that the Berne Convention was not self-executing. In adopting the Berne Convention Implementation Act, Congress explicitly stated that the treaty was “not self-executing under the Constitution and the laws of the United States”; that U.S. obligations under Berne “may be performed only pursuant to appropriate domestic law”; and that U.S. copyright law, as amended by the Implementation Act, satisfied U.S. obligations under Berne. Moreover, Article 36 of Berne itself states that the treaty is not self-executing:
“(1) Any country party to this Convention undertakes to adopt, in accordance with its constitution, the measures necessary to ensure the application of this convention.
(2) It is understood that, at the time a country becomes bound by this Convention, it will be in a position under its domestic law to give effect to the provisions of this Convention.”
Congress passed the Implementation Act specifically to revise U.S. law to comply with the Berne Convention. Though the Implementation Act amended other sections of the Copyright Act, it deliberately left Section 412 unchanged. For instance, Congress eliminated the requirement in Section 411(a) that foreign works be registered as a prerequisite to maintain an infringement action, finding the requirement to constitute a prohibited formality. On the other hand, Congress concluded that the statutory incentives for registration in Section 412 “are not preconditions for the ‘enjoyment and exercise’ of copyright” because “they do not condition the availability of all meaningful relief on registration, and therefore are not inconsistent with Berne.”
Because the Berne Convention was not self-executing, the court concluded that it could not preempt Section 412 of the Copyright Act. Owners of foreign works who might seek to enforce their copyrights in the United States would thus be well advised to register their works in order to maximize the tools and remedies available to them in the event of infringement.
Print This Post
Tenenbaum Tries, Tries Again
Seeks New Trial or Reduction of Damages Award
Joel Tenenbaum rang in the New Year by seeking a new trial or, alternatively, a reduction of the $675,000 award of statutory damages imposed by a jury last summer for his illegal file-sharing activities. Attempting to capitalize on favorable language in the court’s opinion rejecting his fair use defense, Tenenbaum’s motion trumpeted the court for becoming “the first to recognize a fair use interregnum for copyright infringement following the debut of Napster.” Tenenbaum can’t be blamed for trying to turn lemons into lemonade, but the court recognized no such thing, though it plainly wished to rule otherwise. At most, the court speculated that a file sharer “might” be able to rely on a fair use defense under certain limited circumstances not applicable to Tenenbaum’s conduct, such as by swapping files during the time period “before digital media could be purchased legally, but [] later shift[ing] to paid outlets.”
Fair use
Tenenbaum devoted much of his brief to rehashing the same fair use arguments that the court already (properly) rejected. After praising the court for supposedly establishing the so-called “fair use interregnum,” Tenenbaum faulted the court for cutting it off before his file-sharing was detected in August 2004 due to the fact that “a commercial market for digital music had fully materialized” by then. According to Tenenbaum, early online sellers of digital music did nothing to alleviate the injustice of having to purchase entire CD’s rather than individual songs because they employed encryption technology which restricted purchasers’ ability to transfer songs between different media players. This “boxed music consumers like Tenenbaum into an unfair choice” until the music industry began offering unrestricted copies of songs for sale online in 2007. Tenenbaum also reasserted his “attractive nuisance” argument – that the music industry lured Tenenbaum and other consumers into wrongdoing with their marketing strategies – and bemoaned anew the conscription of parents and universities as “copyright police to regulate internet use” by children and students. None of these arguments is likely to persuade the court that it made a mistake in rejecting Tenenbaum’s fair use defense, which remains, as the court succinctly noted, “completely elastic, utterly standardless, and wholly without support.”
Statutory damages and due process
Tenenbaum buried his most interesting, and potentially most successful, argument at the end of the brief – that the $675,000 statutory damages award is so grossly excessive that it violates his Constitutional right to due process. The Supreme Court has held that statutory damages violate due process where they are “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67-68 (1919). In Williams, the Court upheld a $75 statutory damages award against a railroad that had overcharged passengers by 66 cents per ticket. Relying on the Williams standard, Tenenbaum contrasted the “bankrupting” size of the award with his conduct, which he characterized as “at most comparable to shoplifting music from a record store.” Assuming a purchase price of 99 cents per song, Tenenbaum calculated that the ratio between the award and the actual damage to the plaintiffs was 22,500 to 1 – far in excess of the 113 to 1 ratio which the Williams Court found acceptable.
The shoplifting analogy is a compelling one. The consequences for theft can be severe, but it is almost inconceivable that Tenenbaum would have been assessed a six-figure penalty for walking out of a record store with a handful of CD’s stuffed under his jacket. The methodology he used to arrive at his 22,500:1 ratio is flawed in that it fails to account for the fact that a single song, made available over a peer-to-peer system, could be copied innumerable times, thus resulting in more than one lost sale to the plaintiffs. Nonetheless, the award is strikingly high given the nature of the offense. The judge has already expressed considerable sympathy for Tenenbaum and distaste for the record industry’s strategy of suing individual file sharers; the argument that a penniless college student should not be bankrupted for a relatively petty offense could well resonate with the court.
Tenenbaum also argued that the damages award violated due process under the standard applied to punitive damages. A punitive damages award which is “grossly excessive” in relation to the state’s interest in punishment and deterrence enters “the zone of arbitrariness that violates the Due Process Clause of the Fourteenth Amendment.” BMW v. Gore, 517 U.S. 559, 568 (1996). Courts examine three “guideposts” to determine whether punitive damages are appropriate: (1) the degree of reprehensibility of the defendant’s conduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the damages award; and (3) the difference between the award and the civil penalties authorized or imposed in comparable cases. Id. at 575. Tenenbaum contended that his conduct was not reprehensible, involving only economic harm not motivated by intentional malice and conduct that “even now many see as having been unauthorized but not morally wrong”; that the Supreme Court has noted that “few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process”; and that statutory damage awards in file-sharing cases in which the defendants lost by default or on summary judgment have been limited to the minimum possible statutory damage amount.
In citing Williams as the standard for assessing the appropriateness of a statutory damages award in the copyright context, and addressing Gore as an alternative argument, Tenenbaum departed from the post-trial strategy employed by Jammie Thomas-Rasset, the other file sharer to seek modification of a massive statutory damages award. Thomas-Rasset was found liable for copyright infringement for sharing 24 songs, and a jury initially awarded the plaintiffs $222,000. The court vacated that award due to concerns over the propriety of the jury instructions concerning liability. After a second trial, Thomas-Rasset was again found liable, and the jury awarded the plaintiffs $1.9 million in damages. Thomas-Rasset moved for a new trial, relying primarily on the standard set forth in Gore, essentially conflating the two tests (“The Due Process jurisprudence that is today embodied in BMW v. Gore has its roots in Williams, a case involving statutory damages”).
Remittitur
Tenenbaum then argued that if the court does not grant him a new trial, it should reduce the statutory damages award to the minimum amount. Remittitur is appropriate where an award is “grossly excessive, inordinate, shocking to the conscience of the court, or so high that it would be a denial of justice to permit it to stand.” Here, Tenenbaum’s strategy mirrored Jammie Thomas-Rasset’s; she also sought remittitur as an alternative to her due process argument. The court recently granted Thomas-Rasset’s request, reducing the $1.9 million award to $54,000.
Tenenbaum argued that Congress set the currently applicable range of statutory damages to combat large-scale commercial piracy of software over the Internet, but did not intend to subject consumers like Tenenbaum to the upper limit of available damages. According to Tenenbaum, Congress sought to remedy the tremendous costs of software piracy to software companies, their employees and the economy – concerns that sound strikingly familiar in the music file-sharing context – but that it envisioned imposing those damages on those who made the software available for download on a widespread basis and not the individuals who actually downloaded them. Of course, Tenenbaum himself placed songs in the shared folder of his hard drive, making them available for download to anyone within his peer network, so it is unclear how, in practical effect, his conduct differed from that of the software pirates, except perhaps in degree.
Moreover, Tenenbaum offered no justification for why the minimum statutory damages amount is the appropriate award, as opposed to some other amount. This omission underscores the difficulty associated with his request; namely, how the court can defensibly set a damages award within such a large range of potential statutory damages. Perhaps the court will look for guidance to the recent decision in the Thomas-Rasset case; there, the judge settled on a trebling of the minimum award per sound recording as the appropriate amount, based on treble damage provisions in other federal statutes.
The Department of Justice, intervening to defend the constitutionality of the Copyright Act’s statutory damages provisions, and the plaintiffs have submitted their briefs opposing Tenenbaum’s motion. A hearing is scheduled to occur on February 23, 2010.
-
About Naomi Jane Gray
Naomi Jane Gray is a partner in the law firm of Harvey Siskind LLP, where she focuses her practice on intellectual property (including copyright, trademark and trade secrets) litigation and counseling.
The statements and opinions posted on this blog are personal to Naomi Jane Gray and do not necessarily represent the views of Harvey Siskind LLP or its clients.
More About Naomi Jane Gray
-
Contact
-
Naomi Jane Gray
Harvey Siskind LLP
4 Embarcadero Center
Suite 3950
San Francisco, CA 94111
(415) 354-0100
ngray@harveysiskind.com Categories
Tags
- attorney's fees
civil procedure
CLE
Copyright Office
counseling
discovery
DMCA
ebay
Fair Use
file sharing
Fonovisa
formalities
Injunctive relief
jurisdiction
Licenses
Mandatory deposit
Mildred
Naomi Jane Gray
offer of judgment
red-flag knowledge
Registration
regulations
Remedies
salinger
speaking engagements
statutory damages
tenenbaum
Transfers
user-generated content
Viacom
vicarious liability
YouTube