“How much money can I make?” is the first question people ask when deciding on whether to enter into a copyright lawsuit. It is the same question for both the plaintiff and the defendant, each weighing the potential award against the potential costs and the time and effort required to get to that point. Each side looks at the initial evidence and makes assumptions on their chances of winning. Plaintiffs formulate a minimum settlement number that they would take at that stage of the litigation, as well as what price they believe would satisfy the opposition given the evidence. This number is constantly changing; each stage of the litigation provides new evidence that shifts the assumptions. Plaintiffs may also have objectives beyond money, such as removal of the offending products from circulation. That question often depends on how the work is being infringed, its public exposure, and to what extent the original work may be devalued. For the defendant, removing the offending work may be such a burden that they may wish to quickly offer a settlement, one with a high enough number that it will be accepted, yet with a stipulation that the leftover inventory may be sold. Additionally, defendants are often worried about bad press or harm to the company’s public image.
Given the unlimited factual variations, it is impossible to provide any monetary number without the specific facts of a case. However, the Copyright Act has within its text, rules by which all damages are awarded, and understanding these can help guide a decision to litigate an infringement.
There are two types of damages available in a copyright infringement action;
Statutory damages are only available to copyright holders with a valid copyright registration prior to the infringement or within 3 months of publication. Non-statutory damages also require copyright registration, but that can be made after the infringement is discovered. I want to make sure that everyone understands the difference between a copyright and a copyright registration. While every author holds valid copyright in their work as soon as it is created, a copyright registration requires that the author register and submit the work to the Copyright Office. Adding a © to a work is not sufficient, and not required for valid copyright.
So, what is the difference between statutory and non-statutory damages and why might statutory damages be so much more lucrative?
To answer that, we must first look at what occurs when only non-statutory damages are available. Non-statutory damages allow a plaintiff prevailing on an action to receive:
actual damages PLUS a percentage of the profits that are attributed to the infringement.
What is meant by actual damages and attributed profits? Actual damages represent the money that would have been received if the author had created the work and sold or licensed it to the infringer. So, if a boutique wants to use a photographer’s image on an in-store display, only up for a month, the actual damages are the cost of the photoshoot, say $500, plus the licensing fee the photographer would have charged for that use, say $1,000. Attributed profits is a harder concept to determine. When someone buys a product, for example, a book, the purchase decision looks at various factors about the products; who the author is, the genre, the price, the quality such as hardcover, versus its paperback version, etc. If an infringing image is on the front cover, how much of the purchase of the book can be attributed to the cover? If the image were different, for someone that chose to buy the book, how much of the decision was made by the cover? If it were a Stephen King book, not much probably, but an unknown author, maybe a lot. With that in mind, let’s make some calculations.
In our store display scenario, the copyright holder is entitled to the $500 for the shoot and the $1,000 for the licensing. Calculating how much the in-store display had on sales is very hard to quantify and would probably amount to very little since we have to have a fairly solid reason for determining our attribution percentage. if it were .10% and store sales that month were $10,000, then the calculation for attribution is .10 x $10,000 = $1,000. Adding the actual damages we calculated above, $1,500, for a total of $2,500. That’s probably not worth suing for.
Now, let’s take our book, with an unknown author; the same picture. Quality, book size, and genre probably don’t matter too much, because the store is filled with books of the same size, quality, and genre. So why pick this one? Maybe the description, even its placement in the store, but it is the cover photo which helps to give a sense of the content, and usually plays a large role in purchasing. If the book costs $10.00 and half of the purchase is due to the picture, and 5,000 are sold, then in addition to actual damages, the copyright holder is entitled to $10 x 5000 x .5 = $25,000. Add the $500 for actual damages for a grand total of $25,500. That might be enough to warrant a lawsuit, but don’t forget, the attorney has to be paid. Unfortunately, in the first scenario, there aren’t many actions available to the copyright holder.
Next, we’ll look at what happens if statutory damages are available and I am pretty sure, there won’t be any disagreement on which is better.
Remember that for the copyright infringement for the in-store display, the damages were so small that a lawsuit would be a losing proposition. In all likelihood, a request for removal might be the only recourse. Infringement doesn’t require intent, so even if the store stole it knowingly and with intent, it still may be difficult to get some kind of punitive damages as punishment. So in that scenario, a copyright infringer will likely get away with infringement. That just isn’t right. Congress sought to fix this eventuality when writing the Copyright Act. It is not hard to imagine a company that would calculate various factors, such as the odds of being caught, the likelihood of an author learning of the infringement, likelihood that the author would sue, the damages available to the author, and the potential settlement costs; then were those calculations to show that infringing rather than licensing the works is more profitable, become serial infringers.
Understanding Statutory Damages
To keep that inevitable result from occurring, the Copyright Act allows the copyright holder in an infringement suit to elect:
- Non-statutory damages, (the actual damages plus attributable profits), or
- Statutory damages which allow for up to $30,000 per infringement.
For statutory damages, the owner is not required to present proof of damages or profits. So, it is easy to see why copyright owners often prefer statutory damages. There is nothing to prevent a court from considering evidence concerning actual damages and profits in making an award of statutory damages within the statutory range, however, that is rare.
For our in-store display scenario, the infringer would be subject to a large enough award that a lawsuit would now become worthwhile for the copyright holder. Additionally, attorney fees are also available, paid by the defendant. That fact is a serious deterrent for infringers. Also, even though intent does not matter in copyright infringement (not knowing about the infringement, or it being accidental is not a defense), the Copyright Act allows up to an additional $150,000 per infringing work for willful infringement. How willful the infringement is and, therefore, how much of that $150,000 is awarded is up to the court. So a willful infringement in our in-store display scenario could cost the store $100,000 or more.
There is only one caveat: An award for statutory damages is available for
- works in which the copyright registration is before the infringement, or
- for works registered after an infringement but the registration occurred within three months of publication (see here for information on what constitutes publication)
It is easy to see the advantages of registration. But let’s look at a real case from 2003 in which the plaintiff was awarded almost $20 million; Lowry’s Reports, Inc. v. Legg Mason Inc.
“An individual employed in Legg Mason’s research department contracted with Lowry’s to receive a single copy of its financial newsletter. Her contract prohibited copying or dissemination of the newsletter or its contents. Without authorization, that employee made numerous copies of various newsletters received which were faxed to Legg Mason brokers and branch offices, posted on the company intranet, and supplied to other members of the research department. Legg Mason brokers downloaded copies of the newsletter from Legg Mason’s website. After receipt of a cease and desist letter from Lowry’s, the employee continued to provide copies to other members of the research department.” – Internet Library
Here was the award breakdown:
- The jury awarded $250,000 for lost revenue:
- $50,000 for each of the 102 registered copyrighted works infringed from July 1999 through July 2001 for a total of $5.1 million.
- The jury also found willful infringement and awarded an additional $100,000 per infringement for a total of $10.6 million.
- For the period June 20-July 26, 2002, the jury awarded statutory damages of $100,000 for each of 32 copyrights infringed for a total of $3.2 million.
This award was upheld on appeal. Scenarios like this one are not as rare as one might think. We just don’t hear about them because the fear of large statutory awards often leads to a settlement prior to any trial, or companies settle early to limit the bad press that might come with a drawn-out court case. The advantages of statutory damages are clear. They not only generate greater awards, but require less attorney time to prove actual damages, and alleviate the need to have a concrete basis for attribution since proof of that is not required. It makes a case financially feasible, where it wasn’t before. And most importantly, most attorneys will take a copyright infringement case on contingency if statutory damages and legal fees are available. All that needs to be done is to register your artistic works.
Do you register your works for copyright protection? Let us know in the comments below.
This article has been updated from an earlier version.