Suing for Copyright Damages: Actual vs. Statutory
Exist, Inc. v. E.S.Y., Inc., 2015 U.S. Dist. LEXIS 26248 (S.D. Fla. Mar. 4, 2015)
The United States is the world’s greatest producer of intellectual property. http://www.ncpc.org/topics/intellectual-property-theft/facts-and-figures-1. In 2011, the U.S. Patent Office issued more than eight million patents along with the U.S. Copyright Office issuing more than 33.6 million copyrights in the same year. Id. The rise of intellectually property has also caused the rise of intellectual property theft to increase. For instance, the development of the Internet and technology has allowed copyright infringement to increase rapidly. According to the Council of State Governments, the U.S. economy loses $58 billion each year to copyright infringement alone. Id. That includes the $16 billion in the loss of revenue to copyright owners and $3 billion in lost tax revenue. Id. What constitutes copyright infringement? The copyright law provides the owner of a copyright six exclusive rights: 1) to reproduce the work in copies; 2) to prepare derivative works; 3) to distribute copies of the work to the public; 4) public performance; 5) public display; and 6) in the case of sound recording, digital audio transmission. 17 U.S.C. § 106. Section 501 states that “anyone who violates any of the exclusive rights of the copyright owner . . . is an infringer of the copyright.” 15 U.S.C. § 501.
With the rise copyright infringement claims, there has been an increased importance in how to address monetary awards. Judges award monetary relief under the United States Copyright Act in the form of either actual damages or statutory damages. The benefit of suing for statutory damages is that the law sets a minimum amount of damages that can be awarded. For example, the minimum amount of money that can be awarded for copyright infringement is $750. 17 U.S.C. §504(c)(1). With statutory damages, if the defendant is found liable, the plaintiff is awarded the statutory amount and doesn’t have to go through the burdensome process of proving actual damages. A major disadvantage of statutory damages and what usually dissuades people from seeking statutory relief is that cap for the amount of money that can be awarded. For example, the maximum amount of money that can be awarded for copyright infringement is $30,000. Id. But that cap is raised to $150,000 if the defendant acted willfully. 17 U.S.C. §504(c)(2).
On the other hand, the advantages of suing for actual damages, and the reason most people choose actual damages, is because there’s no statutory cap for the amount of money that can be awarded. Along with actual damages, the copyright owner can usually get an additional award for punitive damages as well. So, if someone wants to sue Bud Light for $10,000 for false advertising because drinking beer didn’t equal hot beach babes like shown on their commercial, suing under actual damages provides that freedom. Overton v. Anheuser-Busch Co., 205 Mich. App. 259, 517 N.W.2d 308, 1994 Mich. App. LEXIS 218 (Mich. Ct. App. 1994). A disadvantage of suing for actual damages, and what most people don’t realize, is that actual damages is proven by discovery, which may include not only the accused infringer’s financial information – but also the copyright owner. Put another way, seeking actual damages may put into play the review of your bank accounts, tax returns, and other financial records by the accused infringer’s attorneys as well as the court.
Judge Alicia O. Valle of the United States District Court for the Southern District of Florida recently addressed this scenario. In Exist, Inc. v. E.S.Y., Inc., the copyright holder sued for actual damages for copyright infringement. The Defendant, ie the accused infringer, responded by serving a non-party subpoena on the copyright holder’s accounting firm, requesting information related to its finances over the past six years. Exist, Inc. v. E.S.Y., Inc., 2015 U.S. Dist. LEXIS 26248 (S.D. Fla. Mar. 4, 2015). As a result, Plaintiff / copyright owner filed a motion to quash the subpoena as irrelevant, overbroad, and unduly burdensome. Id at 2.
Judge Valle first addressed the issue of whether Plaintiff’s finances were relevant. The Judge held that because Plaintiff was seeking a judgment in the amount of actual damages, including “all profits to each Defendant plus all losses to Plaintiff”, Plaintiff’s financial status before, during, and after the alleged wrongful conduct at issue was relevant and thus generally discoverable. Id at 7.
Judge Valle next addressed the issue of whether the subpoena was overbroad or unduly burdensome. The Judge noted that although Plaintiff didn’t state how any particular request was overbroad or unduly burdensome, six years worth of financial information was found to be overbroad. Id at 8. Judge Valle narrowed the relevant time period to 2010 to the present in accordance with when Plaintiff started using the marks at issue. Id.
Statutory damages are usually available for most civil suits, with the exception of trademark infringement. The distinction to be made here is that this case dealt with the measurement of damages for a copyright infringement claim. However, if you brought a claim for damages as a result of an injury, the amount of damages would not be measured the same. The measure of damages for injuries are usually determined by medical bills, property damages, emotional distress, etc. The take away is that the decision to sue for actual damages or statutory damages should be decided on a case-to-case basis with the guidance of your lawyer.