Statutory damages in copyright litigation can be a trap for the unwary.
In Part I of the post on statutory damages, I focused on two common misconceptions about statutory damages. I explained that a copyright owner is not entitled to statutory damages for the continuation of infringing conduct post-registration that began pre-registration. I also explained that a copyright owner may recover only one award of statutory damages for multiple infringements of one copyrighted work whether committed by one infringer or by multiple infringers acting together.
I now explain how the courts have applied the one-grant- of-statutory-damages limitation in the last sentence of section 504 (c)(1) of the Copyright Act of 1976 (the “Act”). I also give some suggestions about when infringing conduct will be found to be willful.
The One-Work Limitation Explained
The last sentence of section 504 (c)(1) of the Act states that, in determining the number of grants of statutory damages to be awarded, “all the parts of a compilation or derivative work constitute one work.” This one-work limitation, when applicable, significantly reduces an infringer’s exposure. This is because, as explained in Part I of this post, one infringed work merits only one grant of statutory damages, no matter how many times the work has been infringed.
But when is this one-work limitation applicable? Confusion abounds. The statute clearly states that “all the parts of a compilation or derivative work constitute one work.” (A compilation is a collection of copyrighted works; a derivative work is one that borrows and transforms an underlying work such as a movie derived from a screen play.)
But there ends the clarity. The statute does not specify whose compilation or derivative work the statute is referring to. In other words, is the “compilation or derivative work” one that plaintiff creates which defendant then infringes? Or instead is the statute referring to a compilation or derivative work defendant makes from a number of separately copyrighted works of plaintiff such as when a defendant combines a number of separately copyrighted songs into an infringing album?
Most courts assume, without much discussion, that the one-work limitation refers to a compilation or derivative work that the plaintiff puts together, which defendant then infringes. Thus, where a photographer compiled 122 images into a catalogue which defendant then infringed, the plaintiff was awarded only one grant of statutory damages.
Other courts disagree. One court found that, where defendant took 64 of the plaintiff’s photographs and packaged them together into four magazine issues or compilations, plaintiff was nevertheless limited to only four awards of statutory damages.
A Second Circuit appellate court has now resolved this confusion by a decision binding at least on the district courts in New York, Connecticut and Vermont. The court made it clear that the one-work limitation refers to a compilation the plaintiff creates that is then infringed. The court found the one-work limitation inapplicable where it was the defendant who created the infringing compilation (a series of CDs) from thirteen of the plaintiff’s separately copyrighted songs. Accordingly, the court held that the plaintiff was entitled to an award of statutory damages for each of the thirteen infringed songs.
This result makes sense. Otherwise a defendant would have the perverse incentive to combine as many different copyrighted works as possible into one work yet be subject to only one grant of statutory damages.
Uncertainty Whether Infringing Conduct Will Be Deemed Willful and the Statutory Damages Awarded for that Conduct
There is also considerable uncertainty whether the court or jury will find the infringing conduct to be innocent, non-willful or willful and the resulting amount of statutory damages that will be assessed against the defendant for that conduct.
The uncertainty begins with the Act’s failure to define willfulness. The courts have attempted to fill the gap, finding a defendant acted willfully if it knew its conduct was infringing or acted with reckless disregard for the copyright owner’s rights. But knowingly infringing conduct does not always equate with willfulness. For example, a defendant who has been warned to end its infringing conduct may avoid a willfulness finding by demonstrating it reasonably and in good faith believed its continuing conduct was not infringing. Further, the good faith belief may be evidenced by an unsuccessful fair use defense if the court finds that that belief was objectively reasonable.
The only instance where willfulness will almost certainly be found is where a defendant continues its infringement in defiance of a court order. Thus in one case, maximum statutory damages of $150,000 per work infringed were awarded where defendant ignored an injunction that prohibited continuing use of an infringing program. In another case, maximum statutory damages were also awarded where defendant continued its conduct after a district court granted summary judgment finding that conduct infringing.
Other Posts About Statutory Damages
Want to read Parts I and III of this series that also clear up other common misconceptions about statutory damages in copyright litigation? See link (Part I) and link (Part III ). Want to read some later posts commenting on the decision in Sony BMG v. Tenenbaum slashing the jury’s verdict by 90%?. Go to link and link. Want to read a post about some of the issues raised by the upcoming third trial in Capitol v. Thomas-Rasset case? Go to link. Still have questions about statutory damages in copyright litigation and want to see a video answering those questions, go to link or want to read an article about statutory damages written for non-lawyers, go here. Also see this link (explaining when a copyrighted work qualifies as a work for purposes of fixing statutory damages) and this link (explaining the one work limitation set forth in the last sentence of 17 U.S.C. § 504 (c)(1).