Copyright Law — FALL 2008

            Credit where credit is due: Jonathan Rogers gave me the swift slap across the face necessary to get me going on this and informed me that Google constitutes a valid place to get started.

Three websites form the underlying meat to my commentary post and provide some amount of support to my outlandish claims; however, they are not much quoted and shouldn’t be necessary reading to understand my points:

1.      http://www.openrightsgroup.org/2008/11/26/from-bad-to-worse-meps-to-rush-through-disembowelled-term-extension-directive/ (discussing  a European Union plan to extending copyright terms and how this is an extremely bad idea)

2.      http://www.soundcopyright.eu/system/files/Briefing.pdf (also discussing the extension of the European Union copyright and how this is an extremely bad idea, but including more facts and numbers to show just how extremely bad it is)

3.      http://www.nber.org/papers/w10271.pdf (a look at historical copyright in the United States, particular the period of legalized piracy of the works of foreigners)

            The concept of international copyright brings two intertwined topics to my mind: First, massive amounts of foreign piracy – such as that found either in developing countries where (foreign) copyright concepts do not exist or the piracy for profit sometimes found in poorer segments of countries; Second, ridiculously long copyright periods unrelated to the interests of the artist.

            I realize these things seem somewhat unrelated and not unique to international copyright. (In fact, both these charges are accurate.)   However, they both seem to be symptoms of the same fundamental misperception of copyright: Copyright is meant “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”.  By going back to this basic principle (without reigniting all the previous discussions about the interpretation of the Copyright Clause), the disregard given by some countries, cultures, or population segments, particularly of foreign works can be understood better.

            Discussing first the piracy in developing areas, “[i]t is worth emphasizing that, once the U.S. had developed its own native stock of literary capital, it voluntarily had an incentive to recognize international copyrights.” Source #3.  This same principle, applied in the quote to the pre-1891 United States stance, could easily relate directly to any other nation in the world. A nation must build its own intellectual capital in the form of copyrightable works of whatever sort to a meaningful level before it will care about international copyright.  So long as that developing nation’s interests in prosperity and advancement outweigh the limited loss it suffers by allowing the rest of the world to steal its scarce copyrightable materials, then that developing nation will willing to better itself intellectually at the expense of others.  While this may appear a sweeping generalization, the principle manifests itself daily in matters both related and unrelated to copyright and at every level of interaction – from interpersonal to international. The fact that other incentives (e.g., Normal Trade Relations or Free Trade Agreements) have been attached to copyright agreements in the past show that reciprocal copyright recognition does not amount to an equal trade-off in and of itself.

            If (the above is correct and) every country will have its own pros and cons of recognizing foreign copyrights, does this create moral implications for incentivizing copyright agreements with developing nations in particular? Copyright contributes to the furtherance of the arts and sciences of a country by protecting an author’s incentives to create such items; however, these bits of intellectual property, while commonly available in civilized and developed countries, may be rare and unavailable in a developing nation. By offering economic incentives for an agreement that this developing nation will not proliferate these copyrighted works of knowledge and empowerment, the more advanced countries are offering the developing nation a different path to prosperity.  Unfortunately, the two options before the developing country are unequal and deceptive.  By agreeing to such a deal, the country will get economic benefits and trade relationships which will allow it to trade with the superior country (and pay for the goods it receives in exchange).  It seems to me that this, while appearing to benefit the smaller country more, will actually prove to slow the progress that the country could have made on its own had it continued to avail itself to the free (albeit pirated) knowledge already accumulated by the more technologically advanced and better structured country.[1]  Overall, the benefits of certain countries or segments of a country can accrue through a blatant disregard for foreign copyright can surpass the countervailing considerations up to a certain point.

            The extremely long duration of copyrights sticks in my craw on a regular basis, and as a result I can find this evil in any facet of copyright that comes up for discussion. In the topic at hand, the duration of a copyright could affect many different areas of international law and relations. Going back to the topic of developing nations: Assuming a nation chooses to recognize foreign copyrights for whatever reason, extremely long copyright terms will extend the period during which the dissemination newly available wisdom (in the form of the written word) will be restricted due to the increased expense.  (The difference in price between a semi-cheap book and a free or extra-cheap pirated book could still greatly reduce the general availability of a book depending on the economic realities of the population of a developing country.)

            Even looking more generally at the implications of long (or longer) copyright terms globally indicates several legitimate concerns.  The clearest legal issue would arise when different countries began setting different terms for how long copyrights within that country would last.  Imagine how quickly terms could be extended should countries begin to try one-upping each other – a county adds two years to the longest term of any other country in order to better protect its artists, but immediately one of its treaty partners lengthens the duration of its copyright term. The governments of these countries would hopefully realize the foolishness of such petty games and stop before things got out of hand; however, trusting government to recognize foolishness has never ended well in the past.

            The more disturbing facts of extending terms for copyright holders is the fact that it does not generally benefit the artists who originally produced a work, but rather the international record company that presently holds vast catalogs of past copyrights.  Further, not only are the benefits derived mostly by companies and a few key stars, but the brunt of these extra payoffs come directly from the end-consumer in most cases.  Source #2 provides good information and numbers on this (in pounds) that demonstrate the point. By extending the term of copyrights in a global marketplace (rather than a particular country) the monetary concerns increase exponentially.

            International copyright recognition, while sounding like a wonderful concept of equal protection and prosperity, proves that in practice the interests of both individual countries and individuals may to some extent prove better served by piracy.

[1] Okay, I’m feeling a little P.C. just now, so let me clarify when I say “better” or “more advanced”, I’m referring to it in a sort of third-world vs. first-world / economical view. I’m not judging any country because of its size or values or anything.

I should probably be enjoying the holidays with family, but how much turkey and annoying relatives can one person take honestly?

Ran across this article about Apple sending a DMCA threat to a website dedicated to cracking the iTunes Database of songs used in iPods to allow people to use programs other than iTunes to sync their ipods. http://www.eff.org/deeplinks/2008/11/apple-confuses-speech-dmca-violation

Thought this was relevant for two reasons.

First, the EFF, who posted the article claims that there is no claim because the database is not copyrightable- it is a database listing of the songs on your ipod.  The website is definitely trying to get around a technological security measure, without a doubt. I’m a bit fuzzy - does the work underneath HAVE to be copyrightable for DMCA protection? I wonder if Apple could somehow claim their unique layout of the data would be copyrightable?

Second, I think this gets back to the larger societal/policy issue we keep coming back to, analogous  to the DeCSS issue. If people are using this to simply get to music they bought and want to use with their own syncing software - isn’t it a legitimate use? No one is trying to infringe the music DRM, just use a different program to sync. Apple probably tries to cover this somehow in the contract with iTunes, and when you first “install” your iPod to your computer I’m sure there is a click agreement.

Can be found here:

https://deans.richmond.edu/as/SEI

Section 504 provides that an infringer of copyright may be liable for the copyright owner’s actual damages and any additional profits of the infringer.[1]  The copyright owner is entitled to recover the actual damages suffered by him as a result of the infringement.[2]  The Supreme Court has yet to address whether a reasonable license fee is an appropriate measure of damages under the “actual damages” prong of section 504. 

The Second Circuit in On Davis v. The Gap, Inc. held that section 504(b) permits a copyright owner to recover actual damages, in appropriate circumstances, for the fair market value of a license covering the defendant’s infringing use.[3]   The court analogized the question to illegal takings or uses in contexts outside the realm of copyright: in each case, the defendant “has surreptitiously taken a valuable right, for which plaintiff could have charged a reasonable fee.”[4]  In such takings, the plaintiff’s revenue is less than it would have been had defendant paid for what he took, but no less than it would have been had defendant refrained from taking altogether.[5]  The court concluded that the better reasoned view, “at least in some circumstances,” is to charge the illegal taker with a reasonable cost of what he took (versus leaving the victim of the taking with nothing).[6] 

The Seventh and Ninth Circuits are in accord.  The Seventh Circuit in Deltak, Inc. v. Advanced Systems, Inc. concluded that “[t]he value of the infringer’s use is a permissible basis for estimating actual damages.”[7]  Similarly, the Ninth Circuit in Wall Data Inc. v. Los Angeles County Sheriff’s Dept. held that “[I]t is not improper for a jury to consider either a hypothetical lost license fee or the value of the infringing use to the infringer to determine actual damages, provided the amount is not based on ‘undue speculation.’”[8] 

The Sixth Circuit, however, stands in opposition to the Second, Seventh, and Ninth Circuits.  The court in Wrench LLC v. Taco Bell Corp. held that “[t]he remedies available under copyright law do not include damages for the reasonable value of the defendants’ use of the work.”[9] 

The effects of excluding reasonable license fees from actual damages can be profound.  In Chieco v. Willis & Geiger, Chieco won a jury verdict in his favor against Lands’ End for copyright infringement.[10]  Despite his success on the infringement suit, Chieco left with a net monetary loss because the jury could not, under the instructions given, award any profit nor fashion a license fee for hundreds of infringements which, though found to exist, did not qualify for statutory damages.[11]  The zero dollar profit and actual damage awards dictated the court’s rulings on post-trial requests for fees and costs, resulting in a net monetary loss for the prevailing copyright plaintiff.[12]  Petitioning for certiorari to the Supreme Court, Chieco presented the question, “Are the Second and Seventh Circuits correct in holding that a reasonable license fee is an appropriate measure of damages under the “actual damages” prong of the Copyright Act’s damage statute (Section 504(b)) (and is the Sixth Circuit incorrect when it states: “The remedies available under copyright law do not include damages for the reasonable value of the defendants’ use of the work”)?”  The Supreme Court denied certiorari.[13] 

Given the apparent injustice of Chieco, it seems only proper to account for a reasonable license fee or royalty rate in the computation of actual damages under section 504.  While there is certainly a potential for abuse in permitting recovery for such “lost” fees, the potential for abuse may be militated by capping recovery at a fair market value, and denying recovery for claims with are unduly speculative.[14] 

But perhaps the issue is not quite so straight forward.  The circuits which have opted to account for a reasonable license fee in determining damages have appeared to treat such fees as “entitlements” of the copyright holder.[15]  To hold that a copyright holder is entitled to a reasonable license fee seems wholly intertwined with the market effects prong of the fair use defense. 

The Second Circuit in Ringgold v. Black Entertainment Television, Inc. considered the propriety of accounting for potential licensing revenue under the market effects factor of fair use. [16]  While the court noted the potential for circularity, the court reasoned that it could “avoid the vice of circularity by considering ‘only traditional, reasonable, or likely to be developed markets’ when considering a challenged use upon a potential market.”[17]  The court’s position in Ringgold seems consistent with its subsequent treatment of licensing fees in On Davis. 

The Sixth Circuit’s positions on the issues cannot be squared so easily.  The court in Princeton University Press v. Michigan Document Services, Inc. explicitly held that, where a licensing market already exists, there is no circularity in holding that the potential destruction of the plaintiffs’ market by widespread circumvention of the plaintiffs’ permission fee system is enough to negate fair use.[18]  Given the Sixth Circuit’s refusal to account for potential licensing revenues in the context of actual damages in Wrench LLC, it is unclear how the court purports to consider potential licensing revenues in the context of fair use. 

Given the apparent inconsistency of the Sixth Circuit’s views, the potential for injustice where potential licensing revenues are not accounted for in computing actual damages (as in Chieco), and the reasonable limitations which can be imposed on consideration of licensing revenues for both actual damages and fair use, the better reasoned view appears to be that of the Second Circuit.  By accounting for potential license fees in actual damages—but only those which are not unduly speculative and do not exceed fair market value—and accounting for the same in the context of fair use—but only for “traditional, reasonable, or likely to be developed markets”—the victorious plaintiff can avoid a net monetary loss while preventing him from receiving a windfall. 

[2] § 504(b).

[3] 246 F.3d 152,172 (2d Cir. 2001).

[4] Id. at 165-66.  For example, “P, the owner of a baseball stadium charges $50 for admission to games. D, through a corrupt arrangement with a stadium usher, sneaks in free on days when the stadium has excess seating capacity. P shows no economic injury inflicted by D’s free entrance, other than the hypothetical loss of the revenue for the tickets D did not purchase.”  Id.

[5] Id.

[6] Id.

[7] 767 F.2d 357, 360-61 (7th Cir.1985).

[8] 447 F.3d 769 (9^th Cir 2006) (citations omitted).

[9]  256 F.3d 446 (6th Cir. 2001).

[10]Petition for Writ of Certiorari, Chieco, 2005 WL 1060947 (No. 04-1469).

[11] Id.

[12] Id.

[13] 545 U.S. 1123 (2005).

[14] See On Davis, 246 F.3d 152,172 (2d Cir. 2001).

[15] See, e.g. On Davis at 161.

[16] 126 F.3d 70 (2d Cir 1997).

[17] Id. at 82.

[18] 99 F.3d 1381 (6th Cir. 1996).

On October 13th of this year President Bush signed into law the Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO IP). This bill enhances the remedies available in both criminal and civil Intellectual Property law. One of the biggest changes the bill makes is the creation of the Intellectual Property Enforcement Coordinator. The IPEC serves within the Executive Office of the President and is in charge of an inter-agency advisory committee that will develop a Joint Strategic Plan which will help to “reduce the number of counterfeited and infringing good in the domestic and international supply chain,” identify any weaknesses in the system for stopping these kinds of goods, ensure that information concerning these types of goods are shared between agencies and work overseas to enforce IP rights. This position and committee seems to bring the federal government as a whole into a more active role in investigating counterfeited and infringing goods. The Joint Strategic Plan seeks to keep federal, state and local agents more informed about Intellectual Property issues and help strengthen the enforcement of IP rights. This sounds like a good thing right? It could be very good for IP law but the bill also has the potential for extreme over enforcement.

Take a look at the provisions in the bill for the seizing and forfeiture of goods. This allows the forfeiture of:

‘‘(A) Any article, the making or trafficking of which is, prohibited under section 506 of title 17, or section 2318, 2319, 2319A, 2319B, or 2320, or chapter 90, of this title.‘‘(B) Any property used, or intended to be used, in any manner or part to commit or facilitate the commission of an offense referred to in subparagraph (A).‘‘(C) Any property constituting or derived from any proceeds obtained directly or indirectly as a result of the commission of an offense referred to in subparagraph (A).       

This extends the governments reach past what you are actually using to infringe and allows the government to take items that are only tangentially related to the infringement. The government can take or have forfeited the same items regardless of whether the case against a person is civil or criminal. If you have put an infringing item on the internet to be downloaded by others, you computer can be taken and any items that the infringing title is on can also be taken. The forfeiture provisions in the title extend what the government can possibly take, it will take time to see how the government will use these provisions but the sheer breadth of the reach is stunning.

The bill also sets forth appropriations to state and local law enforcement agencies for the purpose of informing and educating them on intellectual property issues, putting together task forces for the purpose if investigating IP cases, to facilitate the sharing of information about Intellectual Property issues from the Federal agencies, and reimbursing costs incurred through enforcement. The amount appropriated for this is $25 million a year for each year between 2009 and 2013. Federally, an additional $10 million a year for the same time period is appropriated for improving the investigative and forensic resources regarding the enforcement of law relating to IP. In addition to this an addition $10 million is appropriated to the Director of the FBI and another $10 million is appropriated to the Attorney General for the Criminal Division of the Department of Justice. These extra amounts are given for the hiring of new law enforcement agents and for their training, and is also to be used for equipping them with advanced tools for forensic science and expert computer forensic assistance. These appropriations tend to show that in the near future the government plans to take a more active role in the enforcement of Intellectual Property rights. Depending on how zealous the government is in its enforcement this could mean that larger infringing networks could be shut down, it could also mean that in addition to shutting down those people that commit large scale infringement for profit, more individuals will be prosecuted criminally for infringement.

Civil remedies have long been the way that Intellectual Property holders have gone about protecting their rights. The PRO IP bill extends the criminal remedies available to stop infringement and gives the government a more active role in policing intellectual property rights. This could have a number effects on the enforcement of the Intellectual Property rights. First, this bill will most likely mean that the number of counterfeit and infringing products that will be available in the US market will be lessened as these types of goods will be seized and the suppliers shut down. It could mean that Intellectual Property holders could let law enforcement agencies take the front of the battle to protect their rights; they could instead of pursuing civil litigation let the government know about the infringement and take care of it. More likely with Intellectual Property holders being concerned with not only stopping the infringement but also getting money from the infringers, it will mean that there will be double enforcement, where IP holders will let the government know about the infringement and will pursue civil remedies as well. This could mean that infringers could face criminal charges and fines, be shut down and have to pay the Intellectual Property holder for their damages. The bill has the possibility for extreme action to be taken against infringers, but it will take time and the courts to decide what the proper amount of enforcement will be.

            Any “legal and beneficial owner of an exclusive right under a copyright” is entitled to sue “anyone who violates any of the exclusive rights of the copyright owner” as enumerated in the Copyright Act. (§ 501 and Silvers v. Sony).  In addition to damages, profits, costs, and attorney’s fees, injunctive relief is a remedy available for copyright infringement.

            Injunctive relief is based on principles of equity.  (Text at 909).  A court may “grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright.”  (§ 502).  Historically, preliminary injunctions have been crucial to copyright owners in copyright cases.  (Text at 909).    Typically, if the copyright owner can establish a prima facie case of validity and infringement, the court will issue a preliminary injunction.  (Id.).  Moreover, if the rationale for issuing a preliminary injunction is sound, a permanent injunction will likely follow. (Id.).

            There are four requirements for a finding of injunctive relief: 1. irreparable harm, 2. inadequacy of money damages, 3. balance of hardships, and 4. public interest. (Text at 910).

            Interestingly, the text notes “it remains to be seen” whether courts will evaluate these four requirements differently in light of eBay Inc. v. MercExchange, a patent case.  (Id.)  In eBay the court held the “these four factors should govern in ruling upon a permanent injunction…and should not automatically flow from a finding of patent infringement.”  (Id.)  This type of analysis was already well established in copyright cases.  (Id.)  I do not think the courts decision in eBay should change the courts commonsense approach to applying the traditional four factors in injunctive relief decisions in copyright cases.

            I am unable to think of any scenarios in copyright that would necessarily parallel the eBay case.  In eBay the court found eBay willfully infringed Merchexchange’s patents but did not grant injunctive relief as was customary.  The court found granting an injunction would not be equitable, in the best interest of the public, and that a patent troll could be made full with monetary remedies because they had no intent to put the patent into practice.  Mercexchange’s only goal was to license the technology.  Merchexchange’s “willingness to license its patents” and “its lack of commercial activity in practicing the patents” tipped the scales for the court in favor of finding no irreparable harm if an injunction did not issue. (eBay at 712).

            Conversely, although copyrights are “intangible” the work itself is not.  Although, a patent is fixed in a tangible medium, a piece of paper, the idea is intangible.  By definition a copyright is an “original work of authorship [that must] be fixed in any tangible medium of expression.”  (§ 102).  Moreover, to infringe a copyright, one must copy, import, or facilitate in some way copying a copyrighted work.  (§ 501).  eBay simply put an idea described in Mercexchange’s patent into actual practice-eBay did not literally copy the patent.  Thus, in a copyright infringement for making digital copies of movies on a DVD-a perfect copy-using a commonsense approach, the court would likely heavily weigh the four factors for issuing an injunction in favor of the copyright holder.  Similarly, if only a portion of the copyrighted material is taken or the work is transformative, the court may find injunctive relief would not be equitable when evaluating the four factors if there is an adequate way to remedy the infringement.  Accordingly, a commonsense approach to applying the four factors for determining whether to grant injunctive relief in copyright infringement cases would serve courts well.

Each aspect of copyright law should, in theory, strike a balance such that innovation and creativity are still worth their costs because copying is worth less.  Legal remedies stand at the heart of this great balancing act, because they are the predominant cost that copyright law applies to the copier.  Remedies aim to find the sweet spot that takes away from the infringer and gives to the author just enough to reasonably limit the cost of protecting the work (i.e., maintain an incentive to continue creating works) and simultaneously disincentivize copying.  Finding the balancing point is difficult in and of itself, and adding second-order improvers to the mix only muddies the already murky waters.  As we discussed on the first day of class, copyright law creates problems because this isn’t a static system.  “If I have seen a little further it is by standing on the shoulders of Giants.”  Isaac Newton, 1676.  The innovations and creative works of today will be the foundation of the innovations and creative works of tomorrow.  By adding too much cost to authors who utilize portions of pre-existing copyrighted works, we hinder future authorship.

This is why striking a balance between authors and second-order improvers is fundamentally important.  The apportionment of infringer’s profits under §504(b) is the place where the balancing requires a delicate analysis.  That’s because it is the damages award that often decides which of the two, the creativity or the infringement, was worth the cost.  The apportionment of profits is particularly intriguing from a policy standpoint because the law recognizes that in some situations we want to assign value to both the initial creative work and a second, albeit infringing, creative work.  In other words, in some situations we may want it to be worth both the author’s and the infringer’s while to independently create.  The question is whether apportionment of damages, as it is currently applied, actually promotes creativity regardless of the culpability of its author.

The Supreme Court of the United States has held that apportionment is appropriate when the evidence shows that not all of the infringer’s profits are the result of the infringement.  See Sheldon v. Metro-Goldwyn Pictures Corp., 309 U.S. 390, 400-06 (1940).  The Court acknowledged that mathematical exactness when apportioning is not required, rather, a “reasonable approximation” is sufficient.  Id. at 408.  Some courts disagree as to who should bear the burden of proving apportionment.  Compare Christopher Phelps & Assoc., LLC v. Galloway, 492 F.3d 532 (4th Cir. 2007) (finding that “[a]ll profits should be deemed attributable to the infringement unless [the defendant] proves by a preponderance of the evidence that they are not”) with Fournier v. McCann Erickson, 242 F. Supp. 2d 318 (S.D.N.Y. 2003) (stating that, in cases where a copyright infringer’s profits are not entirely due to the infringement, and the evidence suggests a rational division, it is the duty of the trier of fact to make some apportionment).  It is evident, however, that regardless of where courts place the burden of proof, each court assigns value to the independently created work of the infringer, and wants to remove that value from the damage award to the plaintiff.  But, what is that value, how do courts “reasonabl[y] approximat[e]” it, and most importantly, do the results of the apportionment effectively walk the copyright policy tightrope?

Two Problems with Current Apportionment Law: Valuation and Unpredictability

Pursuant to §504(b), a prevailing copyright owner is entitled to recover “any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages.”  This means that the value for all elements of profit attributable to factors other than the copyrighted work should stay with the infringer.  There are two problems with current apportionment law.  First, it is unclear whether it actually furthers the goals of copyright law.  The key to apportionment is making value judgments.  What is the source of value within a work, and is that value due to the unauthorized use of a protected work, or the independent creativity of the infringer?  If the query revolves around the source of value of a given work, then we must be clear regarding the scope of that value.  This is a good place for copyright policy to make an appearance.  What is the value that copyright law aims to protect and in turn promote?  Creative innovation.  Why then, does the law apportion value in calculating profits to marketability and profitability, as opposed to creativity?  What copyright law aims to do is incentivize creative work product, not to incentivize profitable business tactics.  Therefore, by defining the valuation of the work by profitability as opposed to creativity, it skews the effects of the law away from promoting/rewarding creative labor, towards rewarding mere entrepreneurial ability.  See Comment, Aaron Keyt, A NEW FRAMEWORK FOR MUSIC PLAGIARISM LITIGATION, 76 C.A.L.R. 421 (1988).  If we used a creativity valuation rather than a profitability valuation, the policy effects could be beneficial.  “The apportionment process would result in comparatively heavy damages against a defendant whose creative contributions added little to the value of the work, thus discouraging uncreative borrowing. Conversely, a defendant who exercises substantial creativity in his use of the borrowed material would be exposed to proportionately lower liability.”  Id. at 44.

The second significant problem with current apportionment law is that apportionment determinations are virtually unpredictable.  See, e.g., Sheldon v. Metro-Goldwin Pictures Corp., 309 U.S. 390, 407-09 (1940) (apportioning 20% of an infringing film based on the profits received because of “the drawing power of the ‘motion picture stars’”); Bruce v. Weekly World News, Inc., 310 F.3d 25, 31-32 (1st Cir. 2002) (finding a 50% apportionment of profits from sales of t-shirts featuring an infringing photography of President Clinton shaking hands, edited to depict him greeting an alien); Three Boys Music Corp. v. Bolton, 212 F.3d 477, 480 (9th Cir. 2000) (sustaining a jury award of $5.4 million in profits from a single infringing song on a popular album, stating that “28% of the album’s profits derived from the song,” and that “66% of the song’s profits resulted from infringing elements”); Blackman v. Hustler Magazine, Inc., 620 F. Supp. 792, 801 (D.D.C. 1985) (aff’d on this point, rev’d on other grounds, 800 F.2d 1160, 1164-65 (D.C. Cir. 1986) (allocating 60% of profits from a 136-page magazine, as a result of infringing photographs on 6 pages); Lottie Joplin Thomas Trust v. Crown Publishers, Inc., 456 F. Supp. 531 (S.D.N.Y. 1977) (awarding the plaintiff 50% of the profits from an album where defendants had infringed the copyright in the plaintiff’s song by placing it in a record album with nine other non-infringing songs); see also Phoenix Renovation Corp. v. Rodriguez, 258 Fed. Appx. 526, 536 (4th Cir. 2007) (finding that the district court did not abuse its discretion in crediting the defendant’s evidence showing that “customers chose defendants for reasons such as experience and price and that the infringing contract merely reflected the final step in entering into an agreement with customers that had already decided to do business with [the defendants],” thereby apportioning 100% of the profits).

Certainly part of this unpredictability is due to the fact that many circuits, including the Fourth Circuit, have adopted a case-by-case approach to calculating apportionment, rather than an application of bright line rules.  See Walker v. Forbes, 28 F.3d 409, 412 n.2 (4th Cir. 1994) (stating that “[t]he differences in the way different copyrighted works can be infringed, and the way that those infringing items derive their revenue, makes the imposition of a rule impossible.  In each case, the fact finder must simply do its best, keeping in mind the strictures [sic] of the law, to grapple with the particular set of facts and determine what profits can be attributed to the infringement.”).  And, maybe we future lawyers should not complain, because the current legal structure for apportionment opens the door for good advocacy.  Yet, in terms of policy concerns, it also opens the door for questioning our valuations and questioning whether the law strikes an appropriate balance.  The law currently gives judges little legal substance on which to hang their proverbial hats.  “Reasonable approximation” is not sufficiently detailed to give adequate and predictable guidance.  We have seen unpredictability before in the area of fair use, and perhaps we simply acknowledge that in terms of apportionment unpredictability is unavoidable, and we move on.  But, because damages may have direct effects on downstream innovation, we should attempt to avoid unpredictability if at all possible.  Apportionment will always be a difficult calculation, but if the law changed to limit the valuation to creative contributions as opposed to business contributions, then courts would only be comparing two things (as opposed to a myriad of uncreative outside elements): the copyrighted work + the creative innovation, and the copyrighted work alone. That approach would at least mitigate the random guessing on the part of courts, and would connect apportionment to the policy rationale of copyright protection.

If a person is injured by a defective product or in an accident caused by negligence, that person has several remedies available to him in a court of law.  Barring extraordinary circumstances, if the person can prove that the defective product caused his injuries, he will receive actual damages from the maker of the product, or whoever is responsible for putting that product into the stream of commerce.  The actual damages the injured party receives will typically cover any bills resulting from treating the injury, i.e. hospital and doctor’s bills, as well as any money lost as a result of missing work, etc.  Essentially, the actual damages help to make the plaintiff whole again, or as they were before the incident causing the injury occurred.

In addition, the plaintiff may receive punitive damages.  Punitive damages exist as a possible remedy for several reasons.  The foremost reason is to set an example for other producers.  If the injury was a result of negligence, or if the producer knew injuries might be likely to occur and did not warn consumers, punitive damages are an extra deterrent against that kind of behavior.  They encourage producers to be vigilant with safety measures. 

In Davis v. The Gap, Inc., the district court held, and the 2nd Circuit affirmed, that Davis was not entitled to punitive damages under the Copyright Act.[1]  The court noted that “[a]s a general rule, punitive damages are not awarded in a statutory copyright infringement action,” primarily because the purpose of punitive damages is achieved in other ways through the Copyright Act.[2]  § 504(c)(2) allows an award of statutory damages to be increased when there is willful infringement involved, thus serving the goal of preventing purposeful and malicious infringement.[3]  The copyright owner must elect to receive the statutory damages, but can do so anytime before the final judgment is issued.[4]  The actual statutory damage amount received, however, can range from a lowly $200 to an unlikely $150,000.[5]

After Davis, however, several decisions in the Southern District of New York allowed punitive damage claims to proceed.[6]  The language in the Copyright Act is clear as to what damages can be obtained as a result of a person’s copyright being infringed, and those remedies do not include punitive damages, so it is interesting that the courts came to these conclusions in certain cases.[7]  In TVT Records. v. Island Def Jam Music Group, Judge Marrero held that that plaintiffs there could indeed seek punitive damages, and he gave two reasons for holding so.[8]  First, for one infringement action the plaintiffs were seeking actual damages over statutory damages, and second, for another infringement action the plaintiffs could not seek statutory damages at all.[9]  “The impact of the TVT Records decision was mitigated, however, when the plaintiffs later elected to recover statutory damages (presumably to avoid an appeal of the judgment).”[10]   Later, in two separate decisions, Judge Louis L. Stanton refused to dismiss claims for punitive damages, and allowed the plaintiffs to amend the complaints to include a prayer for such damages.[11]  In Blanch v. Koons Judge Stanton stated that, “‘[u]ltimately, the determination whether punitive damages are available for copyright infringement cases must be made in a case where the issue is squarely presented: where the jury could find malice or willful infringement, and the plaintiff is not seeking (or is barred from obtaining) statutory damages.’”  However, he also admitted that he was simply allowing the argument to be heard on its facts, and did not anticipate the plaintiff winning those damages.[12]Not all Southern District judges follow this line of reasoning, including Judge William H. Pauley III, who has held that punitive damages are “categorically unavailable” in copyright actions.[13]  In addition, it is likely that most courts in the United States hold that punitive damages are unavailable.  However, there is clearly a confusion on the part of at least some judges whether or not punitive damages should, at the least, be an option to include in a prayer for remedies.  Confusion in the courts can only lead to confusion on the part of many plaintiffs looking for relief.  Should punitive damages be available in certain circumstances?     What would those circumstances have to be to include them?  Should a willful and malicious infringement of a copyright, particularly one that violates moral rights, be considered a case that deserves a punitive damage award?  Some foreign governments have implemented the idea or at least toyed around with it in decisions.  

Ok, last one — we will not have class Monday, December 1. I have to go talk at “PTO Day” at, you guessed it, the PTO. This change is now reflected on the syllabus.