Defense Waives $3.4 Million Defense in Copyright Case
In a somewhat baffling case, the U.S. Court of Appeals for the Seventh Circuit recently remanded a copyright case back to the district court due to an undeveloped record relating to whether the plaintiff was entitled to a $3.6 million statutory damages award based on the infringement thirty-three separate illustrations. Sullivan v. Flora, Inc., 936 F.3d 562 (7th Cir. 2019).
The opinion primarily analyzed an interesting issue relating a quirk in the statutory damages provision of the Copyright Act. Statutory damages are available for infringement of “any one work.” 17 U.S.C. § 504(c). The provision further states that “all of the parts of a compilation . . . are one work.” Id. One of the questions presented was, therefore, whether the plaintiff could recover a single statutory award for infringement of all thirty-three separate illustrations, or whether she could recover a statutory award for each illustration. Sullivan, 936 F.3d at 567-72. The court held that, in keeping with the approaches followed by most other circuits, the question needed to be asked whether each illustration had independent value apart from its value as a part of the compilation. Id. at 572. Requiring such an inquiry is reasonable so that a “form over substance” evaluation does not limit damages simply because an artist chose to register multiple works in a single application. Id.
However, by far the most striking issue in this case was the fact that the defense failed to raise a particular defense to the award of statutory damages – one that would have almost certainly resulted in an award of $143,500 instead of $3.6 million.
A fundamental aspect of copyright infringement litigation is the availability to recover statutory damages and attorneys’ fees. Whether a plaintiff is entitled to recover statutory damages or attorneys’ fees generally turns on whether the work in question was registered prior to the infringement. If the work was not registered prior to the infringement, there can be no award of statutory damages or attorneys’ fees. 17 U.S.C. § 412.
In fact, whether a work was registered pre-infringement is the very first question my firm will ask a potential plaintiff. Because if you cannot recover statutory damages and/or attorneys’ fees, you will be required to prove up actual damages and the infringer’s profits. And unless you have an extraordinarily clear-cut case on damages, such damages will often be difficult to prove. So whether a plaintiff can recover statutory damages ($750 up to $150,000) and attorneys’ fees is often the dispositive issue in the case, at least from a practical standpoint.
What initially caught our eye was the recitation of the facts in the appellate opinion that seemed to establish that the plaintiff was not entitled to statutory damages (i.e., plaintiff’s letter complaining of copyright infringement sent before registration of the copyrighted works), which was then immediately followed by a discussion on how to properly calculate the “number” of statutory awards. Id. at 565-67. Apparently, the defendant did not raise (and likely did not recognize) the issue until the third phase of the trial (i.e., damages). Id. at 572.
Having reviewed the opinions and some of the briefing in the district court and appellate court cases, we concluded that defense counsel was putting most of its effort into the “joint authorship” defense, but that is no excuse for failing to recognize a fundamental issue that could have effectively resolved the dispute in the defendant’s favor before the case even started. Take away the prospect of statutory damages and attorneys’ fees, and there is zero possibility of the $3.6 million that the jury awarded the plaintiff.
By the time defense counsel finally raised this defense (during Phase 3 of the trial), the judge held that the defendant had waived the issue. Id. at 573. Whether this failure to raise a critical issue was “strategic or inadvertent” (and if this was strategic, it was a horrible strategy), how a defense team could have litigated an entire copyright case without stumbling across this issue is a mystery.
Mike Regitz focuses his practice on intellectual property and technology disputes, counseling, and licensing.
RegitzMauck PLLC is an intellectual property boutique based in Dallas, Texas. The firm focuses on providing value-based legal services to cost-conscious clients seeking high quality legal representation in intellectual property, cybersecurity, and data privacy matters and disputes.