Copyright Infringement Damages

By: Fernando Torres, MSc
What monetary damages can copyright owners be entitled to recover? Section 504(a) of 17 U.S.C. grants three types of damages remedies for copyright infringement:

  • Actual damages in the form of their lost profits in order to “repair” the damage;
  • The defendant’s profits to prevent infringers from benefiting from the illegal act, and;
  • Statutory damages, when unable to prove actual damages or profits and if the work is federally registered.

    Other than in the latter case, the amount of damages has to be measurable, and the statutes and case law have established several criteria in this respect. If both defendant and plaintiff occupy the same market, courts tend to prefer lost sales measurements, not unlike trademark or patent infringement; otherwise, the courts tend to prefer a “reasonable royalty” or a “market value” test to determine the hypothetical fee that would have been received. Additional concepts of damages may apply too.

    If the copyright owner has previously licensed a work, and the infringement occurs in the same market, the courts will likely use the prior license as a measure of actual damages. If the copyright owner never actually licensed its intellectual property in the same market, the value lost must be approximated from the infringer’s acts, and a ‘Reasonable Royalty’ calculated. A reasonable royalty has been defined as “the royalties customarily paid for the type of use to which the defendant has put the infringing material.” This may either be a lump sum or a royalty derived from profits, or a combination.

    When neither proven lost sales (same market) nor previous licenses exist, the court may determine the copyright’s fair market value by employing a market value test; the value of a license that a hypothetical willing buyer would pay a willing seller. An important question here is whether or not a hypothetical negotiation is even likely. If not, then the court may look at alleged harm to the reputation of the copyrighted work, or to the “value of the use” if the copyright owner cannot prove lost sales or the infringer did not directly profit from the infringement (thus making royalty payments speculative).

    In some other cases where the infringing use does not lend itself to a reliable valuation, the courts have compensated authors for the loss of the value to their professional reputations suffered by not being credited as the author of a particular work, as well as for the general loss of business good will accompanying the lack of attribution.

    As far as the profits obtained by the infringer and attributable to the infringement, the statutes say that the copyright owner may be entitled to the profits attributable to the infringement, unless this is duplicative of the alleged lost sales.

    The burden of proof of the revenues and the costs falls on the copyright owner and the alleged infringer respectively. The attribution of the profits to the infringing act is very specific. The infringed work may be intermingled with the infringer’s own original contributions and, in such a case; it can be very difficult for the court to separate the two. The court, therefore, has to rely on an apportionment of the profit but, if the distinction is not reliable, all of the profit is deemed to be attributable to the infringing elements.

    The calculation of damages is, therefore, based on three principles:

    • Expert testimony is allowable;
    • Evidence only needs to be reasonably supportable, as opposed to mathematically exact; and
    • All doubts should be resolved in favor of the copyright owner.

    Deductible expenses are generally recognized to include direct costs, and indirect operating costs, as long as they are proportionately attributable to the infringing product or service.

    Finally, for works that have been formally registered within 90 days of publication, the copyright owner also has the choice of recovering damages amounts determined by statute. This recovery of specific amounts, instead of actual damages or profits, may be for $750, up to $30,000, with respect to any one infringed work.In cases of willful infringement, the court may increase this amount up to a maximum of $150,000, for each work. That is to say, the author of an infringed book can recover statutory damages of $30,000 regardless of how many copies were illegally printed and/or sold by an infringer. In contrast to trademarks and patents, copyrights do not need to be registered to be protected, and registration formalities are only necessary to be eligible for statutory damages awards.

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