Overview on Damages Available in Copyright and Trademark Disputes in the U.S. by Ralph H. Cathcart 1 COPYRIGHT DAMAGES

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1 Overview on Damages Available in Copyright and Trademark Disputes in the U.S. by Ralph H. Cathcart 1 I. Injunction COPYRIGHT DAMAGES Remedies available for copyright infringement under 17 U.S.C. 502, et. seq. of the Copyright Act: I. Injunctive relief: Section 502 Preliminary Final II. Monetary relief: Section 504 Actual Damages Disgorgement of Profits Statutory Damages Attorney s Fees and Costs Four elements considered: - 1) likelihood of irreparable harm with no adequate remedy at law; - 2) the balance of harm favors the movant; - 3) likelihood of success on the merits of the case; and - 4) the public interest favors the granting of the injunction. B. Innocent Infringement usually limited to injunction. II. Monetary Relief U.S.C. 504 Remedies for infringement: damages and profits a. Registration Requirement i. Section 411 prohibits commencement of a copyright infringement action unless the copyright at issue has been registered. o Exceptions: 1) non-u.s. works; and 2) works consisting of sounds, images, or both. 1 Overview on Damages Available in Copyright and Trademark Disputes in the U.S., 2015 by Ralph H. Cathcart

2 (The first fixation of which is made simultaneously with its transmission, provided: (1) serve notice upon the infringer; and (2) timely registers work, if required, within three months after first transmission. b. Advantage of Registration - Time limitation on available remedies i. Section 412: Statutory damages or attorney s fees may be available if infringed copyright was timely registered. None for unpublished work if infringement prior to effective date or for published work if infringement after publication and before effective date of its registration, unless registration made within three months of first publication. ii. Registration of copyright made within three months of publishing your work, or at any time prior to an infringement, registration allows you to elect to seek statutory damages and/or attorney s fees. Caution: Many courts will NOT grant both statutory damages and attorney s fees. iii. Unlike Section 411, non-u.s. works are not exempt from Section 412 requirement for the purposes of seeking statutory damages and attorneys fees. Exception Pre-registration or duate morale. N.B. - Notice defeats defense to innocent infringement (no reduction in damages). c. Three (3) Year Statute of Limitation i. Section 507(b): No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued. o Where repeated infringements over time, recovery barred for claims arising more than 3 years before commencement of suit. o Copyright law follows the separate accrual rule, whereby a new three-year period begins to run each time an infringing copy is made. Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct, 1962, 188 L. Ed.2d 979 (2014), 110 U.S.P.Q.2d 1605, on remand. (laches not a defense to a 2

3 claim for longstanding (over 15 years) infringement, insofar as latter infringements occurred within the three-year limitations period) [Raging Bull Robert DeNiro] d. Calculation of statutory damages i. Section 504(c) provides that a statutory damage award is payable for all infringements with respect to one work. ii. Multiple Infringement of same work - repeated infringements of a work by the same party vs. infringements of the same work by multiple parties: Single party: Section 504(c)(1) provides for single recovery for all infringements involved in the action in connection with one work for which any one infringer is liable individually. Multiples parties: two or more parties that have participated jointly in, or contributed to a single infringement are deemed jointly and severally liable for a single statutory damage award. iii. Range of Statutory Damages: Willful infringement: Up to $150,000 per infringement Knowing infringement: Between $750 to $30,000 per infringement. o The majority of statutory damages awards fall within this range Innocent infringement: As low as $200 per infringement. iv. Benefit of Statutory Damages: Don t have to prove any damages v. Relationship between statutory damages and actual damage: Some courts have held that the existence and extent of actual damage incurred should also play a role in determining statutory damages awards. 3

4 e. Recovery of Actual Damages o New Line Cinema Corp. v. Russ Berrie & Co., 161 F. Supp. 2d 293, 303 (S.D.N.Y. 2001) (holding that New Line s statutory damages should be commensurate with the actual damages incurred. ); o UMG Recordings, Inc. v. MP3.com, Inc., 2000 U.S. Dist. (S.D.N.Y. Sept. 6, 2000) (reasoning that although Congress provided plaintiffs with the option of statutory damages in lieu of having to show actual damages, it viewed the lack of proof of actual damages as a mitigating factor that favors the defendant). i. Section 504(b). A copyright owner is entitled to recover actual damages suffered as a result of the infringement. The scope of recovery for actual damages is typically determined by looking at the extent to which the infringement has diminished the market value of the work, determined as of the infringement. Reputational harm is also relevant. ii. Different Measures of Actual Damages: o Profits lost by the plaintiff o Burden of proof on the plaintiff: to establish a causal connection between the alleged infringement and the subsequent lost revenue that the plaintiff would have earned for the infringement. o Then burden shifts to the defendant: to show there is no such causal connection o Reasonable royalty rate Several courts have held that the plaintiff s actual damages are equal to the value of, or reasonable royalty for, the infringer s use of the infringed work. See Davis v. The Gap, Inc., 246 F.3d 152 (2d Cir. 2001). 4

5 f. Disgorgement of Defendant s Profits i. In addition to recovering actual damages under Section 504(b), a plaintiff may recover any profits of the infringer that are attributable to the infringement and that are not taken into account in computing the actual damages. ii. Determining defendant s profits and burden of proof: g. Punitive Damages o Section 504(b) requires a plaintiff to provide only proof of the defendant s revenue, while the defendant has to prove his or her deductible expenses and elements of profit attributable to factors other than the copyrighted work. (Net profits) i. An award of statutory damages of up to $150,000 per work in case of willful infringement is intended to create a punitive remedy. h. Attorney s Fees o However, the Second Circuit suggests that punitive damages may be available to the plaintiff in actions where statutory damages are not available. See TVT Records v. The Island Def Jam Music Group, 262 F. Supp. 2d 185 (S.D.N.Y. 2003) Court implies that punitive damages are available only when 1) there is malice or willful infringement, and 2) statutory damages do not apply i. Subject to the registration requirement of Section 412, a court may award reasonable attorneys fees to the prevailing party. Usually must show some willful conduct. o Fogerty v. Fantasy, Inc., 510 U.S. 517, 535, n. 19 (1994) frivolousness, motivation, objective unreasonableness and the need in a particular circumstance to advance consideration of compensation are factors a court takes into account to grant attorney s fees. ii. Prevailing defendants have advantage in seeking attorney s fees in copyright actions because they are not subject to the registration requirement in Section 412. Cf. Foreign nationals need not obtain registration to commence suit. 5

6 o Budget Cinema, Inc. v. Watertower Assocs., 81 F.3d 729 (7th Cir. 1996) (plaintiff s complaint is unreasonable because it requested attorneys fees while not having a timely filed registration; the court ordered that the defendant was the prevailing party and reversed the district court s denial of defendant s request for fees). iii. Where a plaintiff s claims are objectively reasonable and brought without improper motive, courts are generally hesitant to award attorneys fees to a prevailing defendant. Michael Cottrill, et al. v. Britney Spears, et al., 2003 U.S. Dist. (E.D. Pa. Jul. 2, 2003). 2. The Digital Millennium Copyright Act (DMCA) Copyright enforcement on Internet and safe harbor provisions for ISP s. (17 U.S.C. 512, ) provides that a plaintiff may elect actual damages and profits of violator or statutory damages o Relevant difference: Section 504 statutory damages: computed on a per work infringed basis, the DMCA allows for recovery of actual or statutory damages for each violation of Sections 1201 or (anti-circumvention) Civil Remedies for infringement of 1201 (circumvention) or 1202 (copyright management information): actual damages and disgorgement of profits (no double dipping). 4. Statutory Damages: 1202 removal of copyright management information (i.e., watermark, author s name,, date - $2,500 - $25,000) 5. Statutory Damages 1201 anti-circumvention - $200 - $2,500 (per product) Treble damages if repeat offense within 3 years of judgment. 6

7 TRADEMARK DAMAGES o Lanham Act (15 U.S.C et seq.) A. Typically, prevailing plaintiffs are awarded injunctions against further infringing or diluting use of the trademark. 15 U.S.C. 1116(a). B. Monetary relief: 15 U.S.C. 1117(a): monetary relief: (1) Disgorge defendant s profits, (2) actual damages sustained by the plaintiff, (3) the costs of the action, and (4) Damages must be trebled (actual or profits, whichever is greater) for counterfeits, together with reasonable attorney s fees). 15 U.S.C. 1117(b) For trademark dilution claims (Famous marks), damages are available only if the defendant willfully traded on the plaintiff s goodwill. (15 U.S.C. 1117(a)) o Otherwise, plaintiffs in a dilution action are limited to injunctive relief. 15 U.S.C. 1125(c). A. Injunctions: Elements to grant a preliminary injunction or a TRO: 1) likelihood of irreparable harm with not adequate remedy at law 2) the balance of harm favors the movant 3) likelihood of success on the merits of the case; and 4) the public interest favors the granting of the injunction Title VIII. Provisional and Final Remedies. Rule 65. Injunctions and Restraining Orders (c) Security. The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. 7

8 B. Monetary Relief (Always subject to principles of equity.) Section 35(a) Lanham Act, 15 U.S.C. 1117(a): provides for awards of profits, actual damages and costs. Generally, absent a clear showing of actual harm, courts often look for evidence of intentional conduct to support monetary damage award. Disgorgement of Defendant s Profits i. The award of the infringer s profits is not subject to proof of actual damages. (Unjust enrichment) ii. iii. iv. Enhanced profit awards. Unlike actual damages, which caps the award at treble, Lanham Act can enhance profits award, if actual damages are inadequate. Burden of Proof. Because it is often difficult to prove actual damages (diverted sales) or plaintiff has suffered some reputational harm, a plaintiff may prefer seeking defendant s profits because the Plaintiff only has to prove defendant s gross sales, then the defendant bears the burden of proving any deductions or other costs to reduce the award to its net profits. 15 U.S.C. 1117(a)(3). Statutory Damages Not available for infringements only counterfeits of registered marks. v. Willfulness/Bad faith. Recovery of defendant s profits usually requires a showing of willfulness or bad faith, although courts differ on what conduct satisfies this requirement. Examples include: o Quick Techns., Inc. v. The Sage Group PLC, 313 F.3d 338 (5th Cir. 2002) (recognizing that willful infringement, i.e., with intent to confuse or deceive, is an important factor that must be considered in determining whether to award profits, but declining to adopt a bright line rule that willfulness is a prerequisite for profits). o The George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532 (2d Cir. 1992) (holding that under 35(a) of the Lanham Act, a plaintiff must prove that an infringer acted with willful deception before the infringer s profits are recoverable by way of an accounting ). 8

9 vi. Actual harm/confusion. Some courts (e.g. 9 th Circuit) do not appear to require showing of actual confusion (vs. likelihood of confusion) for recovering an accounting of defendant s profits. i. Actual Damages o Gracie v. Gracie, 217 F.3d 1060, 1068 (9th Cir. 2000) ( a showing of actual confusion is not necessary to obtain a recovery of profits. ). vi. Actual harm/confusion and Willfulness/Bad Faith. To recover actual damages, most courts require a showing of some form of actual harm (i.e., actual consumer confusion, deception or reputational injury). However, some courts remain split over whether actual damages under section 1117(a) require a showing of willfulness, bad faith, or actual confusion. o Chanel, Inc. v. Veronique Idea Corp., (S.D.N.Y. June 27, 2011) (the court found that a plaintiff may recover damages without showing willfulness.) o Champagne v. Diblasi, No , 2002 U.S. App. (2d Cir. June 4, 2002) (plaintiff must prove either actual consumer confusion or deception or that the defendant s actions were intentionally deceptive, thus giving rise to a rebuttable presumption of consumer confusion). vii. Registration Formalities for recovery of damages o Certain limitations for recovery of monetary damages under a claim for infringement of a registered mark (15 U.S.C. 1114): Notice: Failure to give statutory notice ( ) prevents recovery of profits under a claim for infringement of a registered mark unless and until actual notice of the registration can be proven. o N.B. Recovery of monetary damages without a registration is possible under 15 U.S.C. 1125(a) 43(a) but omission of notice typically limits recovery to when infringer had actual notice.. viii. Different Measure of Actual Damages: 9

10 o Profits lost by the plaintiff In Intel Corp. v. Terabyte Int l, Inc., 6 F.3d 614, 621 (9th Cir. 1993), the plaintiff s lost profits were calculated by multiplying the number of infringing items the defendant sold by the profit margin the plaintiff lost due to the defendant s sale of the infringing items. o Corrective advertising Can recover the cost of advertising undertaken to restore the actual or estimated value of the trademark that was lost because of the infringement. Binder v. Disability Group, Inc., 772 F. Supp. 2d 1172, (C.D. Cal. 2011). o Reasonable royalty rate Trovan, Ltd. v. Pfizer, Inc., 2000 U.S. Dist This calculation is common when a plaintiff previously licensed its mark to a defendant. j. Statutory Damages for Counterfeiting and Cyberpiracy ii. Available under 15 U.S.C. 1117(c), which provides that the plaintiff may elect to recover, instead of actual damages and profits, an award of statutory damages in the amount of not less than $1,000 or more than $200,000 per counterfeit mark per type of goods; or not more than $2,000,000 in case of showing of willfulness. Caution: No attorney s fees. iii. Cyberpiracy. Available under 15 U.S.C. 1117(d), which provides that the plaintiff may elect, to recover, instead of actual damages and profits, an award of statutory damages in the amount of not less than $1,000 and not more than $100,000 per domain name. (i) Both sections 1117(c) and 1117(d) were added by the federal statute Anticounterfeiting Consumer Protection Act in 1996 (Rebuttable presumption of willful infringement if false contact information given to domain registration or registry. 10

11 k. Punitive Damages NOT AVAILABLE iv. Punitive damages are not recoverable under the Lanham Act in theory, but may be available for accompanying causes of action for trademark infringement or unfair competition under various state laws (where punitive damages are allowable in tort actions). However, an award of enhanced damages is available under the Lanham Act where willful infringement or bad conduct proven. d. Attorneys Fees i. Under 15 U.S.C. 1117, a court may award reasonable attorneys fees to the prevailing party in exceptional cases. o Nat'l Ass n of Prof l Baseball Leagues, Inc. v. Very Minor Leagues, Inc., 223 F.3d 1143 (10th Cir. 2000) (when a plaintiff seeks to recover attorneys fees, courts look to whether the defendant s infringing conduct was in bad faith; when a defendant seeks to recover fees, courts look to the plaintiff s conduct in bringing the lawsuit and the manner in which it is prosecuted. o Stephen W. Boney, Inc. v. Boney Services, Inc., 127 F.3d 821 (9th Cir. 1997) (holding that bad faith or other malicious conduct may satisfy the exceptional circumstances standard whether the defendant or the plaintiff is seeking to recover attorneys fees). o Loadstar Method Supreme Court Case IP legal services presumed more skillful and difficult. Legal fees calculated by number of hours reasonably required and prevailing rates in the locality. UDRP proceedings Arbitrators in UDRP proceedings do not award damages or attorneys fees. 6. The Federal Anti-Dilution Act. Monetary remedies available under Section 35 of the Lanham Act, 15 U.S.C. 1117(a) for willful violations only. Based on the language of the statute, which provides for recovery where there is a willful violation under section 1125(c) (dilution provisions). Even if plaintiff proves actual economic harm element to find liability, it may not be entitled to monetary relief if it cannot prove willfulness. 11

12 7. Trademark Trial and Appeal Board 1. No damages or attorney s fees available. 2. Limited Sanctions available dismissal of pending Application or cancellation of Registration. Typically will stay TTAB proceedings where District Court action concerns same or related substantive rights and parties; or to avoid inconsistent decisions/res judicata, judicial economy. This especially true where issues of trademark infringement as opposed to registerability at issue in district court. 3. Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (Courts should defer to expertise of administrative agencies) Threshold questions are 1) has Congress directly spoken on the precise question at issue and 2) if not, was Agency s construction permissible construction of the statute. Cf. E&J Gallo Winery v. F & P Sp.A., 899 F. Supp. 465 (E.D. Cal. 1994) ( the T.T.A.B. s special expertise is hardly necessary in federal district courts which regularly adjudicate trademark matters. ) 12

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