Chapter 6
Penalties for Infringement: Paying the Price
Failure to comply with the rules of copyright can be very expensive. The law imposes a number of penalties for misuse of copyrighted works. Most important, the courts enforce money damage claims. The costs of noncompliance can be profits and actual damages, but sometimes these values are difficult to determine. To ensure that the copyright owner is compensated when works are infringed on, the law establishes statutory damages, which may be sought in lieu of the others. Statutory damages can be awarded in the range of $750 to $30,000 per work infringed; if the actions of the infringer are determined to be willful, these claims can balloon to $150,000 per work.
A copyright owner does not have to offer any proof of loss to claim statutory damages. That makes them a powerful remedy and a key disincentive to infringement. Once the determination has been made that there is an infringement, the owner chooses which form of monetary remedy to seek. For media users who violate copyrights, the statutory claim can have a multiplier effect. Since damages accrue to each work infringed, if a number of works are involved, statutory claims can be sought for each work.
For example, in the early 1980s when the right of a satellite resale carrier to retransmit broadcast signals under the cable compulsory license was tested in court, the carrier was well aware that every day about 20 programs were delivered to cable systems. Therefore, every day statutory damage claims (which then were $250 to $10,000 per work) accrued at the rate of $5,000 to $200,000. Similar exposure could occur if a new medium (such as an Internet provider) decided to deliver off-the-air signals to the public without clear entitlement under the Copyright Act's compulsory licensing limitation. If disputes linger in court while the alleged infringing activities continue, the statutory claims can be monumental.
Even claims of actual losses, as distinguished from statutory damages, can be huge. In the digital arena, film distributors and recording companies are frightened that copyright pirates can cause tens of millions of dollars of losses simply by posting copyrighted works on the Internet, thus allowing millions of people access to them for free. With digital copying as easy to accomplish as pushing a few computer keys, their fears are well founded. Napster, one of the dot-com websites that allowed copyrighted musical files to be exchanged, was sued for copyright infringement and lost. When the court awarded damages to the recording companies that initiated the case, the total award was in the hundreds of millions of dollars. Expect to see many more battles over digital use of copyrighted works in the coming years. The more works affected by the litigation, the higher the awards will be for successful owners.
In addition to monetary damages, the copyright law provides that infringement can be terminated and the infringing goods seized and destroyed. In one case of media copying, known appropriately by the call letters WPOW, an applicant for a radio station was found to have copied the engineering section from a competitor's file. A court later ordered the purloined portion deleted from the infringer's application. The result was potent—POW!—the stripped-down file was held to be incomplete and the application was summarily dismissed.
Such injunctive relief is vital when infringements occur at formal checkpoints as, for example, customs depots. Bootlegged copies of software and musical CDs delivered from infringement capitals in the Far East are routinely seized and destroyed by customs officials, since under copyright law, the Customs Service can be deputized to protect registered copyrighted works. However, in a world of satellite communication and e-mail, the capacity to enjoin the transmission is essential in maintaining control over the work because the transmission may be unstoppable once sent.
As a rule, injunctive protection proves more complex in online environments. With the anonymity often associated with online and Internet communication, it is cumbersome to locate and stop infringers. Even if a targeted infringing site is shut down, clever hackers can move to another location to continue illegal postings. Cyberspace offers the greatest challenge yet to the efforts to stop infringing activities. As a result, OSPs like AOL and the phone companies have been logical targets. Since any website that utilizes copyrighted materials without consent must, of necessity, pass its content through the OSP, these businesses are materially involved. And, since it is easier and financially more rewarding for a content owner to locate and sue a deep pocket like AOL than an individual user living (say) in the Philippines, OSPs sought changes in the copyright laws of the United States and many foreign countries to minimize their risks. We discuss the OSP Limitation on Liability, which was an essential component of the DMCA, in Chapter 8.
Another dynamic feature of copyright remedies (Figure 6-1) is that the prevailing party in a copyright lawsuit can seek to be reimbursed for legal fees and expenses. In the U.S. judicial system, where parties typically pay for their own lawyers and the cost of bringing a case can be so high that some rights are never enforced, this provision makes copyright law very accessible to owners and, therefore, a credible threat to would-be infringers. It means that, if one risks infringing on a copyright and is successfully sued, the cost could include paying the fees of all the lawyers in the case, which is not a happy thought.
Therefore, we must be aware of four important limitations in the case of the statutory damages and attorneys fees provisions. First, if the owner is a U.S. resident or citizen, the work must be registered with the Copyright Office at the time of the infringement. Even though the old formality of registration was made permissive by the 1976 Act and cannot be required of any foreigner claiming rights under the Berne Convention, for U.S. nationals the requirement still has vitality. The balance struck encourages filing works with the Copyright Office by requiring that registration for the work must be completed prior to filing a lawsuit.
Second, infringements that occur prior to registration do not subject the defendants to statutory damages or attorneys fees with two exceptions. One exception is the case of infringements occurring very soon after publication, as in the case of live transmission of, say, a baseball game or daily newscast copied simultaneously with its telecast. In that event, the owner has 3 months to register and claim the special statutory benefits for infringements dating from the initial telecast. The second exception is for works of foreigners: No formality can impede their rights. In the absence of compliance with these rules, infringements still allow the owner to seek actual damages and accounting of profits, but the other benefits are lost. Bear in mind, however, that if the infringements are continuing, statutory entitlements are reestablished each time the infringing behavior is repeated.
Third, an exception applies to qualified nonprofit educational institutions (such as libraries and public broadcasters). If the qualified nonprofit user has reason to believe that the use of the work was allowed under the fair use doctrine, the court should not charge statutory damages. While the nonprofit defendant could still be required to pay actual damages caused by the infringement, statutory damages cannot be assessed. Finally, “innocent” publishers, which may include a broadcaster carrying an advertisement containing copyright infringement materials that it had no reason to believe was unauthorized, are granted an exception that limits the damages they might have to pay to $200.
This gives you an idea of the costs of missteps that attend copyright infringement. Since most people are voracious when it comes to content, the potential for large claims to develop is substantial.