Many copyright cases address acts of infringements that are morally offensive or otherwise reprobate but which, at the end of the day, did not result in a huge financial benefit for the infringer. Perhaps the financial benefit to the infringer was massive, but hard to calculate, as when, ahem, certain tech companies steal so much art to build their brands that it is hard to carve out the value of the theft of a single piece of art. At other times there may be no financial benefit, as is the case when an infringer steals and distributes the art simply to spite or wound the artist. And sometimes the infringer is not in possession of a great business mind and mismanages the creation and sale of the infringing items in such a way as to lose money. In such cases, cash damages are difficult to quantify and recover.
This is problematic because, in most cases, cash is necessary to feed the engine that keeps copyright litigation in motion. So, what is an artist that has been ripped off to do in cases where the infringer did not receive a readily quantifiable and sufficiently sizable cash benefit? Congress, in writing the Copyright Act, had a plan for that, in the form of statutory damages under Section 504(c).
The section provides that an artist, if she has complied with certain formalities, may recover from the infringer monies in an amount ranging from $200 to $150,000 per infringed work. A wide range to be sure, and the statute and cases interpreting same have provided scant and sometimes conflicting directives in how, exactly, the amount should be calculated. But a recent decision out of the Northern District of California provides some additional guidance.
One thing we know for sure is that the infringer’s scienter and the manner in which it committed the infringement are crucial to the analysis. We know this because Section 504 explicitly states that an infringement committed “willfully” increases the statutory award floor to $30,000. And precedent in most circuits state that an infringement resulting from “reckless” conduct, including situations where the infringer ignored obvious signs of infringement, will increase the statutory award floor to that same level.
Beyond that, statutory damages are left to the discretion of the jury (or the judge if a jury is waived) and that discretion is relatively unfettered and for the most part bulletproof on appeal.
We saw this in the recent N.D.C.A. case of Erickson Productions v. Kast, where the reckless online publication of three photographs resulted in a hefty verdict against the infringer. Kraig Kast, the defendant and infringer, ran sundry businesses, one of which was Atherton Management, a real estate wealth management company. Kast, hoping to win a business project from the State of California, hired a web developer, Only Websites, to design a project website. Under Kast’s agreement with Only Websites, he was responsible for certain website content, including, arguably, photographs. Kast’s correspondence with Only Websites seemed to indicate that he wanted to “mimic” the Wells Fargo website to create his site. Other correspondence indicates that Kast would choose photographs provided to him by Only Websites. And one incriminating email from Kast advised Only Websites that “[w]e will leverage the content from the competitor’s site” to build his project site. Much was in dispute other than the fact that Kast at some point stopped paying Only Websites in connection with the project.
Against this backdrop, Kast’s site was completed and went live. When it did, it incorporated three photographs that had been copied from the Wells Fargo website. And, Jim Erickson, the artist who had created the photographs and licensed them to Wells Fargo was displeased by this exploitation of his work without consent.
After receiving a cease-and-desist, Only Websites removed the photographs. But, unwisely, Kast and Only Websites refused to negotiate a settlement of the obvious copyright claim. Kast, further compounding his own miseries, then took the case all the way to trial, and beyond.
At trial, there was some dispute as to who was responsible for publishing Kast’s site and for selecting the Erickon photography for use thereupon. And, most important for our little klatch today, Kast contended at trial that he did not reap a financial benefit from the infringing photos because “[h]e made no money off the website” and “avoid[ing] a license fee” to the photographer was not a financial benefit.
The jury was unpersuaded and exercised its jurisdiction to enter a $450,000 willful, contributory, copyright-infringement verdict against Kast. The case was appealed to the Ninth Circuit, which affirmed and reversed, each in part. The court upheld the “contributory liability” finding because such liability can be found when an infringer “knows or has reason to know” of the infringement. But, it vacated the willfulness finding and remanded for a determination as to Kast’s state of mind. The basis for the reversal was the District Court’s jury instructions, which expressed that a willfulness finding can be proper when an infringer “should have known” of the infringement.
On remand, applying a more stringent “willfulness” standard without a “should have known” modifier, the District Court concluded that substantial evidence supported the conclusion that Kast’s infringement was willful. The Court rejected Kast’s claims of ignorance as to the provenance of the infringing works given that they were “photos on a website that Kast had repeatedly and specifically directed the developers to emulate.” Finding that “Kast acted in reckless disregard of the “substantial and unjustified risk” that Only Websites had simply copied the Erickson photos from the Wells Fargo website[,]” the Court rightly affirmed the $450,000 jury verdict.
This case, which has been pending for an astounding seven years, underlines not only the impact of statutory damages but also their importance. It is unlikely any artist would have been able to litigate a case in Federal Court for that long if the available actual damages were less than $20,000, which would have been the case here without the availability of statutory damages. The availability of statutory damages allowed the artist to prosecute his case all the way to a favorable resolution, over a very aggressive and prolonged defense.
The problem, though, is that the Section 504 regime, which is supposed to further the interests of the Copyright Act and encourage artists to enforce their rights, does not always work as intended. That is because it is applied in concert with Section 505, which allows for an award of attorneys’ fees to the prevailing party in a copyright case, and which, in practice, is heavily tilted in favor of defendants.
Crucially, and regrettably, in order to seek statutory damages under Section 504 and attorneys’ fees under Section 505, an artist must comply with the seemingly simple but actually quite baroque requirements of the Copyright Office registration process and must do so before an infringer copies their work. If she fails to satisfy either of those steps, she is barred from seeking statutory damages or attorneys fees in any case for which the infringement predates her registration.
But, in contrast, the defendant is still able to seek attorneys’ fees against the plaintiff. As most artists do not register before the infringement, the specter of attorneys’ fees is more often than not often leveraged against artists who may have valid claims but are wary of the risk of paying hundreds of thousands of dollars in defense attorneys’ fees. An easy fix would be to remove the requirement that a registration “predate” an infringement in order for an artist to recover statutory damages and attorneys, or simply remove the registration requirement altogether. For now, only those lucky or well-advised enough to have registered their work early and often can do as the artist did here and recover statutory damages under Section 504.
Scott Alan Burroughs, Esq. practices with Doniger / Burroughs, an art law firm based in Venice, California. He represents artists and content creators of all stripes and writes and speaks regularly on copyright issues. He can be reached at [email protected], and you can follow his law firm on Instagram: @veniceartlaw.