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Volume 13, No. 3 © 2005 The Metropolitan Corporate Counsel, Inc. March 2005

Are Punitive Damages Available Under The Copyright Act?

Marc J. Rachman Sara L. Edelman and David Greenberg

DAVIS & GILBERT LLP

Given the Copyright Act’s1 express enu- meration of available remedies under the Act and its silence with respect to punitive damages, one would think that a copyright owner is barred from seeking punitive damages when bringing a claim for copy- Marc J. Rachman Sara L. Edelman David Greenberg right infringement. Several recent deci- sions in the Southern District of New York, profits of the infringer... or ... statutory statutory damages amount. however, have allowed punitive damages damages....” 2 A copyright owner may elect The Second Circuit United States Court claims to proceed. This article will discuss to recover statutory damages at any time of Appeals long ago stated explicitly that the traditional view that punitive damages prior to final judgment; such damages can “[p]unitive damages are not available in are not available under the Copyright Act, range anywhere from as little as $200 for statutory copyright actions.” 6 That court and will explore recent decisions indicating innocent infringements to $150,000 for recently explained that “[t]he purpose of that such damages might be recoverable willful infringements.3 Notably, Congress punitive damages – to punish and prevent under certain circumstances. This article made no provision in the Act for awards of malicious conduct – is generally achieved will then discuss the implications for both punitive damages. “The language is clear, under the Copyright Act through the provi- plaintiffs and defendants, and will finally unambiguous, and exclusive: these are the sions of 17 U.S.C. § 504(c)(2), which allow argue that punitive damages should not be alternatives available to a copyright plain- increases to an award of statutory damages available in copyright actions. tiff, and punitive damages are not provided in cases of willful infringement.” 7 Federal The Copyright Act specifically pre- by either of them.” 4 courts around the country have likewise scribes the damages recoverable in copy- The discretionary increase for willful held that punitive damages cannot be right actions. “Except as otherwise infringement is the only punitive provision recovered in statutory copyright actions.8 provided by this title, an infringer of copy- to be found in the Act. To encourage copy- And the leading commentator on copyright right is liable for either... the copyright right registration, Congress mandated that law agrees “[i]t is clear... that exemplary or owner’s actual damages and any additional statutory damages are available only where punitive damages should not be awarded in the owner registered the work prior to the a statutory copyright infringement The authors are attorneys in the New York- infringement, or at least within three action.” 9 based firm of Davis & Gilbert LLP. Marc J. months of the work’s first publication if the This apparent bar to punitive damages Rachman, Partner, Sara L. Edelman, infringement occurred before registration.5 under the Copyright Act first showed signs Counsel, and David Greenberg, Associate, But owners who have not timely registered of erosion in the Southern District of New concentrate their practice in intellectual their copyrights are not left without a rem- York in Silberman v. Innovation Luggage, property and complex business litigation edy: they are entitled to their actual dam- Inc.10 In that case, while the court dismissed matters. The authors represented the defen- ages plus any of the infringer’s profits the plaintiff’s punitive damages claim, it dants in the Stehrenberger case discussed attributable to the infringement, which, in qualified its holding. Citing On Davis for in this article. many instances, far exceed the maximum the proposition that the ends of punitive Please email the authors at [email protected], [email protected] or [email protected] with questions about this article. Volume 13, No. 3 © 2005 The Metropolitan Corporate Counsel, Inc. March 2005

damages are served by the Act’s statutory Considering these recent developments, oneself eligible to recover punitive dam- damages provisions, Judge Gerald E. both plaintiffs’ and defendants’ counsel ages without a cap – exactly the opposite of Lynch stated, “While no statutory damages need to be aware of the ramifications of the what Congress intended. are available here, there is still no reason to diverging views. Previously, evidence of Moreover, even in cases where statutory deviate from this principle in a case where, willfulness or malice was irrelevant in damages are unavailable, the ends of deter- as here, no malice or ill will towards the cases where statutory damages were not rence and punishment are well met by plaintiffs has been alleged.” 11 This state- available, except for the limited purpose of defendants’ prospect of having to disgorge ment by Judge Lynch was curious, consid- precluding a defendant’s ability to deduct all profits “attributable to the infringe- ering his flat rejection of punitive damages taxes in calculating profits, which is not ment,” particularly since the defendant in the Leutwyler case (quoted above).12 allowed if willfulness has been shown.22 In bears the burden of showing that its profits In May 2003, in TVT Records v. Island light of the unsettled law on the issue, are attributable to sources other than the Def Jam Music Group,13 the Southern Dis- defendants’ counsel must now be wary of infringement, and since a willful infringer trict seized upon the language in Silber- such evidence. Securing evidence of inno- is precluded from deducting taxes when man. Perceiving Silberman and On Davis cent infringement could now become criti- calculating its profits.24 Even the support as reflections of a “softened” approach to cal in avoiding potentially ruinous verdicts. cited in the TVT Records decision is less punitive damages, Judge Victor Marrero Likewise, plaintiffs’ counsel need to be solid than it appears. Judge Marrero’s cita- held that the TVT Records plaintiffs could conscious of the potential effects of willful- tions seem to favor dicta over holdings, as seek punitive damages, since they could ness or malice. In light of cases like TVT Judge Pauley recognized in Nicholls. In not seek statutory damages for one Records and Blanch, even plaintiffs who the face of the “weight and reason of the infringement, and had elected to pursue have failed to timely register their work law... strongly against it,” 25 the ambiguous actual damages over statutory damages on should consider including a request for language in these sources should not be another.14 The impact of the TVT Records punitive damages in their complaints where used to bring about a fundamental change decision was mitigated, however, when the there is colorable evidence of willfulness or in copyright law, and to undercut Con- plaintiffs later elected to recover statutory malice, so as not to foreclose recovery in gress’s clear wish to encourage damages (presumably to avoid an appeal of the event that such damages ultimately registration. the judgment). prove available. More recently, in Blanch v. Koons,15 the With the question of the availability of 1 The Copyright Act of 1976, 17 U.S.C. § 101 et seq. Southern District allowed a plaintiff to punitive damages arising more and more 2 17 U.S.C. § 504(a). 3 See id. § 504(c). amend her complaint to add a prayer for frequently in copyright actions in the 4 Leutwyler v. Royal Hashemite Court of Jordan, 184 punitive damages.16 Relying on Silberman Southern District, “some higher authority F. Supp. 2d 303, 308 (S.D.N.Y. 2001). and TVT Records, the court explained that [will ultimately] have occasion to squarely 5 See 17 U.S.C. §505. 6 Oboler v. Goldin, 714 F.2d 211, 213 (2d Cir. 1983). “[u]ltimately, the determination whether consider this question, at which point, one 7 On Davis v. The Gap, Inc., 246 F.3d 152, 172 (2d punitive damages are available for copy- way or the other, a clear answer may Cir. 2001). 8 right infringement cases must be made in a emerge.” 23 It is the view of these authors E.g. Bucklew v. Hawkins, Ash, Baptie & Co., 329 F.3d 923, 931-32 (7th Cir. 2003); Epcon Group, Inc. v. case where the issue is squarely presented: that the courts should ultimately decide that Danburry Farms, Inc., 28 Fed. Appx. 127, 130 (3d Cir. where the jury could find malice or willful punitive damages are not available in fed- 2002); Design Art v. National Football League Props., infringement, and the plaintiff is not seek- eral copyright cases, even when statutory Inc., No. 00CV593 JM, 2000 WL 1919787, at *5 (S.D. Cal. Nov. 27, 2000). ing (or is barred from obtaining) statutory damages are not sought or are unavailable. 9 4 Melville Nimmer and David Nimmer, Nimmer on damages.” 17 But, Judge Louis L. Stanton As Judge Stanton himself pointed out in Copyright, §14.02[B], at 14-29 (Matthew Bender & Co. continued, “I do not forecast any favorable Blanch, one of the principal purposes 2004). 10 2003 WL 1787123 (S.D.N.Y. Apr. 3, 2003). view of plaintiff’s position: the present behind the statutory damages provisions is 11 Id. at *10. weight and reason of the law (favoring reg- to encourage owners to register their work, 12 See Leutwyler 184 F. Supp. 2d at 308. istration) seem strongly against it. I simply and thus provide notice of the owner’s 13 262 F. Supp. 2d 185 (S.D.N.Y. 2003). 14 Id. at 187. allow the argument to be heard on the rights through such registration. If courts 15 329 F. Supp. 2d 568 (S.D.N.Y. 2004). facts.” 18 Less than a month later, in were to allow copyright owners to recover 16 Id. at 570. 17 Id. at 569. Stehrenberger v. R.J. Reynolds Tobacco punitive damages where statutory damages 18 19 Id. at 570. Holdings, Inc., Judge Stanton considered were unavailable, it would frustrate this 19 335 F. Supp. 2d 466 (S.D.N.Y. 2004). The authors another claim for punitive damages, again legislative purpose. Further, Congress of this article represented the defendants in the refusing to dismiss it as a matter of law.20 elected to enact a tiered and capped system Stehrenberger action. 20 Id. at 469 n.3. Despite the TVT Records, Blanch, and of statutory damages, creating basic bound- 21 Nicholls v. Tufenkian Import/Export Ventures Inc., Stehrenberger decisions, not all Southern aries of relief between $750 and $30,000, No. 04 CV 2110, (WHP) (S.D.N.Y. Sept. 13, 2004), District judges are convinced that the avail- and then allowing a maximum fivefold discussed in Robert J. Bernstein & Robert W. Clarida, Damages for Copyright Infringement: Punitive or ability of punitive damages is a matter open increase for willful infringement. This sys- Statutory?, New York Law Journal, Nov. 18, 2004, at to debate. Mere weeks after Blanch, and tem would become completely irrelevant 3. only one day before Stehrenberger, Judge were plaintiffs allowed to simply elect 22 See New Line Cinema Corp. v. Russ Berrie & Co., Inc., 161 F. Supp. 2d 293, 304 n.5 (S.D.N.Y. 2001) (cit- William H. Pauley, III, in an unreported actual damages and profits, and then seek ing cases regarding deduction of taxes by willful decision, held punitive damages categori- an unlimited monetary amount in punitive infringer). cally unavailable in copyright actions, damages for willful infringements. In fact, 23 TVT Records, 262 F. Supp. 2d at 187. 24 See 17 U.S.C. § 504 (b); New Line Cinema, 161 F. because Congress made no provision for it would create an incentive not to timely Supp. 2d at 304 n.5. such damages in the Copyright Act.21 register one’s copyright in order to make 25 Blanch, 329 F. Supp. 2d at 570 n.1. Please email the authors at [email protected], [email protected] or [email protected] with questions about this article.