Case Title and Citation: Curtis et al. v. Illumination Arts, Case No. C12-0991JLR
Court: United States District Court, W.D. Washington, Seattle
Document status: Order Granting Default Judgment
Key issue or relevant point: Whether or not Plaintiffs’ motion for default judgment should be granted, and if granted, what should be: (a) the amount of statutory damages for willful infringement, and (b) the amount of attorney’s fees and expenses.
Ruling of Finding: Under the facts of the case the Motion for Default Judgment was granted. The court believed a “Substantial” award of statutory damages was more appropriate than a maximum award, largely based on the preexisting relationship between the parties. Here, although the Defendants’ conduct prior to and during litigation was tantamount to “egregious”, the previous long-term and mutually beneficial contractual and licensing relationship between the parties hindered the Courts willingness to award $150,000 in max damages. The Court also awarded reasonable attorney’s fees and expenses in favor of the Plaintiff.
Plaintiffs are the registered owners of the three copyrighted children’s books, and entered into publishing and licensing contracts with the Defendants involving these three children’s books. Although beneficial to the parties during most of the contractual relationship, things soured with the downturn of the economy and a loss of business revenue, and the Defendants eventually stopped paying the royalty due to the Plaintiffs.
After repeated demands and failure on the part of the Defendants to pay what was owed, Plaintiffs terminated its publishing and licensing contract with Defendants. As Defendants continued to publish, reproduce, and distribute all the three children’s books, Plaintiffs filed its complaint for willful copyright infringement (and other claims, including breach of contract).
During the pre-trial stage, Plaintiff asked the court to enter a default judgment against Defendants as a result of their inexcusable delay, as well as willful and culpable defiance of court orders and deadlines. Plaintiffs also prayed that a maximum statutory damages be awarded for willful copyright infringement, in addition to attorney’s fees and costs.
A party may elect to receive statutory, rather than actual, damages for registered copyrights. If a Plaintiff can prove that the infringer's conduct was willful, the court may award up to a maximum statutory damages of $150,000.00 per infringement.
In this case, the Court used four factors in its determination of the appropriate amount of statutory damages for willful copyright infringement, which were:
(1) the infringer's profits and expenses they saved because of the infringement;
(2) the Plaintiff's lost revenues;
(3) the strong public interest in ensuring the integrity of copyright laws; and
(4) whether the infringer acted willfully.
As highlighted in the discussion of Getty v. Virtual, the Court here felt the first two factors are “generally given less weight than the others because of the inherent uncertainty in calculating an infringer's profits and a Plaintiff's lost revenue.” Plaintiffs could not prove the certain amount of profits gained by the Defendants and their lost revenue due to the infringing acts. Based on the minimal amount of evidence presented by the Plaintiff with regard to these factors, an award of maximum statutory damages was deemed unwarranted.
However, the Court gave great consideration to the third factor – a strong public interest in ensuring the integrity of copyright laws. If a court finds infringing conduct is severe, it may impose higher or maximum statutory damages because a higher award will dissuade future illegal conduct. The evidence here showed Defendants received multiple notifications and warnings to stop selling and distributing the books, but Defendants failed to cease from engaging infringing acts.
In support of this factor, Plaintiffs cited cases in which courts awarded maximum statutory damages. In the case of IO Group, Inc. v. Antelope Media, the award of maximum statutory damage was in part due to defendants’ failure to respond. Plaintiffs also cited the decision of the aforementioned Getty v. Virtual, in which the court awarded maximum statutory damages against defendants who likewise failed to end their infringement despite repeated notifications and warnings.
The Court was unpersuaded, however, that maximum statutory damages were appropriate for this case. The Court differentiated from those cases by focusing on the history between the parties here as a result of their long-term publishing and licensing contracts In addition, Plaintiffs received their royalty payments during the contract, and only ceased receiving royalty when the Defendants suffered severe economic loss. In Getty Images, Plaintiff never gave Defendants the authority to display and distribute its images. The Court thus found these facts mitigated the award of maximum statutory damages.
The fourth factor is whether the infringer acted willfully. The Court explained in analyzing the ‘willfulness’ factor, a plaintiff must prove willfulness, and particularly that a defendant’s act was "with knowledge that [it] constituted copyright infringement” and that “[T]his factor is typically given the most weight by courts in determining an appropriate amount of statutory damages…” Given the nature and circumstances of this case, the Defendants acts here were unquestionably “willful”, but the Court also noted, “Just because a defendant is held willful does not in itself necessitate imposition of heightened statutory damages.”
A court first considers whether an award should be made under its discretion using the following:
(1) the degree of success obtained;
(2) frivolousness of the suit, if any;
(4) objective legal or factual unreasonableness; and
(5) the need to advance considerations of compensation and deterrence.
While a finding of ‘willfulness’ does not necessitate an award of fees, the Court found the record in this case more than adequate to favor the factors to justify an award of fees and expenses.
Next, a court uses the “lodestar” method in determining the amount of reasonable fees and expenses.
In calculating the lodestar, the court should consider any relevant factors listed in Kerr v. Screen Extras Guild, Inc. that are applicable, which in this case were the following:
(1) the time and labor required;
(2) the novelty and difficulty of the questions involved;
(3) the skill required to perform the legal service properly; and
(4) the amount involved and the results obtained, the court finds that the number of hours expended and the total amount of fees charged is reasonable.
There was no doubt in this case as to Defendants liability for willful copyright infringement, including ample evidence showing ‘egregious’ behavior and intentional conduct. However, as was the case here, a court can consider facts to mitigate an award of maximum statutory damages, and instead award a “substantial” amount damages, especially when it is “just and appropriate” discretion to do so.