Copyright Litigation [Damages & Remedies – Plaintiff's Lost Profits due to infringing uses of software, games and other digital content]

Introduction

A question we got recently is from a photographer who found his pictures being used on the product packaging of another company.  He asked whether or not he could seek the “profits made by the company.”  This gives us occasion to discuss this important copyright topic.  The short answer is YES, in the right case you can recover profits of Defendant that are attributable to the Copyright infringement of your pictures, song, book, or other copyrighted art.

Section 504 of the Copyright Act

Under 17 U.S.C. 504 there are different types of remedies for federal copyright infringement.

(a) In General.— Except as otherwise provided by this title, an infringer of copyright is liable for either:

(1) the copyright owner's actual damages and any additional profits of the infringer, as provided by subsection (b);

or

(2) statutory damages, as provided by subsection (c).

(b) Actual Damages and Profits.— The copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.

As one Court put it: “Congress explicitly provides for two distinct monetary remedies— actual damages and recovery of wrongful profits. These remedies are two sides of the damages coin—the copyright holder's losses and the infringer's gains. “Actual damages are usually determined by the loss in the fair market value of the copyright, measured by the profits lost due to the infringement or by the value of the use of the copyrighted work to the infringer.” McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 566 (7th Cir.2003); See   Mackie v. Rieser, 296 F.3d 909, 914 (9th Cir.2002) (approving of recovery of reasonable license fee).  See  Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 707-08 (9th Cir. 2004).

Copyright damages (lost profits) caselaw

In a copyright infringement case, the Plaintiff needs to be prepared to bear the burden of proof to show that the infringement contributed to profits of Defendant (i.e. but for the infringement Defendant would not have made certain profits).  Here is some federal copyright caselaw that discusses this point.

1.  Andreas v. Volkswagon

In Andreas v. Volkswagen of Am., Inc., 336 F.3d 789, 796 (8th Cir. 2003) the federal court dicussed direct and indirect infringement:

“Although cases distinguish between direct and indirect profits, the statute does not.  On its face, § 504(b) does not differentiate between ‘direct profits' and ‘indirect profits. We agree that in an indirect profits case the profits “attributable” to the infringement are more difficult to quantify. But that difficulty does not change the burden of proof established by the statute. The burden of establishing that profits are attributable to the infringed work often gets confused with the burden of apportioning profits between various factors contributing to the profits. T he plaintiff has the ‘burden' to demonstrate a nexus between the infringement and the indirect profits before apportionment can occur.….. The nexus requirement exists in both direct and indirect profits cases……Once that nexus is established in either a direct or indirect profits case, if “an infringer's profits are attributable to factors in addition to use of plaintiff's work, an apportionment of profits is proper. The burden of proving apportionment (i.e., the contribution to profits of elements other than the infringed property), is the defendant's.” Frank Music I, 772 F.2d at 518 (internal citations omitted) (holding that infringing use of music in one of ten acts of Las Vegas casino musical revue entitled copyright holder to portion of casino's hotel and gaming operations based on revue's promotional nature).” A jury awarded Brian Andreas a total of $965,000 in his copyright infringement action against Volkswagen of America, Inc., doing business as Audi of America, Inc. (hereinafter “Audi”) and McKinney & Silver, Inc.'s Audi's advertising agency. The jury found that the defendants violated federal copyright law when M & S included a phrase from one of Andreas's copyrighted works in a television commercial that it created for the introduction of the Audi TT coupe.

2.  The Estate of Vane v. the Fair

One Copyright case that discussed proving lost profits through the use of expert witness testimony was Estate of Vane v. The Fair, Inc., 849 F.2d 186, 188 (5th Cir. 1988).  In this case the federal court noted:

“When financial records sufficiently detailed to show an infringer's sales are not available, expert testimony may be used to develop either such proof or, as Vane attempted, proof of its profits rather than its sales. But it is the trial court's role to evaluate this testimony. The trial court in this case concluded, with ample basis, that the testimony introduced was inadequate to establish The Fair's profits attributable to the infringement.” Regardless, the profits of Defendant must be established (the causal link). “To take away incentives for would-be infringers and “to prevent the infringer from unfairly benefitting from a wrongful act,” the statute also provides for the recovery of wrongfully obtained profits resulting from the infringement. These profits can be direct or indirect. Profits indirectly gained from infringements used in promotional efforts, as is the case here, fall squarely within the rubric of wrongful profits. Under §504(b), actual damages must be suffered “as a result of the infringement,” and recoverable profits must be “attributable to the infringement.” From the statutory language, it is apparent that a causal link between the infringement and the monetary remedy sought is a predicate to recovery of both actual damages and profits. We take this opportunity to reaffirm the principle that a plaintiff in a § 504(b) action must establish this causal connection, and that this requirement is akin to tort principles of causation and damages.”  See  Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 708 (9th Cir. 2004).  

As you can see, it is one thing to allege Defendants made profits, but another thing to actually prove it.

Contact Copyright Infringement lawyers

If you have questions about Copyright infringement litigation or need to send a copyright cease and desist letter contact us to discuss your case.  We can be reached at (877) 276-5084.  We can help with DMCA cases, video, music, and photography infringement, software audits with the business software alliance and claims of infringement on social media websites such as eBay and Etsy.  We can also assist in responding to notices of copyright infringement with movies (ex. adult pornographic movies downloaded off file sharing websites such as Bittorrent), and cases from Malibu Media, Flava and others.