Copyright Watchdog – Masterfile Corporation v. Country Cycling & Hiking Tours By Brooks, Inc. – New York Federal Court. Photo infringement at issue.
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If you received a legal demand letter from a stock photo company like Getty Images, or Masterfile (or their representative “Artist Defense”) this is a good case you should review. This deals with Plaintiff seeking money for a Defendant company that allegedly used copyrighted photos on their website. The parties sought to negotiate a pre-litigation settlement to no avail. The Plaintiff then filed a copyright infringement lawsuit. Defendant did not respond and a default was entered. After a default judgment is entered, a Plaintiff needs to prove up their damages in Court. The Defendant acted in pro per (without a lawyer) and submitted a letter to the Court, which was accepted only because the Defendant was representing themselves. The Plaintiff ultimately obtained a judgement, but it was for much less than they were seeking.
Here are the general facts of the case:
“In this copyright infringement action, plaintiff Masterfile Corporation (“Masterfile”) alleges that defendant Country Cycling & Hiking Tours by Brooks, Inc., doing business as Brooks Country Cycling Tours (“Brooks”), unlawfully posted Masterfile's copyrighted photographs on a website used to advertise its cycling programs. Masterfile contends that the use of its images in this manner violated the Copyright Act of 1976 (“Copyright Act”), 17 U.S.C. § 101, et seq. Following Brooks' failure to respond to the complaint, Your Honor entered a default judgment and referred the matter to me for an inquest. Thereafter, by order dated December 27, 2006, I directed Masterfile to submit its inquest papers by February 28, 2007. The order further directed Brooks to respond by March 14, 2007. Both parties timely complied. For the reasons set forth below, I recommend that Masterfile be awarded judgment against Brooks in the amount of $5,980, consisting of $1,120 in statutory damages and $4,860 in attorneys' fees and costs.
The Court's ruling
Here is the important part. The Court had to figure out what measure of damage (amount) was appropriate under the Copyright Laws. Normally a company seeking to enforce their copyrights will try to threaten (expressly or implicitly, and some nicer than others) $150,000 PER PHOTO (or piece of software for example, we also handle software audits for companies across the United States). This may sound outrageous, but it is what the law allows as a maximum especially where “WILLFUL COPYRIGHT INFRINGEMENT” can be established.
Notwithstanding, here was the Courts “damages” analysis:
“A. Statutory Damages Under the Copyright Act, an infringer of a copyright is liable for either the copyright owner's actual damages and any additional profits of the infringer or statutory damages. 17 U.S.C. § 504(a) (1); See Brown v. Party Poppers, Inc., No. 00 Civ. 4799, 2001. Here, Masterfile has elected to recover statutory damages.
Statutory damages may be awarded: for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work. 17 U.S.C. § 504(c)(1). If the infringement was willful, the Court may increase the award of statutory damages to a maximum of $150,000. § 504(c)(2).”
B. Innocent infringement: “Likewise, if the infringer “was not aware and had no reason to believe that” its “acts constituted an infringement” the Court in its discretion may “reduce the award of statutory damages to a sum of not less than $200.” The Court has broad discretion, within these statutory limits, in awarding statutory damages. See Fitzgerald Publ'g Co. v. Baylor Publ'g Co., 807 F.2d 1110, 1116 (2d Cir.1986); Nat'l Football League v. PrimeTime.
In determining the appropriate award, the Court may consider such factors as “the expenses saved and profits reaped by the defendants, the revenues lost by the plaintiffs, the value of the copyright, the deterrent effect of the award on other potential infringers, and factors relating to individual culpability.” See Guess, Inc. v. Gold Ctr. Jewelry, 997 F.Supp. 409, 411 (S.D.N.Y.1998);
Ultimately, the “statutory damages should bear some relation to actual damages suffered.” See Van Per Zee v. Greenidge, No. 03 Civ. 8659, (quoting RSO Records, Inc. v. Peri, 596 F.Supp. 849, 862 (S.D.N.Y.1984)). Masterfile seeks to recover “statutory damages in the amount of $5,600 for each of the four infringements … for a total amount of $22,400.” Masterfile concedes that had Brooks sought a license, the licensing fee that it would have charged would have been only $1,120 per year for each of the four years the Images were used, or a total of $4,480.2.
ATTORNEY STEVE NOTE: Masterfile contends, however, that it is industry custom to “charge unauthorized users three to five times the amount of the applicable license fee” in order to deter unauthorized use and recover the costs associated with enforcement. For those readers who follow my blogs dealing with the Business Software Alliance (software compliance cases), this is the same argument I hear from them and their IP lawyers in responding to their common 3x infringement multiplier.
Now back to the case:
Opting for the higher end of the range, Masterfile seeks to recover statutory damages in the amount of $22,400 ($4,480 x 5). There are several problems with Masterfile's proposed statutory damages.
First, Masterfile has proceeded on the assumption that Brooks engaged in “four infringements.” However, the Copyright Act “unambiguously provides that a ‘compilation,' although composed of ‘separate and independent works,' ‘constitute[s] one work' for purposes of calculating statutory damages.” See Country Rd. Music, Inc. v. MP3.com, Inc., 279 F.Supp.2d 325, 332 (S.D.N.Y.2003). Although Brooks posted four separate images on its website, Masterfile elected to register the Images with the Copyright Office as one compilation. Therefore, for the purpose of calculating statutory damages, Brooks infringed only “one work.” 17 U.S.C. § 504(c)(1).
Second, Brooks paid a professional web designer to design and maintain its website and had no part in the selection of the images for the site. Thus, Brooks had no “knowledge that [it was] using,” copyrighted material until Masterfile contacted it, nor did it have any reason to believe that its acts constituted infringement.
Once Masterfile contacted Brooks, the Images were removed from its site the very next day. This suggests that any damages awarded should be at the low end of the spectrum.
Third, Brooks is a small company with gross receipts of $12,275 in 2005 and $16,409 in 2006. (Id. (attached tax returns)). In 2005, Brooks lost nearly $5,000 on its operations; in 2006, it showed a profit of only $1,390. Virtually all of Brooks' income was attributable to cycling programs organized for three law firms, none of which came to Brooks via its website. Accordingly, had Brooks known that there was a fee associated with its website designer's use of the Images, it is highly unlikely that it would have spent $1,120 per year for a license, rather than looking to the public domain for artwork.
Finally, Brooks' owners and officers are “semi-retired” and not actively pursuing new business for the company. Accordingly, a high statutory damage award is not necessary to deter Brooks from infringing Masterfile's copyrights again in the future. Nor, given the unique circumstances of this case, does it seem likely that a high award is necessary to further the goal of general deterrence. Nonetheless, Masterfile is entitled to an award that bears some relationship to its actual damages.
Accordingly, I recommend statutory damages in the amount of $1,120. Basing the award on the cost of a four-year license for only one of the Images, as opposed to four, is appropriate because Brooks
(1) was not aware that its actions constituted infringement,
(2) infringed only “one work” under the Copyright Act, and (3) acted appropriately once it learned of the problem.”
Next, the Court addressed the issue of attorney fees awards. In Copyright cases, an aggrieved Plaintiff may seek an award of attorney fees, but this is up to the judge. Here was the discussion on this point:
B. Costs and Attorneys' Fees The Copyright Act provides that a “court in its discretion may allow the recovery of full costs [and] a reasonable attorney's fee to the prevailing party.” 17 U.S.C. § 505; see Fogerty v. Fantasy, Inc., 510 U.S. 517, 523 (1994).”
ATTORNEY STEVE TIP: Note that copyright attorney fees is a “two way street.” Meaning, a prevailing Plaintiff or Defendant can seek their attorney fees if they prevail in the case. Now back to the decision:
“In determining the appropriate amount of costs and fees, a court may consider such factors as “ ‘frivolousness, motivation, objective unreasonableness … and the need in particular circumstances to advance considerations of compensation and deterrence.' Notwithstanding these factors, because “the Copyright Act intended to encourage suits to redress infringement, ‘fees are generally awarded to a prevailing plaintiff. When fixing a reasonable rate for attorneys' fees, courts should consider “what a reasonable, paying client would be willing to pay,” Arbor Hill Concerned Citizens Neighborhood Ass'n v. County of Albany, 493 F.3d 110, 112 (2d Cir.2007), and apply the prevailing market rates for attorneys of similar expertise providing comparable services.
The court may also rely on its own knowledge of private firm hourly rates. Miele v. N.Y. State Teamsters Conf. Pension & Ret. Fund, 831 F.2d 407, 409 (2d Cir.1987). Second Circuit precedent requires a party seeking an award of attorneys' fees to support that request with contemporaneous time records that show “for each attorney, the date, the hours expended, and the nature of the work done. Fee applications that do not contain such supporting data “should normally be disallowed. See also Kingvision Pay-Per-View, Ltd. v. The Body Shop,. It was reasonable for Masterfile to bring this suit once Brooks declined to settle for anything greater than a nominal sum. Accordingly, even though Brooks itself may not have infringed Masterfile's copyrights willfully, Masterfile is entitled to recover its reasonable attorneys' fees and costs.
In prosecuting this action, Masterfile engaged the services of Cowan, DeBaets, Abrahams & Sheppard LLP (“Cowan, DeBaets”), a well-recognized firm in the intellectual property field. Masterfile has submitted the declaration of Zehra J. Abdi, the Cowan, DeBaets associate who spent the most time on this case, setting forth:
(a) her professional experience;
(b) the professional experience of Nancy E. Wolff, the partner who worked on the case;
(c) to the tenth of an hour, the time devoted to each particular task and the nature of the work; and (d) the rate at which each task was billed.
Cowan, DeBaets billed Masterfile for its time at hourly rates of $320 for Ms. Wolff and (depending on the time period) either $100 or $135 for Ms. Abdi. These rates are reasonable for counsel in a copyright case in this District. See, e.g., Van Per Zee, (rates of $150 to $350 per hour were reasonable in copyright infringement suit); Design Tex Group, Inc. v. U.S. Vinyl Mfg. Corp., No. 04 Civ. 5002, 2005 WL 2063819, at *4 (S.D.N.Y. Aug. 24, 2005) (awarding $395 to $485 per hour for partners and $180 to $265 per hour for associates under 17 U.S.C. § 505); Arclightz & Films Pvt. Ltd. v. Video Palace Inc., 303 F.Supp.2d 356, 363 (S.D.N.Y.2003) (hourly rates between $100 and $375 were reasonable in copyright infringement suit). Although Ms. Abdi also handled certain tasks more appropriately performed by a paralegal, I have not reduced the rate to be recovered for her time because both of her rates would have been reasonable rates for a paralegal. See Heng Chan v. Sung Yue Tung Corp., (rates of $50 to $150 per hour are reasonable for paralegals of varying experience); Sheehan v. Metro. Life Ins. Co., 450 F.Supp.2d 321, 328 (S.D.N .Y.2006) ($150 per hour is a reasonable rate for a paralegal); Yurman Designs Inc. v. PAJ, Inc., 125 F.Supp.2d 54, 55-56 (S.D .N.Y.2000) ($162.35 rate for paralegals reasonable in this District). Turning to the time actually expended, I find that the hours claimed by counsel are reasonable for the tasks performed. I also find that the costs claimed by Masterfile are reasonable. Indeed, Masterfile has not sought to recover any sums for copying costs.
I therefore recommend that Masterfile be awarded attorneys' fees and costs in the amount of $4,860, consisting of fees of $4,430 and costs of $430.5…..For the reasons set forth above, Masterfile should be awarded judgment against the defendants in the amount of $5,980, consisting of $1,120 in statutory damages, $4,430 in attorneys' fees, and $430 in costs.
As you can see this amount was much less than they had sought.
What to do if you get an infringement letter – TOP 10 TAKE AWAYS!
Here are some things to consider if you get a photo image infringement letter:
- Make sure the company is REAL (what could be worse than paying a fake company in Nigeria)?
- Make sure if the company you are dealing with claims it “represents” the digital image owner, ask to see a power of attorney showing they have the right to collect money on the rights holder's behalf.
- Consider immediately taking down any infringing photos off your website
- Consider the defense of hiring a third party to post photos (let's call it the “webmaster defense”)
- Request a three year history of licensing fees for the image at issue. If they are saying it “normally licenses the photo for $1,400 a year, ask for proof of that.
- Request to see proof that the images were copyrighted with the U.S. Copyright office. It there are several images registered as a “compilation” that needs to be brought out.
- If your use is PERSONAl (non-commercial) consider whether a “fair use defense” might apply.
- Know that in negotiations, there is usually not a need to “rush it” (start low and move up slowly in very small increments)
- You may be able to ask for payments
- Make sure to get a confidential settlement release if you are able to settle your case. This should be part of the deal. You will probably want to have copyright counsel review the release.
These are my top 10 tips for image infringement cases. If you don't want to deal with it, call us for representation.
Does Masterfile file federal court infringement lawsuits?
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Contact a Photo / Image infringement law firm
If you received a legal demand letter due to using a stock photos, illustrations, image or vector without paying a proper licensing fee contact us to discuss your legal rights. We can help you settle your case and seek a confidential settlement settlement agreement. It should be noted that some people, when they receive a infringement notice from a company like Getty or Masterfile may think the letter is a scam. Before taking that route, think about the potential consequences of being sued, and getting a judgement against you. We can help you evaluate your options. Call us at (877) 276-5084. In many cases we offer low flat rate fees to retain copyright counsel. If the case goes to litigation, we have extensive federal court experience.