Tag Archives: Damages

Copyright’s absolute liability?

Originally posted 2009-08-18 13:58:00. Republished by Blog Post Promoter

Michael Ratoza of U.S. IP LAW reports (via @BeelJDPhD) on a case that issues a somewhat stunning ruling for those of us, such as LIKELIHOOD OF CONFUSION®, who have never really thought about the question of common-law indemnification for copyright infringement — or, worse, who have thought about it a little and assumed it must exist.

128298583190782500copycatIt doesn’t.  Maybe.

The story:  A builder was sued for copyright infringement for selling a house constructed on plans it had purchased from a third party but which, it turned out, had in fact been copied, without permission, from another set of plans which happened to have been protected by copyright owned by a competing developer.

In attempting to defend itself, the builder brought indemnification claims against the seller of the counterfeit plans. He argued that the seller committed fraud and misrepresentation in selling plans that the seller knew were wrongfully copied. The court dismissed the indemnification claims because there is no right of indemnity for copyright infringement.

The court pointed out that there is no indemnity right included in the Copyright Act, and that the Copyright Act preempts conflicting state law. As such, state indemnity law does not apply. In any event, it is federal common law, not state common law, that applies in a copyright proceeding. Federal common law is very limited and does not include the right of indemnity for violation of federal law.

Outside of the building context, this case raises anew the obvious problem faced by the buyer of goods that turn out to be counterfeit. How can the innocent buyer of counterfeit goods protect itself from liability when the seller fails to disclose that the sold goods were wrongfully copied?

And sellers usually will fail to disclose that sort of thing, after all.   Maybe.

I found this language a little odd:

The court pointed out that there is no indemnity right included in the Copyright Act, and that the Copyright Act preempts conflicting state law. As such, state indemnity law does not apply.

Well, wait.  If there is no indemnity right, there is nothing to preempt, is there, unless the Copyright Act explivity forbids indemnification (which it does not)?  It turns out, in fact, that I’m not the only one who sees it this way:

Unlike claims of contribution, courts have upheld state law claims for indemnification, arising out of state common law or statute. In Foley v. Luster,249 F.3d 1281 (11th Cir. 2001), the Eleventh Circuit upheld against a preemption argument, a state common law claim to indemnification. As with contribution claims in copyright cases, the right of indemnification was asserted as a cross-claim. After the plaintiffs settled , the cross-claim went forward, with a jury finding indemnification was required. A post-trial motion to dismiss on the ground of preemption was filed and denied. The Eleventh Circuit affirmed the denial, holding that the extra element test for preemption did not apply, allegedly, because indemnification “does not concern the rights of a copyright holder. Rather, it concerns the allocation of responsibility between copyright infringers.”  But that is true of contribution too, the right to which has been held preempted. . . .

This does not mean, however, that the right to indemnification for paying infringement damages is preempted. It is my opinion, such a right is not preempted because the right or remedy is not equivalent to any granted under the Copyright Act and does not arise under the Copyright Act: once payment is made to the copyright owner, the federal interest in extinguished.

That’s not just any opinion out there, disagreeing with the Eleventh Circuit’s rationale but agreeing with its holding — it’s Bill Patry‘s.

So, the case I first thought Michael was writing about was KBL Corp. v. Arnouts, 2009 WL 302060 (S.D.N.Y. 2009), from February of this year (opinion here).  Interestingly, the court there disagrees with Patry’s link between contribution and indemnifiction, citing Conrad v. Beck-Turek, Ltd., Inc., 891 F.Supp. 962, 966 (S.D.N.Y.1995), and after dispensing of the contribution argument analyzes the indemnifcation on its own merits.  But its rationale in denying indemnification is based on a peculiarity of New York indemnification law: Read More…

IP piggies

Ars Technica:

Not content with the current (and already massive) statutory damages allowed under copyright law, the RIAA is pushing to expand the provision. The issue is compilations, which now are treated as a single work. In the RIAA’s perfect world, each copied track would count as a separate act of infringement, meaning that a copying a ten-song CD evenpig_2_md.gif one time could end up costing a defendant $1.5 million if done willfully. Sound fair? Proportional? Necessary? Not really, but that doesn’t mean it won’t become law.

The change to statutory damages is contained in the PRO-IP Act that is currently up for consideration in Congress. We’ve reported on the bill before, noting that Google’s top copyright lawyer (and the man who wrote a seven-volume treatise on the subject of copyright law), William Patry, called the bill the most “outrageously gluttonous IP bill ever introduced in the US.”

Out. Of. Control.

Should we be doing something?

Best of 2008: Someone dropped in an extra zero, right? RIGHT?

Posted on October 16, 2008.

It’s a month-old story, and how it got past us here notwithstanding, it’s not getting past us now.  Per the ABA Journal, remember the Bratz litigation?  Well, you haven’t read half of it yet:

Two toy companies battling for rights to the Bratz dolls-with-attitude have racked up legal fees of at least $93 million in the case.

MGA Entertainment has spent $63 million in fees since 2004 defending a lawsuit by Mattel Inc. that contended the doll’s designer conceived of the idea before leaping from Mattel to MGA, the Daily Journal reports (sub. req.). Plaintiff Mattel has spent $30 million in just the first half of the year, the story says.

Mattel was awarded $100 million in the case, far short of the more than $2 billion in damages it had sought.

The Daily Journal got MGA’s figures in a lawsuit it filed against its insurers seeking full payment of the Bratz fees, while the publication got the Mattel figure from a stock analyst.



The ABA item quotes a Jones Day litigation partner who is flummoxed at the idea that there is any conceivable way to get to $93 million for a trademark case, even over the course of four years.  We sure are, too.  And re-read this ‘graph: Read More…

Death By Lawyer

mymp3They make that sound like a bad thing. Now, I wouldn’t agree with each and every little thing Stan Schroeder, the author of this article on Mashable, says — such as this about MP3.com of blessed memory:

In 2000, the owners started a new service – My.MP3.com – which enabled users to register CDs they legally own and make online copies on MP3.com’s servers. Although this about as legit as you can get, the record industry managed to sue them (!) and win (!?), and MP3.com had to settle the lawsuit, paying 200 million dollars in damages, which turned out to be a blow from which they would never recover.

“About as legit as you can get”? Yes, well, that’s what Cooley Godward thought, too. Judge Jed Rakoff didn’t see it that way, and — in his inimitable matter — he didn’t suggest there was a lot of doubt about the right answer, either. We never got a second opinion (i.e., one that mattered from an appellate court), so just don’t come away from this article with the wrong impression.

Still and all, a good piece, and food for thought. Hat tip to Overlawyered.

Little claims, big idea?

A major theme around here is the proposition that copyright law encourages litigation of even the most tenuous plaintiffs’ claims, mainly because of the rules regarding fee-shifting for “prevailing” parties.  Similarly there are claims that are not so tenuous, on the merits, but are nonetheless still economically trivial.  The creators of such works are entitled to protection, of course, but providing that protection should not be a source of windfall fees for lawyers.

Evidently the Copyright Office has been thinking some thoughts along these lines, as reported by the Fashion Cloture blog:

The U.S. Copyright Office recently issued a second request for public comments regarding the adjudication of small copyright claims. The Copyright Office’s notice is important for the fashion industry, since there is currently copyright protection for certain aspects of fashion (such as fabric prints and jewelry).

At the request of Congress, the Copyright Office is currently conducting a study on the current legal system for small copyright claims. The Copyright Office published its first request for comments in October 2011, and the Office recently issued a second request to gather further input as to how a small claims system might be structured. The Copyright Office is particularly interested in comments that address the appropriate tribunal/court to handle small copyright claims, whether the small claims process should be voluntary or mandatory, and the roles of mediation and arbitration. Comments must be received by September 26, 2012.

Sounds like something worth looking into, and talking to the Copyright people about.  (One hopes they listen better than the trademark people.)  To put in your two cents, click here.

UPDATE:  Remember Jammie Thomas?

Appeals court sides with RIAA, Jammie Thomas owes $222,000 — The U.S. Court of Appeals for the Eighth Circuit vacates a lower court’s decision and rules that Thomas-Rasset, an admitted music pirate, must pay the top four labels $222,000. . . .

We conclude that the recording companies are entitled to the remedies that they seek on appeal. The judgment of the district court is vacated, and the case is remanded with directions to enter a judgment for damages in the amount of $222,000, and to include an injunction that precludes Thomas-Rasset from making any of the plaintiffs’ recordings available for distribution to the public through an online media distribution system.

I’m not saying that illegal music downloading is trivial.  It is and it isn’t.  And I’m not saying the Constitution really has all that much to say about copyright damages for music downloading.  But as I’ve said before in connection with this case, and others… something is out of whack here.

U.S. District of Arizona: “No automatic injunction upon a finding of copyright infringement”

Not that the plaintiffs in the Designer Skin case didn’t get an injunction:  They did (here it is); a narrow one utilizing proposed language by defendants explicitly permitting S&L to use its own photographs of Designer Skin merchandise on its website (see the prior post).  But the Court ruled that they were not entitled to it merely by virtue of proving copyright infringement.  Here’s an excerpt from the opinion, discussing the point:

The parties dispute the law governing the issuance of a permanent injunction in a copyright-infringement case. Relying on MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 520 (9th Cir. 1993), Designer Skin argues that “a permanent injunction [should] be granted in a copyright infringement case when liability has been established and there is a threat of continuing violations.”  Conversely, S & L Vitamins argues that the MAI rule has been overruled by the recent Supreme Court opinion in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), and that the traditional four-factor test reaffirmed by eBay applies.

MAI’s general rule may accurately describe the result of applying the four-factor test to a copyright-infringement case in which liability has been established and there is a threat of continuing violations. Nevertheless, as Judge Wilson persuasively demonstrated in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197, 1209-10 (C.D. Cal. 2007), this general rule, as a rule, is clearly inconsistent with the Supreme Court’s decision in eBay. Thus, for the reasons given by Judge White in Grokster, Designer Skin’s reliance on this pre-eBay rule is unavailing, and the Court will apply the traditional four-factor test. . . .

This is an important holding, making the District of Arizona among the handful of earliest courts to apply the rule of eBay to copyright infringement.  After the jump, you can see how the court did apply it to one particular factor of interest, the need for a plaintiff seeking an injunction to prove irreparable harm.  The court agreed with S&L that past infringement does not lead to a presumption of future infringement. Unfortunately, to our client’s (nominal) detriment, and despite our argument that, seeing as how Designer Skin enunciated no coherent description of harm it suffered by the infringement — and that, in fact, it probably benefited from it — an injunction should not issue, the court found that there was irreparable harm, for reasons best expressed in its own words. Read More…

Fat lady sings: Findings of Facts and Conclusions of Law in Designer Skin v S & L Vitamins

The District of Arizona ruled today in a case we defended through trial and have reported on here extensively.  The decision is here; the minute entry on the electronic docket reads as follows:

FINDINGS OF FACT AND CONCLUSIONS OF LAW – that S & L Vitamins has infringed Designer Skin’s copyrights in the electronic renderings of the 42 products styled [by various brand names] and that Designer Skin is entitled to a permanent injunction enjoining S & L Vitamins from any such future infringement of these copyrights;

FURTHER ORDERED that S & L Vitamins has not infringed Designer Skin’s copyrights in the electronic renderings of the 12 products styled [by various brand names];

FURTHER ORDERED that each party shall bear its own costs in this matter.

Signed by Judge James A Teilborg

No attorneys’ fees for either side.  The injunction reads as follows (per the minute entry); prefatory language is omitted and emphasis is added:

FINAL JUDGMENT AND PERMANENT INJUNCTION in favor of Designer Skin, LLC against S&L Vitamins, Inc. . . . S & L Vitamins . . . are hereby immediately and permanently ENJOINED from publicly displaying, using, copying, or otherwise infringing Designer Skin’s copyrights in these electronic renderings for any purpose whatsoever. Nothing herein, however, shall be construed to enjoin S & L Vitamins from taking, using, or displaying original photographs of the physical Products themselves in connection with S & L Vitamins’ sale of the Products on the internet.

Signed by Judge James A Teilborg

Interested persons may wish to ponder how, and to what extent, the Court addressed the issues framed by the counsel for the respective parties, including identification of what indeed are “Designer Skin’s copyrights in [its] electronic renderings,” by considering the proposed findings and facts and conclusions of law submitted by the plaintiffs, and by the defendants, respectively.

For practitioners interested in the law of injunctions, the most interesting part of the decision concerns the court’s application of the rule in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) that there is no automatic entitlement to an injunction upon a finding of infringement to a copyright infringement case.  We have made a separate post addressing that part of the decision.

S&L’s website is here, by the way.  Buy Designer Skin lotion from S&L!  It’s the way both sides pay their lawyers!

This Isn’t One, Either. Heavens, No.

Bill Heinze’s I/P Updates blog reports about a trademark registration you can see at the erstwhile movie pirating website LokiTorrent.com. You get a message that says “There are websites that provide legal downloads. This is not one of them.” The site is the property of the good people at the MPAA.  And it ought to: Downloading someone else’s movie is just plain stealing. Even if the MPAA is against it.

Clients sometimes ask whether the infringing website they’re steaming about can ever fall like an overripe fruit into their hot little hands. Yep. It can.

Bratz, foiled again! (Bumped and updated)

First, December’s 15, 2009’s story:

Remember the Bratz dolls case, and the phenomenal legal fees application that followed?

It’s back!   The Ninth Circuit Court of Appeals stayed the trial judge’s order basically liquidating the Bratz.  Here’s what the WSJ Law Blog reported last week:

The Ninth Circuit on Wednesday ruled that Bratz maker MGA Entertainment can continue selling its dolls, despite the stinging defeat it suffered last year a jury when a Riverside, Calif., jury awarded Mattel, Inc. $100 million in damages in a closely followed copyright-infringement lawsuit. . . .

The judges on the appellate panel, Alex Kozinski, Kim Wardlaw and Stephen Trott, questioned whether the trial judge went too far by awarding MGA’s Bratz doll franchise to Mattel and wondered why he didn’t instead award Mattel a royalty or ownership stake in the company.

I never played with dolls due to a household manliness mandate, and I’m already uncomfortable blogging about this for the fourth time, so let’s just note it and go back to what I was doing with this here mitre box and also I’m going to do some re-grouting on some tiles somewhere before bed.  Which I sleep in wearing a rustic burnoose emblazoned with my varsity letter. With the windows open.

Bratz-tip to Jaded Topaz!

UPDATE:  In response to certain inquiries, a clarification:  No, I did not actually earn a varsity letter in high school or otherwise.   But the one on my night-burnoose is “mine.”  It’s a kind of … trophy I took from the still-quivering hulk of the middle-linebacker I brutally beat up and left for dead in a Chicago alley, okay?

Now, today’s update:

No surprise here in light of the earlier ruling, but stunning nonetheless:  The Ninth Circuit kayos the award!  Choice quote — Kozinski, of course — via Bloomberg:

Even assuming that MGA took some ideas wrongfully, it added tremendous value by turning the ideas into products and, eventually, a popular and highly profitable brand.  It is not equitable to transfer this billion-dollar brand, the value of which is overwhelmingly the result of MGA’s legitimate efforts, because it may have started with two misappropriated names.

That’s going to ruin a lot of Big IP summers on Cape Cod this weekend.

UPDATE:  For Mattel, it only gets worse:

[Today a] U.S. jury decided that MGA Entertainment Inc is the rightful owner of the once-billion dollar line of pouty-lipped Bratz dolls.

The astonishing loss for the world’s largest toy maker concluded a case that began in 2004, when MGA’s line of dolls was all the rage among teen and preteen girls. Mattel accused Van Nuys, California-based MGA of stealing its designs by hiring away a key employee.

Mattel CEO Robert Eckert sat stone-faced, staring straight ahead as the verdict was read on Thursday in a Santa Ana, California, federal courtroom. He said afterward that he was disappointed by the verdict.

“We remain committed to protecting the intellectual property that is at the heart of business success,” Eckert said in an email.

What?  MGA’s intellectual property?

The opinion’s here.

Bringing big IP plaintiffs down a peg — or two

Mike Atkins is paying attention to Microsoft’s IP docket, as a Seattle Trademark Lawyer will do. He’s reporting about a default judgment and award the software maker achieved in California, with a rather surprising anticlimax in the dollars-and-cents category:

Microsoft sought more than $3 million in statutory damages. However, the court only awarded $12,500 in damages and $2,000 in fees and costs. The court explained its decision by stating: “Plaintiff asks for the maximum enhanced statutory damages for the infringement of each of seven copyrights and two trademarks. At $150,000 per copyright and $1,000,000 per counterfeit trademark, the tab comes to $2,050,000. Plaintiff has identified a grand total of three units of counterfeit software that defendant sold. It is true that Microsoft could not conduct discovery to determine its damages, but that in itself does not support levying a statutory damages award in excess of three million dollars. … Statutory damages are intended to serve as a deterrent, but that does not justify such a windfall.

Well. True enough, when we got the judgment for seven (theoretical) figures in Louis Vuitton v. Veit, which was a counterfeiting case (and thus also implicated statutory damages), we could point to a major online counterfeiting operation, from which the court could deduce not only massive sales but the sort of massive wrongdoing that those huge swinging statutory damage options are meant to punish. Even then the court wanted as much proof as we could get our hands on of what was going on there.

But only $2,000 in fees and costs? That doesn’t sound right. The attorneys’ fees provisions of the Copyright Act are supposed to make a successful plaintiff at least whole in terms of the cost of enforcement — regardless of the number of units sold. Two thousand dollars doesn’t even cover scribes and sealing wax.

Sounds like something else was going on here. Any suggestions?

Designer Skin v. S&L Vitamins trial update

The remaining issues in the case, you may recall, were copyright infringement and Arizona unfair competition. Here is the status per this morning’s minute entry in the court’s electronic case filing docket:

Minute Entry. Proceedings held before Judge James A Teilborg on 7/16/2008: Jury Trial – Day 2 held. Plaintiff’s case continues. Evidence and testimony presented. Plaintiff rests. Defendant rests. The Court grants defendant’s oral Rule 50 Motion as to statutory damages, actual damages and unfair competition claim. The Court grants defendant’s oral Rule 50 motion to dismiss defendant Lawrence Sagarin as a defendant. The remaining issue in the case is the injunction issue. Closing arguments. Jury deliberations. Jury to return at 9:00 a.m. 7/17/2008 to resume deliberations. (Court Reporter David German.) (TLB )

A tad terse and bloodless — quite unlike how trial has gone.  Not terse or bloodless at all.  [UPDATE:  Here’s the transcript.  Dismissal of the damages claims were stipulated; see the ruling from the bench at page 124 of the PDF for the ruling as to Sagarin.]

“The Court grants defendant’s oral Rule 50 Motion as to statutory damages, actual damages and unfair competition claim” means “The Court grants defendant’s’ oral motion to dismiss Designer Skin’s claims for statutory damages, actual damages and unfair competition. (Earlier on the court declined to take our “suggestion” of a lack of copyright jurisdiction.)

So, so far: No damages, no plaintiff attorneys’ fees in play. Jury (advisory per Rule 39(c) of the Federal Rules of Civil Procedure; injunction against further use of Designer Skin’s “electronic renderings” is not a jury issue, but they are charged with deciding whether there was copyright infringement) is out; they return this morning, Phoenix time, at 9.

We will update and backfill…

UPDATE: The jury returned a verdict of infringement on 42 of the 54 copyrights. In post-verdict interviews, interestingly, the jurors reported they would have awarded no damages, or nominal damages, had the judge permitted them to consider damages. (Per the above the damages claims were dismissed.) The jurors rejected the idea that a manufacturer is entitled to damages in connection with the sale by third parties of merchandise the manufacturer already sold once before, regardless of the legal theory. This came as quite a surprise to the plaintiff’s legal team, whereas the advisory verdict of infringement (which the court indicated he would adopt) was not particularly surprising to us… considering.


Designer Skin v. S&L continued: “S&L had a perfect right to sell this product”

Unfortunately for future defendants in the position of our client, Internet retailer S&L, U.S. District Judge James Teilborg’s decision from the bench in the District of Arizona dismissing the damages claims of suntan lotion manufacturer Designer Skin will not be officially published, being an oral opinion. Well, it will not be published unless and until it is quoted and affirmed by the Ninth Circuit, which a Designer Skin lawyer has promised will happen soon — though not exactly in those words. (Earlier post here.)

Bronze AnarchyFortunately we can mitigate some of the sting of the lack of officially published precedent, for now, and on our electronic mimeograph machine “publish” that opinion. The ruling is below; an example of the subject “electronic renderings” is at left; the transcript of the entire colloquy, including the striking of the would-be “damages” testimony of the company’s president, Beth Romero, and the argument of counsel can be downloaded here.

Disclosure: Neither counsel nor court had prepared particularly thoroughly for these oral motions or the ruling from the bench, which came up earlier in the proceedings than had been anticipated for reasons we will discuss next week. Therefore, in contrast to a situation where one can read each side’s thoroughly researched and argued written briefs and then a meticulously sourced judicial opinion, the oratorical edges in the transcript linked to above as well as the opinion also set forth below may appear somewhat rough all around. Be kind to all of us as you consider them.

The Court has, obviously, heard the evidence and heard the arguments of counsel and I have previously granted the motion to strike certain of the damage evidence from Miss Romero and set forth my reasons why. The Court has now granted the unopposed motion to dismiss the claim for statutory damages. I now grant the Rule 50 motion with respect to actual damages on the bases that there has been no showing of actual damages suffered as a result of the alleged copyright infringement.

As I pointed out earlier, there has been a witting or unwitting conflation between the alleged lifting of the electronic image from Designer’s website and pasting it on the S & L website, and yet we’ve heard virtually all the evidence, in fact, I think it’s fair to say all the so-called damage evidence, directed at product. In other words, the difference here is between the alleged copyright infringement in connection with the image and the product distribution issues.

It is clear that the beef, if you may, on the part of the plaintiffs is the selling of product by S & L, and we’ve heard evidence in terms of how much money Designer has spent in their product development, how much they’ve spent in their product image, the money they’ve spent in their diversion program, and it would appear that is all directed at seeking out product distributors such as S & L.

But even if one could assume that somehow it is to seek out and take action against a copyright infringement of its images, there is no basis for this jury or any reasonable jury to attempt to connect how much of those expenditures are connected to the images themselves as opposed to the product distribution issues. Read More…