April 28, 2010
Record Album Only Supports One Statutory Damages Award--Bryant v. Media Right
By Eric Goldman
Wow, talk about snatching defeat from the jaws of victory. The plaintiffs produced 2 copyrighted albums containing 10 songs each, "Songs for Dogs" and "Songs for Cats," and obtained copyright registrations for the albums and at least some of the individual songs. The plaintiffs retained defendant Media Right to generate album sales for a 20% royalty, but the agreement only permitted Media Right to sell the physical copies it obtained from the plaintiffs, not to make new copies. In its effort to stimulate demand, Media Right erroneously licensed defendant Orchard to offer digital downloads. These albums appear to be niche-y offerings, so perhaps it's not surprising that the albums were not huge hits:
From April 1, 2002 to April 8, 2008, Orchard generated $12.14 in revenues from sales of physical copies of the Albums, and $578.91 from downloads of digital copies of the Albums and of individual songs.
Plaintiffs' share of this meager revenue stream was $331, which Media Right did not pay by mistake.
The district court held that both Media Right and Orchard committed copyright infringement, so now we move onto damages. Due to the plaintiffs' copyright registrations and the trivial actual damages, the plaintiffs sought statutory damages and attorneys' fees. However, the district court made three crucial rulings that gutted the plaintiffs' damages:
* each album constituted a single "work" for statutory damages calculations
* Media Right had not infringed willfully, and Orchard had infringed innocently
* in its equitable discretion, the judge did not award any attorneys' fees
So given that 2 albums were infringed, the judge awarded the statutory minimum against Orchard (2 x $200 = $400) and $1,000 per album against Media Right (2 x $1,000 = $2,000), for a total award to the plaintiffs of $2,400.
The Second Circuit upholds all of these decisions on appeal. In particular, this appears to be the first Second Circuit opinion (and the first appellate opinion generally under the 1976 Act?) holding that an infringed record album is a single work for statutory damages purposes, so the copyright owner is not entitled to separate awards for each individual song on the album. As the court says:
Based on a plain reading of the statute, therefore, infringement of an album should result in only one statutory damage award. The fact that each song may have received a separate copyright is irrelevant to this analysis.
In an era where the record album is dying/dead and consumers pay to download individual tracks regularly, this ruling seems a little anachronistic. Nevertheless, the court's statutory reading persuaded me.
Here's the kicker. At the end of the opinion, the court says:
Appellees also were reasonable in trying to resolve the case short of trial: Appellees made an Offer of Judgment in the amount of $3000, which Appellants rejected, in favor of continuing to demand over $1 million in damages, notwithstanding the evidence that Appellees had received less than $600 in revenues from infringing sales.
[Note: presumably the plaintiffs claimed an alleged case value of $6M--20 songs x 2 defendants x $150,000 maximum statutory damages for each willful infringement per song. Perhaps they claimed a case value of $9M, because they unsuccessfully argued that Media Right's CEO should be independently liable for statutory damages awards. Given these lofty calculations, the plaintiffs may have felt were already being generous to the defendants by offering to take only $1M.]
Isn't this so classic? I see this far too often: a copyright owner is so angry about the infringement and so dazzled by the prospects of winning the damages lottery that the copyright owner makes completely unreasonable financial demands to settle. As it turns out, the defendants' settlement offer was spot-on, but there was no possibility of settlement when the plaintiffs misjudged the case's value by over 400X. But in the end, their misjudgment will cost the plaintiffs significantly. Their final award was undoubtedly less than their costs; I'm sure $2,400 doesn't cover their out-of-pocket litigation costs to get a Second Circuit opinion, even if their attorney took the case on contingency...and I shudder to think about how badly the plaintiffs played it if they actually paid their attorneys. Either way, this is a classic Pyrrhic victory almost certainly attributable to greed.
Now, the coup de grace would be if the defendants can win a Rule 68 motion and get their attorneys' fees for the plaintiffs' continued litigation after they got a settlement offer ($3,000) that was better than their actual award ($2,400). As I recently blogged in the Veoh case, it's not clear to me how defendants can get a Rule 68 payoff in copyright cases. I would certainly enjoy the irony if the defendants get their attorneys' fees awarded here.
Posted by Eric at April 28, 2010 11:28 AM | Copyright
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