December 26, 2011
Infringing Download Without Further Infringement Only Supports Lost License Fee--Real View v. 20-20
By Eric Goldman
Copyright damages may not seem like the sexiest topic, but the reality is that damages issues are producing some of the most interesting recent copyright jurisprudence. The record-breaking Oracle v. SAP damages award stands out, but other interesting case include Oracle v. Google, Bryant v. Media Right, UMG v. Veoh (more to say about that case soon) and of course the P2P file-sharing cases (including the Tenenbaum case).
This case involves an apparently growing phenomenon where competitor A illegitimately downloads competitor B's copyright material and then uses the material for non-infringing purposes. In this case, Real View downloaded 20-20's software (something having to do with kitchen design) without permission via eDonkey and then used it to refine its competing software so that it was more like 20-20's. Real View then aggressively competed with 20-20, including using an alternative business model that substantially undercut the incumbent's business model. After 20-20 sued, a jury concluded that Real View's software didn't infringe 20-20's software. All that left to adjudicate, then, was the initial unauthorized download, which Real View admitted was infringing (Real View brought a declaratory judgment).
20-20 argued that Real View should pay $38M, which is the amount 20-20 spent to buy a competitor company. Failing that, 20-20 argued that Real View should pay $2M due to "price erosion." Real View said it should pay 20-20's standard license fee of $4,200--although apparently 20-20 wouldn't have licensed the software at all to Real View, making the license fee calculation somewhat hypothetical. Real View also admitted to about making three-quarter million dollars in profits from its own licenses.
The jury came back with an award of $1.37M. In this ruling, the judge issued a remittitur down to $4,200, holding that Real View only was liable for the license fee for the unauthorized download--everything else wasn't proved or was irrelevant. For example, the court rejects all of 20-20's arguments about Real View's "saved development" costs as speculative. Perhaps more importantly, 20-20's claims of price erosion were irrelevant; any price erosion occurred due to Real View's non-infringing competitive software, not the infringing software download itself, and 20-20 didn't prove the causal link between the two well enough. Similarly, the court says 20-20 can't get any of Real View's profits from the non-infringing competitive software simply because it was facilitated by the illegal download.
Not surprisingly, 20-20 rejected the remitittur and instead opted for a new trial. After all, what do they have to lose? They will likely get at least $4,200 again (and if they didn't, it's not a big loss), so they might as well shoot for the upside. But if the damages award goes sour a second time, it would be another example where overaggressive copyright enforcement snatches defeat from the jaws of victory.
This case is interesting because it highlight how copyright owners can easily overclaim damages. Even if one step in the defendants' process involving infringing activity, that doesn't mean that the copyright owner gets to disgorge the defendant of all of its profits. For example, if a defendant impermissibly scrapes a plaintiff's website--making unauthorized copies into RAM while doing so--but the defendant's resulting publication doesn't infringe the plaintiff's copyright, arguably this case would take the defendant's profits off the table, leaving only the potentially meager and overly speculative damages from the illegal download.
Posted by Eric at December 26, 2011 08:16 AM | Copyright
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