Judge Tosses $2 Million Jury Verdict for Downloading 24 Songs as "Simply Shocking"

From Capitol Records Inc. v. Thomas-Rasset, 680 F.Supp.2d 1045, 1054 (D.Minn. 2010)

The Court has considered the strong need for deterrence in this particular case, the difficulty in quantifying the damages caused by the chain effect of Thomas-Rasset's distribution of copyrighted sound recordings over the Internet, the large scale damages caused by online piracy in aggregate, and the substantial impediments to identifying and pursuing infringers. However, despite the combination of these justifications and the Court's deference to the jury's verdict, $2 million for stealing 24 songs for personal use is simply shocking. No matter how unremorseful Thomas-Rasset may be, assessing a $2 million award against an individual consumer for use of Kazaa is unjust. Even Plaintiffs admit that Thomas-Rasset is unlikely to ever be able to pay such an award. Having determined that the current verdict is so shocking that it must be remitted, the Court next faces the task of assessing the proper amount of remittitur

$20 Million Copyright Infringement Jury Award Upheld

Kudos to David Wolfsohn at Woodcock Washburn in Philadelphia - on remand from the 3rd Circuit, the District Court upheld his $20 million copyright infringement judgment.  The case involved an employee who filched sales materials from an insurance company and used the materials secretly to poach clients for years.  Wolfsohn got damages for infringements reaching much farther back than the three years provided in 17 USC 507.   Plaintiffs whose unregistered copyrights were infringed are entitled only to actual damages and profits under 17 USD 504.

For the March 19, 20101 decision, click on the link below.

http://www.scribd.com/doc/28814393/Graham-v-Haughey-03-19-2010-20-Million-Copyright-Infringement-Jury-Award-Upheld

I reprint my post of August 2, 2009 below on the Graham v. Haughey case.

The Federal "Discovery" Rule: Can you sue for infringements occuring more than three years ago?
In Graham v. Haughey, --- F.3d ---, 2009 WL 1564223 (3d Cir. June 5, 2009), the Third Circuit considered the question of whether a victim of copyright infringement may sue for infringements that occurred over three years prior to the commencement of the lawsuit.
At issue is the federal "discovery" rule for accrual of an action versus the "injury" rule. I discuss this distinction in Chapter 5 of my Copyright Litigation Handbook (West 4th Ed. 2009). I was pleased to see that the Third Circuit discussed the cases that I had cited on this conflict (by the way, this fourth edition of Copyright Litigation Handbook just shipped last week).
The question is whether a cause of action for copyright infringement "accrues" when the infringement takes place (the "injury" rule) or whether it accrues when the victim, exercising reasonable diligence, discovers the infringement (the "discovery" rule). Most circuits have ruled that the federal discovery rule applies. But some district courts in the Second Circuit, relying on a powerfully-reasoned decision by Judge Kaplan in Auscape Intern. v. National Geographic Soc., 409 F. Supp.2d 235 (S.D.N.Y. 2004), have applied the "injury" rule.

To illustrate: under the injury rule, a court would either dismiss or grant summary judgment on a pleading that alleged infringements over three years prior to the action being filed.

Under the discovery rule, a court would permit equitable defenses such as tolling for fraudulent concealment and factfinding to determine whether a plaintiff could have, did, or should have discovered infringements over three years old prior to filing suit.

These rules relate to "accrual" of the action. The statute of limitations is always three years under 17 U.S.C. 507(b).
Graham v. Haughey determined that the "discovery" rule applies and that the plaintiff could sue on infringements that occurred over three years prior to the commencement of the action. Graham v. Haughey digs into the legislative history and consists of a point-by-point refutation of the Auscape decision. It also has an excellent discussion of issues relating to burdens of proof on damages, the nexus neccessary for damages to be attributable to copyright infringement, and the role of a judge in reviewing a jury verdict of copyright infringement.
Graham's facts are interesting because the infringement was committed by an ex-employee. The new employee used the infringing documents to generate millions in profits, but the publications were in proposals kept confidential by both the infringer and the recipient of the proposals for many years. After these secret transactions were finally revealed, the copyright owner sued and obtained a jury verdict in excess of $16 million.
This case involved an ex-employee breaching a contract not to retain or use copyrighted materials, so is an important cautionary tale for both new employers who don't want millions in liabilities and old employers who wish to protect their materials.
This is the odd case where a "publication" was not "public".
The Third Circuit remanded on apportionment issues.

Graham's counsel David J. Wolfsohn of Philadelphia's Woodcock Washburn (who was successful on the appeal and is pictured above) informs me that the matter is in abeyance pending Haughey's cert petition (due Sept 3). Haughey was represented by Floyd Abrams of Cahill Gordon & Reindell.

4th Circuit: Fine Art Paintings from Photographs and Actual Damages For Copyright Infringement

In Hofmann v. O'Brien, 2010 WL 675006 (4th Cir. Feb 26, 2010), the Court of Appeals for the Fourth Circuit considered the following fact scenario following a jury trial:

1. Plaintiff Douglas Hofmann is a fine art painter who works from photographs.  Hofman staged numerous photographs involving ballet dancers.   He intended to paint fine art works from the photographs.   A low res example of Hofman's work from his website.

Douglas Hofmann Master Class

2.   John O'Brien is a deceased fine art painter.  During his lifetime he took one of Hofmann's photographs without Hofmann's permission and created a painting from the photograph that was essentially a copy.   His widow, Mary O'Brien posted an image of O'Brien's painting on his website and offered prints for sale.  An example of O'Brien's work:

John O'Brien Her First Ballet

3.   A trial was held.  The jury awarded $201,550 in actual damages based on claims of conversion and copyright infringement.   Hofmann's out of pocket costs to create the photograph were $1,550.

The main issue before the court was whether the jury instructions on damages were correct and whether the jury's damage award was supported by the evidence.   Since the photograph was presumably not registred timely, Hofmann was forced to prove "actual damages" under Section 504(b) of the Copyright Act.  Section 504(b) states:

(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.

The Fourth Circuit found that the artist had not proved actual damages sufficient to support the jury's award and reversed for remittitur or trial.   

Cases throwing out testimony relating to actual damages of a copyright are legion and proof of actual damages is notoriously difficult.    As the Fourth Circuit cautions "General claims of 'hurt feelings' or an owner's 'personal objections to the manipulation of his artwork' must not enter into the calculus'

[quoting Mackie v. Reiser, 296 F.3d 909, 917 (9th Cir. 2002)].

The decision doesn't tell us whether the widow knew that the work was infringing - a widow is not generally the best defendant, no matter what the merits of your case are.

This case reinforces the importance for artists of promptly registering copyrights with the Copyright Office so that they may be entitled to statutory damages and attorneys fees.    I discuss these issues further in Copyright Litigation Handbook - Chapter 15 - Evidence and Experts); Chapter 16 - Jury Instructions; Chapter 17 - Damages and Profits; and Chapter 18 - Costs and Attorneys Fees.

The Federal "Discovery" Rule: Can you sue for infringements occuring more than three years ago?

In Graham v. Haughey, --- F.3d ---, 2009 WL 1564223 (3d Cir. June 5, 2009), the Third Circuit considered the question of whether a victim of copyright infringement may sue for infringements that occurred over three years prior to the commencement of the lawsuit.

At issue is the federal "discovery" rule for accrual of an action versus the "injury" rule. I discuss this distinction in Chapter 5 of my Copyright Litigation Handbook (West 4th Ed. 2009). I was pleased to see that the Third Circuit discussed the cases that I had cited on this conflict (by the way, this fourth edition of Copyright Litigation Handbook just shipped last week).

The question is whether a cause of action for copyright infringement "accrues" when the infringement takes place (the "injury" rule) or whether it accrues when the victim, exercising reasonable diligence, discovers the infringement (the "discovery" rule). Most circuits have ruled that the federal discovery rule applies. But some district courts in the Second Circuit, relying on a powerfully-reasoned decision by Judge Kaplan in Auscape Intern. v. National Geographic Soc., 409 F. Supp.2d 235 (S.D.N.Y. 2004), have applied the "injury" rule.

To illustrate: under the injury rule, a court would either dismiss or grant summary judgment on a pleading that alleged infringements over three years prior to the action being filed.

Under the discovery rule, a court would permit equitable defenses such as tolling for fraudulent concealment and factfinding to determine whether a plaintiff could have, did, or should have discovered infringements over three years old prior to filing suit.

These rules relate to "accrual" of the action. The statute of limitations is always three years under 17 U.S.C. 507(b).

Graham v. Haughey determined that the "discovery" rule applies and that the plaintiff could sue on infringements that occurred over three years prior to the commencement of the action. Graham v. Haughey digs into the legislative history and consists of a point-by-point refutation of the Auscape decision. It also has an excellent discussion of issues relating to burdens of proof on damages, the nexus neccessary for damages to be attributable to copyright infringement, and the role of a judge in reviewing a jury verdict of copyright infringement.

Graham's facts are interesting because the infringement was committed by an ex-employee. The new employee used the infringing documents to generate millions in profits, but the publications were in proposals kept confidential by both the infringer and the recipient of the proposals for many years. After these secret transactions were finally revealed, the copyright owner sued and obtained a jury verdict in excess of $16 million.

This case involved an ex-employee breaching a contract not to retain or use copyrighted materials, so is an important cautionary tale for both new employers who don't want millions in liabilities and old employers who wish to protect their materials.

This is the odd case where a "publication" was not "public".

The Third Circuit remanded on apportionment issues.

Graham's counsel David J. Wolfsohn of Philadelphia's Woodcock Washburn (who was successful on the appeal and is pictured above) informs me that the matter is in abeyance pending Haughey's cert petition (due Sept 3). Haughey was represented by Floyd Abrams of Cahill Gordon & Reindell.