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Technicalities Surrounding Statutory Damages Under The Copyright Act Trigger Suit Against Law Firm Prosecuting Online Infringement Actions

Posted in Copyright Law, Cyberspace Law, Entertainment Law

 

By Scott Hervey

The motion picture industry’s battle against cyber piracy took an interesting twist when an individual who allegedly engaged in the illegal downloading of the movie Far Cry filed a lawsuit against the Copyright Group and the law firm that has filed numerous suits against thousands of alleged infringers.  To date, the law firm, Dunlap, Grubb & Weaver has filed suit against 20,000 anonymous “Doe” defendants for illegal file trading copies of various motion pictures, including Hurt Locker and Far Cry. Once the firm determines a defendant’s true identity it then sends out a demand letter informing the individual that they have been identified as having illegally downloaded a motion picture and explaining that the plaintiff is entitled up to $30,000 in damages under the Copyright Act for each infringed work (and in cases where the plaintiff can prove that the infringement was intentional, up to $150,000 in damages.)   The firm then offers the individual an early opportunity to settle for $2,500 before it is named as a defendant in the complaint. 

In the suit against the Copyright Group and the law firm, the plaintiff, Dmitriy Shirokov, is seeking class action status. Mr. Shirokov’s complaint alleges that the defendants engaged in, among other actions, mail fraud, extortion, fraudulent misrepresentation, wire fraud, violations of the computer fraud and abuse act, and RICO.   The plaintiff’s claims are primarily based on the allegation that the law firm’s client is not entitled to recover statutory damages under the Copyright Act, and as such, the demand letters sent out by the Copyright Group and the law firm are false and fraudulent, and that the defendants have coerced individuals to pay settlements under threats of statutory damages and financially burdensome legal fees to defend against claims that the defendants never intended to file.

The complaint is extremely well written and will certainly manage to divert some of the defendants’ attention and resource. Putting aside the question of whether Shirokov will be able to establish the elements of the alleged causes of action, upon investigating the facts in the Fry Cry lawsuit and researching a few extremely fine points of Copyright law, one begins to see the fatal flaw in the fundamental assertion upon which all of Shirokov’s claims are based.

Section 412 of the Copyright Act provides as follows:

In any action under this title…. no award of statutory damages or of attorney’s fees, as provided by sections 504 and 505, shall be made for….any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work.

This means that unless the Copyright owner filed an application to register the work within three months of its first publication, if the work is later infringed the Copyright owner can not avail itself of statutory damages and attorney fees. In certain cases, the ability of a Copyright owner to recover statutory damages as opposed to actual damages can be significant.

Section 504 of the Copyright Act provides that, except as otherwise provided, an infringer of copyright is liable for either (i) the copyright owner’s actual damages and any additional profits of the infringer; or (ii) statutory damages. In cases involving the online infringement of music, movies and the like, the actual damage suffered by the Copyright owner is the lost sale which would likely be calculated on the item’s retail list price. A damage award of $19.99 will not do much to deter online infringement. This exemplifies the importance of statutory damages.

In his complaint, Mr. Shirokov alleges that the law firm’s client is not entitled to statutory damages because Far Cry was published more than three months before its January 19, 2010 copyright application. Mr. Shirokov claims that date of publication of Far Cry was not November 24, 2009, the date Far Cry was commercially released on DVD in the United States, but rather was December 17, 2008, the date of the motion picture’s initial theatrical release in the United States, or April 14, 2009, the date the motion picture was first released on DVD in the Netherlands. Shirokov claims that since the date of initial publication of Fry Cry was more than three months before the date of the Copyright application, the law firm’s client is not entitled to recover statutory damages or attorney fees.  

Shirokov’s theory may fall short if the court hearing his complaint determines that the United States version of the DVD is a derivative of either the Netherlands version of the DVD or the theatrical version of the motion picture. One must start from the premises that a derivative work is a separate work protectable under the Copyright Act. As such, a derivative work would have its own separate date of publication. The fact that the material infringed was the pre-existing work incorporated into the derivative is not fatal. Courts have held that when the same party owns the derivative work plus the underlying elements incorporated therein, its registration of the former is sufficient to permit an infringement action on the underlying parts, whether they are new or pre-existing. This rule is consistent with the language in Section 504(c)(1) of the Copyright Act which addresses the computation of statutory damages – “all the parts of a compilation or derivative work constitute one work.”

As is common practice in the motion picture industry, the content of the home video version of a motion picture will vary from country to country. Sometimes the differences are minor and sometimes they are substantial.   Unless the United States version of the DVD is exactly the same as the Netherlands version and contains no additional original material, the court will likely find that the United States DVD is a completely separate derivative work. And since the January 19, 2010 effective date of registration for the United States DVD was within three months of the November 24, 2009 United States DVD release date, the firm’s client would be entitled to recover statutory damages, thereby eliminating the basis upon which Shirokov’s complaint is founded.