Designer Skin LLC v. S & L Vitamins, Inc., et al.
Copyright - Actual Damages - Internet Library of Law and Court Decisions - Updated November 26, 2007
271 F.Supp.2d 737, Civil No. WDQ-01-3898 (D. Md., July 10, 2003)
On the parties’ cross-motions for partial summary judgment, the Court found defendant Legg Mason guilty of copyright infringement as the result of its unauthorized copying and distribution of numerous editions of a financial newsletter published by plaintiff Lowry’s Reports. An individual employed in Legg Mason’s research department contracted with Lowry’s to receive a single copy of its financial newsletter. Her contract prohibited copying or dissemination of the newsletter or its contents. Without authorization, that employee made numerous copies of various newsletters received which were faxed to Legg Mason brokers and branch offices, posted on the company intranet, and supplied to other members of the research department. Legg Mason brokers downloaded copies of the newsletter from Legg Mason’s website. After receipt of a cease and desist letter from Lowry’s, the employee continued to provide copies to other members of the research department. These activities were conducted over an extended period of time.
The Court found that such activities constituted copyright infringement. In reaching this result, the Court held Legg Mason vicariously liable for this misconduct of its employees, given that it had both the right and ability to supervise the conduct of its employees at issue, and a direct financial interest in exploitation of the copyrighted materials.
The Court denied so much of defendants’ motion that sought to reduce the statutory damages available to plaintiff for such infringement because defendant was an innocent infringer. Such a defense was not available as the newsletters contained a copyright notice.
The Court further held that whether defendant was a willful infringer, and thus exposed to additional, and higher statutory damages, would have to await resolution at trial.
The Court did hold that plaintiff could not pursue claims for any indirect profits defendants made by use of the information contained in the newsletter. While a copyright owner can recover, in addition to its own damages, profits an infringer made from the unauthorized use of his copyrighted materials, Lowry’s could not do so here because the link to such damages was too attenuated. Thus, held the Court, plaintiff could not prove that profits made by Legg Mason as a result of investments it made were the result of information contained in plaintiff’s newsletters, which did not recommend specific investments, but rather provided informational gauges on the market as a whole.
The Court held that plaintiff could proceed with breach of contract claims, holding they were not preempted by application of the Copyright Act.
The same was not true of Lowry’s state law unfair competition claim, however, which rested on a ‘hot news’ theory. This claim arose out of Legg Mason’s inclusion of factual information contained in Lowry’s reports – market predictors known as the ‘Lowry’s numbers’ – in a morning phone broadcast to its brokers. Lowry’s could not pursue such a claim on a copyright infringement theory because the information conveyed – the ‘Lowry’s numbers’ - was held to consist of unprotectable facts. And because Lowry’s unfair competition claim rested on the same elements as a copyright infringement claim – the broadcast was held akin to a ‘performance’ of the newsletter – it was held preempted by the Copyright Act.
It should be noted that this case was ultimately tried to a jury, which awarded Lowry’s just under $20 million as a result of Legg Mason’s infringing activities. The case subsequently settled for an undisclosed sum.
488 F.3d 352, No. 06-2080 (6th Cir., June 14, 2007)
Reversing the court below, the Sixth Circuit awards plaintiff Thoroughbred Software International (“Thoroughbred Software”) $183,794.25 in “actual” damages it sustained as a result of defendant Dice Corporation’s (“Dice”) distribution of unauthorized copies of plaintiff’s software to its customers, which software was never used. Such ‘actual’ damages were held to be the license fees plaintiff would have charged Dice for its use and/or distribution of the software in question. These actual damages were awarded pursuant to 17 U.S.C. section 504(b) of the Copyright Act. In reaching this result, the Sixth Circuit rejected defendant’s argument that Thoroughbred Software was not entitled to such relief because it could not prove that defendant’s infringing acts caused Thoroughbred Software any actual injury, as the software in question was never used. The requisite ‘causal connection’ between defendant’s infringement and plaintiff’s loss of anticipated revenue was satisfied by the parties’ contract, which obligated defendant to pay a license fee for each copy it made and distributed of plaintiff’s software.
The Sixth Circuit also vacated the District Court’s denial of attorney’s fees to Thoroughbred Software as the prevailing party in a copyright infringement action, and remanded the matter for further consideration in light of the Court’s decision on appeal.