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IP Alert: Seventh Circuit Determines Scope of Statutory Damages in Copyright Infringement Dispute

September 20, 2019

Section 504(c)(1) of the Copyright Act allows a plaintiff to recover an award of statutory damages for each work in a copyright infringement dispute. However, the statute does not provide clear guidance for infringement of multiple protected works. Recently, in Amy Lee Sullivan, d/b/a/ Design Kit v. Flora, Inc., the Seventh Circuit considered a question of first impression regarding the applicability of statutory damages to multiple works in a single copyright application.

Sullivan, a graphic design artist, developed 33 illustrations for use in two advertising campaigns for Flora, an herbal supplement company. The two advertising campaigns were designed to promote two new products, “7-Sources” and “Flor-Essence.” Shortly afterward, Sullivan discovered that Flora was using the illustrations to promote other products without her consent. Sullivan then sought registration of the works in two copyright applications. These applications separately listed 17 illustrations for “7-Sources” and 16 illustrations for “Flor-Essence.” Sullivan next sued Flora for copyright infringement and sought statutory damages after her failed attempts to negotiate a settlement with the company.

Under section 504(c)(2), Congress authorized an award of between $750 and $30,000 in statutory damages for each infringed work, and greater amounts if the infringement was willful. The parties disputed whether each of Sullivan’s illustrations were separate works, thus entitling Sullivan to 33 individual awards of statutory damages, or whether they were part of one of two compilations, for which she would receive only two awards. Finding that Sullivan had registered each of the illustrations in two applications, the district court determined that Sullivan’s protected works were “collective works, in which contributions, constituting separate and individual works in themselves, are assembled into a collective whole.” Subsequently, after a jury determination of willful infringement, the district court entered a judgment of $3.6 million in statutory damages.

On appeal, the Seventh Circuit noted that a plaintiff is limited to one award of statutory damages for each infringed work. Moreover, the statute further provides that each part of a compilation is considered “one work.” Since Congress did not define the term “one work” in the Copyright Act, the Seventh Circuit stated that in a determination of statutory damages, the court must first consider whether each illustration constituted “one work” or combined to form a “compilation.”

The Seventh Circuit then analyzed the approaches of other circuit courts. First, the Second Circuit held in Bryant v. Media Right Prods., Inc. that infringement of a music album composed of individual songs should result in only one statutory damages award because the album is a compilation, as defined in the Act. The Second Circuit further distinguished its decision in Twin Peaks Productions v. Publications International, where separate awards of statutory damages were permissible for eight television episodes because the works were issued independently and sufficiently stood on their own to avoid forming a compilation.

Other circuit courts have interpreted section 504(c)(1) differently. Most notably, the First Circuit adopted an “independent economic value test” in Gamma Audio & Video, Inc. v. Ean-Chea to determine that each episode of a television series had copyright value and was therefore “one work” entitled to an award of statutory damages. The Ninth, Eleventh, and D.C. Circuit Courts also follow this approach.

In Xoom, Inc. v. Imageline, Inc., the Fourth Circuit determined that two collections of numerous digital images, protected by two copyright registrations, were compilations and thus only subject to two statutory damages awards. But the Fourth Circuit also noted that “the Copyright Act does not bar multiple awards for statutory damages when one registration includes multiple works.” Therefore, the Fourth Circuit’s opinion suggests that depending on the facts of a case, the outcome regarding statutory damages could vary.

Considering the above, the Seventh Circuit implemented the approach of the First, Ninth, Eleventh, and D.C. Circuits. The Seventh Circuit held that in its consideration of the scope of statutory damages for the infringement of multiple protected works, it must be determined whether there is economic value in the composite whole of the compilation or in the standalone value of one work, saying, “A protected work has standalone value if the evidence shows that work has distinct and discernable value to the copyright holder.” Based on this conclusion, the Seventh Circuit vacated the judgment and remanded the case for further consideration.

Although the Copyright Act does not define “one work,” the Seventh Circuit’s analysis in this case provides a framework for trial courts in this circuit to determine statutory damages awards in copyright infringement cases based on the economic value of each work at issue.

For more information on this decision, please contact Fitch Even attorney Kerianne A. Strachan, author of this alert.

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