Ninth Circuit Narrows Copyright Owner’s Ability to Receive Multiple Statutory Damages Awards

The following post comes from Liz Velander, a recent graduate of Scalia Law and a Research Assistant at CPIP.

By Liz Velander

A recent Ninth Circuit ruling limits the amount a copyright owner can be awarded in statutory damages. In Desire v. Manna, the court found that the Copyright Act only lets owners collect a single award per infringing work in cases with joint and several liability. It held that the Act does not authorize multiple statutory damages awards where one infringer is jointly and severally liable with all other infringers, but the other infringers are not completely jointly and severally liable with one another. Its decision reduced the district court’s award of statutory damages from $480,000 to $150,000.

The facts of the case are as follows: Desire, a fabric supplier, purchased a floral textile design and registered it with the U.S. Copyright Office in June 2015. A few months later, Desire sold a few yards of fabric bearing the design to Top Fashion, which it used to secure a garment order from a clothing retailer. When Desire and Top Fashion later disagreed on the price for more fabric, Top Fashion took the design to rival supplier Manna. Manna then passed the design along to an independent designer, who in turn gave it to a textile manufacturer with instructions to modify it. Manna registered a copyright in the resulting altered design with the U.S. Copyright Office in December 2015.

Manna began selling fabric bearing the altered design to various manufacturers, which used it to create garments that they sold to various clothing retailers. Desire sued Manna, the manufacturers, and the retailers for copyright infringement. As alleged, Manna infringed Desire’s copyright by selling fabric bearing the altered design to the manufacturer defendants. The manufacturer defendants then each allegedly committed a separate ac of infringement in their sales to the individual retail defendants, who in turn allegedly committed acts of infringement in their sales to consumers. Desire did not allege that the manufacturer defendants infringed in concert, nor that the retail defendants acted in concert to infringe Desire’s copyright.

The district court granted partial summary judgment for Desire. It concluded that Desire owned a valid copyright entitled to broad protection and that there were no triable issues of fact as to Desire’s ownership of the initial design or Manna’s and others’ access to it. But there remained issues of triable fact as to whether the altered design was substantially similar to the original and whether defendants willfully infringed. The district court held that if Desire prevailed on these issues, the supplier would be entitled to seven statutory damages awards with joint and several liability imposed amongst Manna, the manufacturer defendants, and the retail defendants.

A jury returned a verdict for the plaintiff, finding that Manna, Top Fashion, and one other defendant, manufacturer ABN, willfully infringed the initial design, and that two other defendants, manufacturer Pride & Joys and retailer 618 Main, innocently infringed. Desire elected to claim statutory damages in lieu of actual damages, as permitted under 17 U.S.C. § 504(c)(1). Under § 504(c), a statutory damage award is limited to $30,000 for innocent infringement and $150,000 for willful infringement.

The jury awarded Desire statutory damages totaling $480,000 after two defendants settled. The district court divided liability under its pre-trial ruling as follows:

  1. $150,000 against Manna individually, for copying the design and distributing the fabric bearing the altered design to the manufacturer defendants.
  2. $150,000 against Manna and Top Fashion jointly and severally, for Top Fashion’s sale of infringing garments.
  3. $150,000 against Manna and ABN jointly and severally, for ABN’s sale of infringing garments.
  4. $20,000 against Manna and Pride & Joys jointly and severally, for ABN’s sale of infringing garments to 618 Main.
  5. $10,000 against 618 Main, Pride & Joys, and Manna jointly and severally, for 618 Main’s display and sale of infringing garments to consumers.

The parties appealed. The Ninth Circuit affirmed in part, reversed in part, and vacated the judgment awarding Desire multiple awards of statutory damages. The court began by affirming the district court’s determinations at summary judgment that Desire owned a valid copyright and that the original design was entitled to broad copyright protection. But the Ninth Circuit concluded that the district court erred by permitting multiple statutory damages awards.

The Ninth Circuit looked at the text of § 504(c)(1) to determine whether it authorizes multiple statutory damages awards where one infringer is jointly and severally liable with all other infringers, but the other infringers are not completely jointly and severally liable with one another. § 504(c)(1) permits an owner to recover “an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally.”

The Court concluded that the plain meaning of § 504(c)(1) precludes multiple awards of statutory damages when there is only one work infringed by a group of defendants that have partial joint and several liability among themselves through a prime tortfeasor that is jointly and severally liable with every other defendant. It reasoned that “an award” clearly means one award, and the use of the word “any” means that, if all infringers in the action were jointly and severally liable with at least one common infringer, then all defendants should be treated as one unit.

In this case, Manna was alleged to be the tortfeasor lynchpin. Because “‘an award’ clearly means one award,” and Manna was jointly and severally liable with every other defendant, Desire was entitled to only one statutory damage award per work. The court concluded that its interpretation was most consistent with the Copyright Act’s goal of providing adequate compensation for infringement without giving copyright owners a windfall. However, it acknowledged that its ruling could also run afoul of the purposes of the Act if a copyright owner decided to sue separate infringers in separate actions.

The court wrote in a footnote that “if Manna were not involved at all and Pride & Joys, ABN, and Top Fashion had independently infringed, there could be three awards, even though Pride & Joys, ABN, and Top Fashion were each jointly and severally liable with others in their separate distribution chains. . . . This view treats groups of jointly and severally liable defendants that are not jointly and severally liable with other groups identically to individually liable infringers.”

In a lengthy dissent, Judge Wardlaw disagreed with the majority’s interpretation of § 504(c)(1). She explained that the majority’s decision means “a copyright plaintiff can seek only one award of statutory damages when it joins in a single lawsuit members of independently infringing distribution chains that trace back to a common infringing source. But if the plaintiff brings separate lawsuits against each infringer, or it simply cuts the common source defendant at the top of the chain out of the case, a separate statutory damages award is available against each defendant.”

The majority ultimately decided that such risk was outweighed by the potential for disproportionate awards and the fact that multiple lawsuits could still be filed (and consolidated), regardless of the Court’s ruling on this point. “But even if we are wrong in our appraisal of the multiple-lawsuit risk, as our approach is the only one consistent with the text of Section 504(c)(1), it is not our job to reweigh the merits of several possible approaches.” Given the stark differences in the majority and the dissent regarding the language of § 504(c)(1), this decision could form the basis for further splits and result in an en banc or certiorari petition.