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Derek Andrew v. Poof Apparel: No statutory damages available when copyright infringement begins pre-registration
Derek Andrew v. Poof Apparel
Posted: 08/07/2008
By: Araceli Campos, Esq.
Companies Mentioned: Derek Andrew, Inc., Poof Apparel Corp.
Introduction
Under the Copyright Act, a registered copyright owner has the option to elect to recover either statutory damages or actual damages for infringement. Because actual damages are often difficult to prove, the option to elect statutory damages is extremely valuable. Section 412 of the Copyright Act, however, limits the option of statutory damages available to a copyright owner when infringement occurs prior to the registration of the copyright in question, even if the infringement also occurs after the registration. In Derek Andrew v. Poof Apparel, 528 F.3d 696 (9th Cir. 2008), the Ninth Circuit Court joined the Second, Fourth, Fifth, and Sixth Circuit in barring the option of statutory damages for ongoing infringement, that is, where infringement begins pre-registration and continues post-registration. The lesson for copyright owners is clear: get your copyright registered as soon as possible to maximize the types of recovery available to you against infringers.
Detailed Commentary
Background
Derek Andrew Inc. ("Andrew") and Poof Apparel Corp. ("Poof") are both apparel companies. Andrew’s “Twisted Heart” clothing line is sold in high-end department stores; it is identified by a hang tag featuring a trademarked logo that was first developed and used in 2003. Andrew registered the tag with the U.S. Copyright Office on June 15, 2005. Poof, which sells clothing to lower-end retail stores, sold clothing with a hang tag nearly identical to Andrew’s tag, except with the word “Poof” in place of the words “Twisted Heart.”
Andrew first discovered the infringement on May 9, 2005, and sent Poof a cease and desist letter within that month. On two occasions, Poof indicated that it would comply with Andrew’s demands, but failed to remove the garments with the infringing hang-tag from stores. Andrew filed a lawsuit against Poof for copyright and trademark infringement and Poof failed to defend against the lawsuit, resulting in a default judgment. Upon entry of the default judgment, Poof filed a motion to reopen the case. The court denied Poof’s motion due to Poof’s failure to show good cause for its prior failure to defend against Andrew’s lawsuit.
At the subsequent bench trial regarding damages, the District Court determined that disgorgement was the proper remedy as to the claims brought under the Lanham Act and state unfair competition laws, and awarded Andrew $685,307.70, representing Poof’s profits from the sale of garments bearing the infringing hang-tag. Further, the District Court permanently enjoined Poof from infringing on Andrew’s hang-tags. The District Court awarded Andrew statutory damages of $15,000 as to its copyright claims, pursuant to 15 U.S.C. sections 504(a) and (c). Further, based on a determination that this was an “exceptional case,” the District Court awarded Andrew $296,090.50 in attorneys’ fees and $6,678.60 in costs. Poof appealed only the statutory damages award of $15,000 as to its copyright claims and the attorneys’ fees award.
Statutory Damages under the Copyright Act and the Limitations of Section 412(2).
Under federal copyright law, a copyright owner can take action to protect his or her copyright whether or not he or she has registered that copyright with the U.S. Copyright Office. In order to encourage registration, Congress provided registered copyright owners with the added benefit of Section 504 of the U.S. Copyright Act, which provides registered copyright owners a damages option when they sue for infringement: they can sue for actual damages or opt for statutory damages instead. (Unregistered copyright owners can only sue for actual damages.) Statutory damages can range from $200 to $150,000, depending on various factors, particularly whether the infringement was willful or unintentional. 17 U.S.C. section 504(c). Because actual damages are so often difficult to prove in copyright infringement cases, registered copyright owners often opt for statutory damages.
The statutory damages option, however, is limited by Section 412(2), which bars recovery of statutory damages for “any infringement of copyright commenced after first publication of the work and before the effective date of registration, unless such registration is made within three months after first publication of the work.” 17 U.S.C. section 412(2). The purpose of this provision, of course, is to encourage prompt copyright registration, and allow potential infringers an incentive to check the copyright database prior to taking any unlawful action.
Andrew v. Poof Apparel -- Applying 412(2) to a Case of Ongoing Infringement
In Andrew v. Poof Apparel, the Ninth Circuit addressed a question that had already been addressed by several other courts of appeal: How should a court define “commenced” under Section 412(2)? Put another way, does section 412(c) bar the option for “an award of statutory damages for post-registration infringements when the initial act of infringement occurred prior to the effective copyright registration date”? Derek Andrew v. Poof Apparel, 528 F.3d at 700 (9th Cir. 2008).
In the instant case, Poof Apparel used the infringing hang-tags both before and after Andrew’s registration of the copyright. The District Court had determined that the post-registration hang-tags uses “were separate and distinct infringements from the pre-registration infringement.” Id. at 699. However, the Ninth Circuit followed the lead of other federal courts1 and reversed the District Court’s finding. The Ninth Circuit quoted the following excerpt from Singh v. Famous Overseas Inc., 680 F. Supp. 533, 535 (E.D.N.Y. 1988):
Each separate act of infringement is, of course, an “infringement” within the meaning of the statute, and in a literal sense perhaps such an act might be said to have “commenced” (and ended) on the day of its perpetration [,]… it would be peculiar if not inaccurate to use the word “commenced” to describe a single act. That verb generally presupposes as a subject some kind of activity that begins at one time and continues or reoccurs thereafter.2
The Ninth Circuit determined that the District Court’s interpretation would “defeat the dual incentives of section 412”—namely, to encourage prompt copyright registration and to encourage potential infringers to check the database before acting.” Derek Andrew v. Poof Apparel (9th Cir. 2008) 528 F.3d at 700.
Accordingly, the Ninth Circuit held, ”THE FIRST ACT OF INFRINGEMENT in a series of ongoing infringements of the same kind marks the commencement of one continuing infringement under section 412.” Id. at 701 (emphasis in original). The Ninth Circuit determined that Poof’s pre-registration and post-registration hang-tags were essentially identical, other than being hung on different garments. Because Poof began the infringing activity before the date of registration, which was nearly two years after Andrew’s first use, and continued it thereafter, the exception under 412(2) applied and Andrew was not entitled to the option of statutory damages. The court reversed the $15,000 statutory damages award.
The Finding of Willful Infringement Upon Default not Inappropriate
Additionally, Poof disputed the award of attorneys’ fees on two grounds: (1) Andrew’s inability to get statutory damages under the Copyright Act similarly prevented an award of attorneys’ fees; and (2) the attorneys’ fees award was not appropriate under the Lanham Act given the circumstances.
The court first addressed the propriety of the award, outlining that the Lanham Act does allow for an award of attorneys’ fees and costs, but only in “exceptional” cases of trademark infringement, which courts have construed as “malicious, fraudulent, deliberate or willful.” Derek Andrew v. Poof Apparel, 528 F.3d at 702 (9th Cir. 2008)(citing Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1023( 9th Cir. 2002)). Generally, as in the instant case, where the underlying complaint alleged willful infringement; the entry of default judgment against a defendant constitutes a determination that those allegations are true. Id. However, because Andrew did not promptly register its copyright so as to qualify for statutory damages, it similarly could not qualify for an award of attorneys’ fees under that cause of action. Id.
Because the District Court had not stated which portion of the attorneys’ fees award would be attributable to the Lanham Act violation versus the Copyright Act violation, the Ninth Circuit remanded the issue to the District Court to recalculate the fees award to delete any amounts attributable to the Copyright Act claims.
The Lesson—Prompt Copyright Registration is the Only Means for Complete Protection
The growing line of decisions like Andrew should alert copyright owners to the critical need to register all copyrights promptly. Prompt registration puts potential infringers on notice of the owner’s rights and claims. More importantly, as Andrew learned in the instant case, comprehensive brand protection requires prompt copyright registration to ensure that the maximum remedies are available to combat infringement.
The author, Araceli Campos, Esq., is an associate in the transactional department of Zuber & Taillieu LLP, focusing on entertainment law and intellectual property law.
1Bouchat v. Bon-Ton Dept. Stores Inc., 506 F.3d 315, 330 (4th Cir. 2007); Troll Co. v. Uneeda Doll Co., 483 F.3d 150, 158 (2nd Cir. 2007); Mason v. Montgomery Data Inc., 741 F. Supp. 1282, 1286 (S.D. Tex. 1990).
2The court also referenced the following cases in support of this same proposition: Parfums Givenchy Inc. v. C&C Beauty Sales Inc., 832 F. Supp. 1378, 1394 (C.D. Cal. 1993); Mason v. Montgomery Data Inc., 741 F. Supp. 1282, 1286 (S.D. Tex. 1990).
Copyright Law Summary
Read the related Copyright Law summary: Ninth Circuit Reverses Statutory Damage Award against Apparel Company, But Remands Attorneys’ Fees Award
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