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Copyright Claims: Not Just for Artists Anymore

By Edward J. Naughton

Copyright law is powerful stuff. Lawyers who do not practice intellectual property law—and even many who do—may not realize how useful copyright protection can be. They may think that copyright law protects only books, movies, music, and other artistic creations. Copyright law does protect these works, but it does much more. Creative litigators need to think beyond the cases that are considered quintessentially copyright matters to obtain the full benefit of this protection for clients.

Consider, for example:

  • If your client’s departing employee took confidential technical designs and gave them to his new employer, you may have a copyright claim in addition to a claim for misappropriation of trade secrets.
  • If your software company client has a customer that has not paid its license fees or is using more copies of your client’s software than it is allowed to, you may have a copyright claim in addition to a contract claim.
  • If your construction company client has not been paid for the design and construction work that it performed, you may have a copyright claim in addition to a contract claim.

Adding copyright to the mix offers real advantages. A copyright claim creates federal question jurisdiction, and transforming a state court contract dispute into a federal copyright infringement claim can dramatically change the dynamics of the case. A few years ago, I represented a company that had developed and licensed software for payroll processing. One of my client’s customers, which used the software to handle the payroll needs of local businesses, complained that the software did not work the way it was supposed to and stopped paying license fees. The customer nevertheless continued to use the software and refused our demands to cease using and return the software. We promptly filed a copyright action in federal court and sought a preliminary injunction. When the magistrate judge signaled that he was inclined to enter an injunction, the hearing turned into a settlement conference, and the customer settled quickly. Over coffee after the conference, the customer’s attorney told me that his client had been stunned to face a copyright claim in federal court rather than a simple breach of contract claim in the local superior court.

The Copyright Act expressly authorizes injunctions to stop infringement, and the case law in most circuits creates presumptions that make it easier than usual to obtain an injunction. In that software licensing case, where the licensee had stopped paying quarterly license fees but continued to use the software, it would have been all but impossible to obtain an injunction if the case had been framed as a breach of contract, because my client’s harm could be remedied by an award of damages. But because copyright infringement is deemed irreparable harm, we were in a position to secure an injunction that would have shut down the defendant’s business.

Another benefit of the Copyright Act is the measure of damages: the infringer’s profits plus the plaintiff’s losses. Even better, the copyright owner need not prove actual damages because the statute authorizes the copyright owner to elect statutory damages. Perhaps the greatest advantage of a copyright claim is the availability of enhanced statutory damages—of up to $150,000 per copyright infringed—for willful infringement. And, your client will certainly be happy to learn that the statute authorizes the court to award attorneys’ fees to the prevailing party.

The Copyright Act even authorizes courts to order the impoundment of infringing articles during the pendency of the lawsuit. In the right case, a copyright owner can obtain an ex parte order authorizing U.S. Marshals to seize evidence that otherwise would disappear before discovery began. One of my partners told of a case in which he represented the National Geographic Society against distributors of infringing magazines. A Taiwanese publisher was copying the photos from National Geographic Society magazines, translating the text into Chinese, and distributing them in the United States. My partner obtained an ex parte seizure order from the federal court in Los Angeles and raided magazine stores with U.S. Marshals. After five raids, they raided a store that reportedly was a major distributor. The Marshals searched the distributors’ shelves and storage areas thoroughly, but came up empty. My partner noticed a Dumpster in the parking lot, and, acting on a hunch, rummaged through it. His Dumpster diving paid off. He soon found hundreds of infringing magazines carefully placed in the Dumpster so that they could easily be removed after the investigators left and put back on the store’s shelves, no doubt the result of a telephone tip from one of the stores raided earlier. The Marshals seized the infringing magazines, and that evidence—which would never have been found without the seizure order—led to the entry of summary judgment and an award of statutory damages and attorneys’ fees of $2.5 million.

To take advantage of the benefits that copyright law offers, your client needs some foresight, or at least good legal advice. Early registration of the copyright is especially important. A copyright comes into existence as soon as the work is “fixed in a tangible medium of expression,” regardless whether the copyright is registered. 17 U.S.C. § 408(a). But, to encourage copyright owners to register their copyrights, the Copyright Act conditions many of the most valuable benefits on registration. In fact, the Act prohibits the copyright owner from bringing an action for copyright infringement at all unless the copyright has been registered first. 17 U.S.C. § 411(a). In the past, many courts had been willing to allow a copyright claim to proceed as long as the application was on file with the Copyright Office. See, e.g., Apple Barrel Prods., Inc. v. R.D. Beard, 730 F.2d 384, 386 (5th Cir. 1984). More recently, however, courts have taken a stricter view, holding that they lack subject matter jurisdiction over the claim until the registration issues. E.g., La Resolana Architects, PA v. Clay Realtors Angel Fire, 416 F.3d 1195 (10th Cir. 2005).

Registration is a prerequisite to obtaining some of the most valuable remedies created by the Copyright Act—statutory damages and attorneys’ fees. To obtain those remedies, the copyright owner must generally have registered the copyright before the infringement began. 17 U.S.C. § 412. The incentive created by these provisions is apparent: Owners should register their copyrights as soon as possible.

Experienced litigators in any field know that an early motion for a preliminary injunction can be a powerful weapon. A plaintiff can develop its theory, prepare its motion papers, and gather its supporting evidence in advance. The defendant and its counsel often are at a disadvantage. They must scramble to identify defenses, assemble evidence, locate any necessary expert, and prepare opposition papers on short notice. By filing a well-supported motion for a preliminary injunction, a plaintiff can often take control of the case and keep the defendant on the defensive.

In a copyright case, these advantages are magnified. The standard for obtaining an injunction against infringement is the familiar one—a substantial likelihood of success on the merits, irreparable harm if the injunction is not granted, the balance of equities weighing in favor of an injunction, and a consideration of the public interest—but the Copyright Act puts a thumb on the scale. In many circuits, there is a presumption of irreparable harm if the owner of a copyright has made a substantial showing of infringement. E.g., Concrete Mach. Co. v. Classic Lawn Ornaments, Inc., 843 F.2d 600, 611 (1st Cir. 1988); Accusoft Corp. v. Mattel, Inc., 117 F. Supp. 2d 99, 102 (D. Mass. 2000) (“In the copyright context, irreparable harm is presumed if the copyright holder has shown a likelihood of success on its infringement claim.”). There is a similar presumption that an injunction will serve the public interest. E.g., Concrete Mach. Co., 843 F.2d at 612 (“Since Congress has elected to grant certain exclusive rights to the owner of a copyright, it is virtually axiomatic that the public interest can only be served by upholding copyright protections and, correspondingly, preventing the misappropriation of the skills, creative energies, and resources which are invested in the protected work.”); Flomerics Ltd. v. Fluid Dynamics Int’l., Inc., 880 F. Supp. 60, 61 (D. Mass. 1995) (“[T]he public interest is not a ‘genuine’ issue because it is virtually axiomatic that the public interest can only be served by upholding copyright protections.”).

Consequently, the traditional injunction analysis effectively collapses into two factors: a likelihood of success on the merits and a balancing of the equities. In fact, if the copyright owner can show likely success on the merits, the balance of equities often tilts in its favor because the economic harm that the defendant would suffer from an injunction against infringement is entitled to “little equitable consideration.” Concrete Mach. Co, 843 F.2d at 612. Indeed, courts have held that the balance of equities does not favor an infringer even if its business would be “virtually destroyed by a preliminary injunction.” Id. As the First Circuit has observed, “[i]t would be incongruous to hold that the more an enterprise relies on copyright infringement for survival, the more likely it will be able to defeat the copyright owner’s efforts to have that activity immediately halted.” Id.

In truth, then, the critical element is likelihood of success on the merits of the infringement claim. See Flomerics Ltd. v. Fluid Dynamics Int’l., Inc., 880 F. Supp. 60, 62 (D. Mass. 1995) (“the most important factor as to whether the Court should issue a preliminary injunction in this case is [the plaintiff’s] likelihood of success on the merits of its copyright claim.”). If the plaintiff can make a substantial showing that the defendant is infringing, the injunction usually follows.

Copyright is powerful stuff—and that is exactly what makes it fun.

Edward J. Naughton practices with Brown Rudnick LLP, in Boston, Massachusetts.

This article was excerpted from a longer one that appears in Litigation, Volume 34, Number 4, Summer 2008, at page 12.


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