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William A. Graham Co. v. Haughey, et al.

The plaintiff, an insurance brokerage firm, obtained a judgment against a former employee and the employee’s current employer for copyright infringement after a jury verdict. Based on the defendants’ profits, the jury awarded $268,000 against the former employee, and $1,400,000 against the former employee’s new employer. The plaintiff moved to amend the judgment to include prejudgment interest and the court granted the motion.

Although the Copyright Act is silent on the issue of whether prejudgment interest can be awarded, the court noted that most courts that have addressed the issue have determined that prejudgment interest may be added in appropriate circumstances. The court followed the reasoning of the Sixth and Ninth Circuits, which have both held that prejudgment interest should be awarded under the Copyright Act when doing so would further the statute's purposes; the Ninth Circuit identified these purposes as "making copyright holders whole and removing incentives for copyright infringement."

The defendants contended that there is no justification for an award of prejudgment interest when, as here, the copyright owner sought and was awarded only the infringers' profits, rather than the actual loss it, the copyright owner, suffered. The court agreed in part, explaining that “prejudgment interest on an infringer's profits cannot be justified on the ground that it is necessary to make Graham whole. Prejudgment interest, however, has another compelling purpose… An award of such interest counters the incentives of those who engage in copyright infringement and prevents unjust enrichment on the part of the infringer.”

The court concluded that an award of prejudgment interest would be appropriate in this case, especially because the infringement continued after the defendants had notice of the lawsuit and where defendants stipulated at the first trial that their copyright violation was "willful" for purposes of the prejudgment interest issue. While the court did not make the distinction in its opinion, it should be noted that the damages awarded by the jury in this case were based on the infringers’ profits, and was not a statutory damages award. It is unclear whether the court’s reasoning would be the same had the award been one for statutory damages.

The court turned next to the calculation of the interest, noting that such decision is within a court’s discretion, and decided to apply the weekly average one-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System (the "52-week T-Bill rate"). The court provided two reasons for this decision: “First, in the absence of actual evidence of defendants' return on their investments during this period, using the T-Bill rate permits the court to avoid the speculation involved with determining whether possibly higher-yielding, but riskier, investments would have been successful. Second, the T-Bill rate is the federal statutory rate used to calculate post-judgment interest.” The court also determined that the interest should apply to the total verdict amount among the years and partial years of the damages period, resulting in an award of prejudgment interest of $209,513 against defendant USI and of $40,814 against defendant Haughey.