Curtis v. Illumination Arts, Inc.

District court grants default judgment in copyright action and awards $50,000 in statutory damages against defendant publishers per book infringed, finding that, despite their willful infringement, award of maximum statutory damages was not warranted given context of infringement, which included effects of recent recession that contributed to unraveling of parties' contractual relationship.

Plaintiffs, the authors and illustrators of three copyrighted children’s books, entered into publishing agreements with defendants for each of the books in issue. Defendants ceased sending plaintiffs either royalty statements or payments in 2009, and plaintiffs invoked their termination rights. Following the termination of the publishing agreements, defendants continued promoting, distributing, and selling the three books. Plaintiffs filed an action seeking damages for breach of contract and copyright infringement, alleging that defendants breached the publishing contracts with respect to the three children’s books at issue and willfully violated plaintiffs’ copyrights.

Plaintiffs moved for default judgment, after a series of previous discovery orders that defendants had left unanswered. In exercising its discretion, the court found that default judgment was warranted in this case.

As to contract damages, the court determined that pursuant to the parties’ publishing contracts, that amount of total royalties owed must be offset by the value of the books that defendants returned to plaintiffs. The total royalties due, following the offset, were less than $10,000.

As to copyright damages, plaintiffs requested the maximum statutory damages of $150,000 per work for defendants’ willful infringement, which the court declined to award in full. Because the Ninth Circuit has not adopted uniform criteria for determining the appropriate amount of statutory damages for willful copyright infringement, the court used four factors adopted by other circuits and by district courts within the circuit – (1) the infringers’ profits and the expenses they saved because of the infringement; (2) the plaintiffs’ lost revenues; (3) the strong public interest in ensuring the integrity of copyright laws; and (4) whether the infringer acted willfully.

Noting that the first two factors are generally given less weight because of the difficulty in calculating an infringer’s profits and a plaintiff’s lost revenue, the court found that the evidence presented indicated that both plaintiffs’ lost revenues and the profits defendants reaped due to defendants’ infringement were relatively low and thus did not provide justification for the entry of maximum statutory damages. With respect to the third factor, the court explained that the more severe the infringing conduct, the more likely the court will award higher statutory damages, as a deterrent to this conduct in the future. In this case, defendants failed to end their infringement of the works after plaintiffs terminated the publishing contracts and after multiple warnings from plaintiffs to stop selling and distributing the books, and defendants failed to participate in discovery once they were sued. The court found that this factor weighed in favor of a hefty award of statutory damages, but not the maximum, as the parties had enjoyed a long, harmonious and productive relationship prior to July 2009 and that the defendants failed to make the required royalty payments following suffering economic setbacks during the recent recession. As to the fourth factor, the willfulness of defendants’ conduct – which is typically given the most weight by courts in determining an appropriate amount of statutory damages – the court found that while it had already made a determination that defendants’ infringement was willful, the statutory maximum was not warranted given the context of the infringement. Accordingly, the court granted plaintiffs $50,000 in statutory damages per book for a total statutory damages award of $150,000.