VHT, Inc. v. Zillow Group, Inc.

Ending six-year copyright dispute between real estate website Zillow and photography company VHT, district court orders Zillow to pay $1.9 million in damages, finding that Zillow’s infringement after receiving VHT’s cease-and-desist letter, though not innocent, warranted damages only at or near statutory minimum. 

Online real estate service Zillow launched a home improvement website in 2013, known at the time as Zillow Digs, using photos it had obtained through licensing agreements with “feed providers” (e.g., Multiple Listing Services, real estate brokers and agents) that had in turn licensed the photos from the real estate photography company VHT Inc. Shortly after Digs was launched, VHT noticed that some of its photos were featured on the new Zillow site. VHT approached Zillow with an opportunity to license the images directly from VHT but did not accuse Zillow of infringement nor demand that Zillow stop using the images at issue. The licensing negotiations between Zillow and VHT terminated in July 2013, and approximately a year later, in July 2014, VHT sent a cease-and-desist letter formally notifying Zillow that it was using the photos without authorization and demanding that the photos be removed.

Zillow explained to VHT that it understood its feed provider agreements to have properly granted it the right to use the photos in question. Despite the parties’ efforts to resolve the dispute, VHT sued Zillow for copyright infringement in July 2015, alleging that Zillow infringed thousands of VHT photos on Digs. In 2017, a federal jury awarded VHT $8.27 million in damages, finding that Zillow directly infringed VHT’s copyrights in roughly 28,000 photos, of which 3,373 were found to have been willfully infringed. Granting in part Zillow’s motion for judgment notwithstanding the verdict, the district court cut the damages award to $4 million and reduced the number of willfully infringed images to 2,700. On appeal, the Ninth Circuit vacated the finding of willful infringement and remanded the case to the district court (read our summary of the Ninth Circuit’s decision here), which in turn ordered a new trial on damages.

Under the Copyright Act’s statutory damages scheme, the amount of damages depends on whether the infringement was willful, innocent or neither. Although the Ninth Circuit had already held that Zillow’s infringement of the remaining 2,700 photos was not willful as a matter of law, it did not address whether Zillow’s infringement was innocent. While willfulness requires a showing that the defendant was “actually aware” of its infringing conduct, innocence requires a showing that the defendant “had no reason to believe” its actions constituted copyright infringement. On remand, following a bench trial, the district court held that prior to the July 2014 cease-and-desist letter, Zillow reasonably and in good faith believed that it had properly licensed VHT’s photos through the agreements with its feed providers. Consequently, the court held that Zillow’s infringement of the 388 photos displayed on Digs prior to the cease-and-desist letter was innocent, entitling VHT to a statutory award of $200 per photo.

As to the remaining 2,312 photos that were added to Digs after VHT sent the cease-and-desist letter, the court determined that Zillow’s conduct was not innocent, because the letter sufficiently put Zillow on notice of VHT’s infringement claims. Accordingly, because Zillow’s infringement of the 2,312 photos was neither willful nor innocent, the Copyright Act entitled VHT to statutory damages of between $750 and $30,000 per work.

To determine the proper amount of damages within the statutory range, the district court considered four factors: (1) the infringer’s profits and the expenses they saved because of the infringement, (2) the plaintiff’s lost revenue, (3) the strong public interest in ensuring the integrity of copyright laws and (4) whether the infringer acted willfully. As to the first two factors, the court noted that the jury previously found that VHT suffered actual damages of only $2.84 per infringed image, which supported an award at or near the statutory minimum. On the third factor, the court concluded that Zillow’s innocent infringement of the 388 photos was not severe and did not warrant an award above the statutory minimum. As to the remaining 2,312 photos, the court held that damages in the low end of the statutory range were warranted. As the court observed, Zillow promptly responded to VHT’s cease-and-desist letter and requested additional information in an effort to verify VHT’s infringement claims but could not immediately identify and remove the images based on the information that VHT supplied. Nonetheless, the court held that “the third factor supports an award slightly above the statutory minimum to deter companies from using works in a new product without first confirming that they have the correct licenses for such use.” Finally, because the Ninth Circuit already concluded that Zillow’s conduct was not willful as a matter of law, the fourth factor also weighed in favor of a damages award at or near the minimum.

Awarding the minimum amount of $200 per work for the 388 photos that Zillow innocently infringed and $800 per work for the remaining 2,312 photos for which Zillow’s conduct was not innocent, the court ordered Zillow to pay a total of $1,927,200 in statutory damages. This amount was in addition to the actual damages that VHT was awarded following the 2017 trial for Zillow’s infringement of other images not eligible for statutory damages, prejudgment interest on that award and post-judgment interest on the full damages amount.

Summary prepared by Frank D’Angelo and Marwa Abdelaziz