Ninth Circuit holds that only one statutory damages award is available where one defendant supplied infringing work to other defendants, even when those other defendants exploited infringing work independently of each other.
Desire, a textile manufacturer, sold a stylized floral-patterned textile to Top Fashion, an apparel manufacturer. Top Fashion intended to use the textile to produce a dress for Ashley Stewart, a women’s clothing retailer. However, after a dispute over pricing, Top Fashion brought the textile to Manna, a rival textile supplier, and asked Manna to create a similar pattern. Manna altered the design slightly, registered it with the Copyright Office, and sold the design to Top Fashion and two other apparel manufacturers, which in turn sold garments made from the textile to Ashley Stewart and two other retailers.
Desire sued Manna, the manufacturing defendants and the retailer defendants, alleging that all had willfully infringed its copyright. The district court granted summary judgment to Desire, determining that Desire’s design was entitled to broad copyright protection. A jury found all defendants liable for infringing Desire’s copyright. The court issued separate statutory damage awards against each defendant and held each defendant liable for its own conduct as well as jointly and severally liable for the infringing conduct of the parties “downstream.” Under this ruling, Manna was held liable for not only its own infringement but also that of all the manufacturing and retail defendants, and each manufacturing defendant was held jointly and severally liable with the retail defendant to which it sold the infringing clothing.
On appeal, the Ninth Circuit upheld the summary judgment as to copyrightability. In doing so, the court rejected evidence offered by defendants that similar floral print designs were available in the market, reasoning that this evidence of “prior art” affects neither Desire’s independent creation of its stylized design nor its originality. Because Desire’s design was stylized and not a true-to-life depiction of a flower, it was entitled to broad copyright protection.
The Ninth Circuit panel split, however, on the issue of statutory damages. The majority first held that the district court appropriately allocated joint and several liability, explaining that Desire’s damages were divisible and that each “upstream” defendant (for example, the manufacturing defendants in relation to the retail defendants) was a “but for” cause of the downstream infringement and was therefore jointly and severally liable for the awards imposed against their downstream joint tortfeasors.
The Ninth Circuit held, however, that the Copyright Act does not permit multiple awards of statutory damages for the infringement of one copyrighted work where at least one defendant (here, Manna) is jointly and severally liable with each of the other defendants (here, the manufacturer and retailer defendants), even if the other defendants are not all jointly and severally liable with each other (here, each separate manufacturer-retailer pair).
The court noted that Section 504(c)(1) of the Copyright Act allows for “an award of statutory damages for all infringements of a single work for which any two or more infringers are liable jointly and severally.” The court reasoned that “Section 504(c)(1)’s use of the word ‘any’ means that if all infringers in the action were jointly and severally liable with at least one common infringer, all defendants should be treated as one unit.” In this case, because Manna was jointly and severally liable with all other defendants, Desire was entitled to only one award of statutory damages.
The court also explained that allowing multiple damages awards in this circumstance would subvert the intent of Section 504(c)(1) by providing plaintiff with a windfall. Here, for example, Desire would have been entitled to a combined $480,000 in statutory damage awards, which the court noted was almost 100 times the estimated profit that Manna earned from selling the infringing product. The court was concerned that in similar situations with even more downstream defendants, an upstream infringer could be liable for astronomical amounts of statutory damages.
Further, the court of appeals held that to uphold the initial judgment would create an absurd result, in that Manna’s independent relationship with each of the manufacturing defendants would lead to a larger number of damage awards than if Manna had worked with all three manufacturing defendants in concert to deliberately infringe upon Desire’s design. The damages award was vacated, and the case was remanded to the district court.
Judge Wardlaw dissented from the court’s ruling on the number of statutory damages that were available, explaining that the language of the Copyright Act allows for separate damage awards for each group of infringements for which a group of defendants were jointly and severally liable. Judge Wardlaw also argued that the majority’s opinion was foreclosed by two prior decisions of the Ninth Circuit, which held that “where separate infringements for which two or more defendants are not jointly liable are joined in the same action, separate awards of statutory damages would be appropriate.” She also warned that the majority’s decision will have “broad implications for copyright litigation in the Ninth Circuit,” as plaintiffs will bring separate lawsuits against each defendant or avoid suing the primary upstream infringer who is jointly and severally liable with the downstream infringers in order to maximize the number of statutory damages awards.
Summary prepared by Tal Dickstein and Alex Inman