First Circuit Affirms Award of Maximum Statutory Damages in Copyright Infringement Case

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Curet-Velazquez v. ACEMLA de Puerto Rico, Inc., No. 10-CV-01587, 2011 BL 222108 (1st Cir. Aug. 29, 2011) The U.S. Court of Appeals for the First Circuit affirmed the district court's grant of $120,000 in statutory damages to the plaintiffs in this copyright infringement suit. The court found that the district court did not err or abuse its discretion when it awarded the maximum statutory damages of $30,000 per infringement for the four infringed works.

The Infringed Works

Composer Catalino "Tite" Curet-Alonso ("Tite Curet") entered into agreements with music publisher Latin American Music Co., Inc. ("LAMCO") and performance rights society ACELMA de Puerto Rico, Inc. ("ACELMA") for a catalog comprised of approximately 1100 to 1200 compositions, four of which were at issue in the present lawsuit. In exchange for $6000, the agreements required that, among other things, LAMCO and ACELMA provide Tite Curet with bi-annual royalty reports. After Tite Curet's death, his heirs brought suit alleging that LAMCO and ACELMA never paid the $6000 fee and failed to comply with their obligations to report royalties. The heirs alleged numerous claims, including copyright infringement. A magistrate judge recommended granting summary judgment to the heirs on certain infringement claims. The district court then held a trial to determine the amount of damages. At trial, the district court considered the heirs' expert's testimony, which presented two theories: the "Opportunity Cost" theory and the "Conclusion of Value" theory. The defendants challenged the expert's testimony, contending that he was not qualified as an expert in copyright infringement and that his theories were inappropriate. The district court eventually concluded that the expert qualified as an expert in copyright infringement, but rejected his Opportunity Cost theory as unacceptable under the Federal Rule of Evidence 702. After determining that the defendants' infringement was not willful, the court proceeded to award the maximum statutory award per non-willful infringement under 17 U.S.C. § 504(c)(1)—$30,000 per infringed work. The district court explained that it was impossible for it to assess actual damages due to the defendants' incomplete records. On appeal, the defendants argued that the district court erred in allowing the expert to testify and in granting the maximum statutory damages.

Expert Testimony

The appellate court concluded that the district court did not abuse its discretion because the defendants were not prejudiced by the expert's testimony. The expert's brief reference to new documents was to address the documents provided and drafted by the defendants. Nor did the expert's testimony differ from his previously submitted report. The court further found that the district court did not abuse its discretion by qualifying the expert to testify on issues of copyright infringement, particularly because the district court rejected the Opportunity Cost Theory, avoiding prejudice to the defendants.

Statutory Damages

The defendants contended that the heirs failed to properly exercise their option to elect statutory damages because their complaint requested either actual or statutory damages. Defendants further argued that the district court's award of the maximum damages was grossly excessive and improperly relied on the expert's opinion. The court explained that when a plaintiff requests either actual or statutory damages the defendant is placed on notice of the possibility of a grant of statutory damages, and therefore is not prejudiced. "Further, the statute clearly states that 'the copyright owner may elect, at any time before final judgment is rendered, to recover[] . . . an award of statutory damages for all infringement involved in the action . . . .'" Curet-Velazquez at 22 (quoting 17 U.S.C. § 504(c)(1)). The court ultimately concluded that the district court did not rely primarily on the expert's testimony, but instead based its decision on the inaccurate and incomplete information provided by the defendants. Though the district court attempted to determine "the expenses saved and profits reaped by the defendants in connection with the infringements, the revenues lost by the plaintiffs as a result of the defendant's conduct, and the state of mind of the infringers," the defendants were uncooperative in providing the court with evidence necessary to substantiate their position. Id. at 24. The court also noted that defendants' royalty reports were sometimes inaccurate, unavailable, or intermingled between the defendants. Accordingly, the court affirmed the district court's award of the maximum statutory damages. Disclaimer This document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy. ©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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