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Damages for online copyright infringement

It is hard to assess the scale of copyright infringement when it occurs on the internet. Proving the amount of the injury is one of the challenges facing the copyright holder. Lump-sum damages can help. This issue was recently addressed by the Warsaw Court of Appeal—a good occasion to cover a few ground rules for how to proceed in cases of this type.

Warsaw Court of Appeal ruling of 29 August 2017 (Case VI ACa 600/16)

The language of love

The plaintiff, a publishing house, sought damages of PLN 3,500 for violation of its copyright to Italian language instructional textbooks. The defendant had posted the materials on his account on the popular Polish web hosting site Chomikuj.pl, enabling other users to download them. The damages sought by the plaintiff were calculated on the basis of the plaintiff’s price list, reflecting the fee it would charge for providing a licence to the work.

When notified of the infringement, the user removed all the files from his account and ceased any further infringement. At trial the user claimed that he had obtained the files himself from another user of Chomikuj.pl and did not realise that someone else held the copyright to the texts. Based on the same circumstances, a criminal case was also pursued against the defendant, in which he was convicted of unlawful but unintentional dissemination of another person’s work, under Art. 116(4) of the Act on Copyright and Related Rights, and was ordered to pay a fine.

At the first instance, the court awarded the plaintiff the relief sought, including damages of PLN 3,500. The defendant appealed. The court of appeal reversed and denied the plaintiff’s claim in its entirety. That judgment is controversial, as it entirely undermined the ability to pursue lump-sum damages, while also holding that the only injury was caused by the original posting of the work where it could be accessed by an unlimited set of people, and the subsequent reposting of the same content did not aggravate the injury.

Legal measures for the holder

The main basis for claims for copyright infringement is Art. 79 of the Act on Copyright and Related Rights, including four claims the holder may assert against the infringer: to cease and desist the infringement, to remove the effects of the infringement, to redress the injury caused by the infringement, and to disgorge any benefits gained from the infringement. In this case, the key claim was to redress the injury caused by the infringement. The regulations provide two options for pursuing this claim: under general rules, or by payment of a sum which is a multiple of the hypothetical royalties. In its judgment of 23 June 2015 (Case SK 32/14), the Constitutional Tribunal held that the provision enabling the plaintiff to claim three times the hypothetical royalties in the case of culpable infringement of copyright was unconstitutional (ruling discussed in detail here). However, courts ruling in later cases held that the provision requiring the infringer to pay twice the hypothetical royalties for non-culpable infringement enjoys a presumption of constitutionality and remains in force.

Determining the amount of the injury for posting a work on the internet

In its judgment, the court of appeal rejected the possibility of seeking lump-sum damages equal to twice the hypothetical royalties, arguing that this provision was also overturned by the judgment of the Constitutional Tribunal. In the court’s view, this created a legal situation in which the only possible basis for pursuing damages is under general rules. But the procedure for calculating the injury when pursuing a claim for damages indicated by the court did not reflect the nature of copyright infringement in an online environment.

First, the court pointed out that in determining the hypothetical royalties, presenting a price list arbitrarily and subjectively drawn up by the plaintiff hardly constitutes sufficient evidence. To verify that amount, the rightholder should either show that it had concluded similar agreements with royalties at that level, or that such royalties were objectively achievable and reflect the true demand. In such situation, it was necessary to refer to market prices for similar works of comparable merit or earlier works by the same author, or admit an expert opinion. These evidentiary requirements constitute a buffer for rightholders, who must remember to properly support their claims. This position as such appears reasonable.

Second, in the view of the court of appeal, the injury is caused to the proprietor of the work when the first file containing the work is posted on a website, because that is when the work is made available to an unlimited number of people, and any subsequent duplication and reposting of the work by other persons does not add to the dimensions of the injury to the holder. This position is an unwarranted oversimplification. The scale of the infringement on the internet should be examined not only in terms of the number of successive postings of the work, but also the weight and relevance of each infringement.

Accepting the court’s view, only the first posting of a work causes the holder any injury. But in practice, the scale of the infringement depends on a whole constellation of various factors which should be considered in such situations. To take the two most extreme instances, posting a file on a personal blog receiving a few dozen views per month would cause a different degree of injury than uploading a video in a sponsored post on Facebook via a fanpage with hundreds of thousands of followers.

It is a distortion to claim that the dimensions of the injury to the rightholder are not aggravated when a file, once published, is passed on and reposted. This view by the court seems to allude to the concept of exhaustion of copyright, which has no application to unlawful publication. The assumption that the second publication, and each publication after that, does not increase the injury already caused to the proprietor, could lead to abuse and creation of a kind of pyramid scheme for unlawful dissemination of intellectual property. Under that logic, as long as the initial posting of the work was made on an obscure site, the scale of the injury would always be found to be small, as reposting on however large a scale would not aggravate the holder’s injury.

In this specific case, the oversimplified assessment made by the court ultimately led to a result that seems fair (as the infringer was only one of over a thousand users uploading the same file on the same site). Nonetheless, the mechanism adopted by the court for examining the amount of the injury for online infringement was dubious. This ruling shows how hard it can be to calculate damages for online copyright infringement. It also demonstrates the practicality of applying the hypothetical lump-sum royalties the holder of the copyrighted work would charge if it agreed to license the use of the work.

Adam Polanowski, Dispute Resolution & Arbitration practice, Wardyński & Partners