Compensation for Copyright Infringement

The rise of intellectual property rights has seen a rapid increase in the number of claims by businesses dealing in software, films and music against small and medium sized enterprises for copyright infringement. There is no "innocence defence" available to infringing business. Often the dispute moves from one of liability to one of the sum of damages for copyright infringement to be paid.

Copyright Infringement

When an employee or consultant obtains copyright works without the license of the copyright owner and they are used within a business (such as say, software), they will infringe copyright. In the ordinary course, employers are vicariously liable for the acts of employees during the course of their employment and for the acts of independent contractors. A copyright owner is likely to have several courses of recovery for the infringement against:

1. the employee or consultant for authorising the infringement by the employer;
2. the employer on the basis of vicarious liability;
3. a person responsible for a place of public entertainment, for allowing or permitting to be used for performance of a literary, dramatic or musical work;
4. a person providing the means by which to reproduce the work.

Obviously, the employer is the most likely target for a claim to damages, as they are seen to be 1. a stable enterprise with a vested interest in avoiding litigation followed by a damages payment; and 2. the employee is more than likely not going to be in a position to satisfy a judgment and the legal fees incurred in the conduct of a claim.

The Measure of Compensation for Infringement

Damages are said to be at large in copyright cases, as they are not fixed to any particular measure. Damage caused by infringement of copyright is quantified by the value by which the copyright is diminished as a chose in action.

The measure of pecuniary damage likely to be ordered in an action for copyright infringement is that of its commercial value. The commercial value of a work in the circumstances of infringement is reached by one of two methods. Firstly, where the infringing works are sold (by the defendant), the commercial value is represented by the loss of profit to the owner, as the owner has been deprived of the opportunity to sell licenses for the work. The alternate means applies where the work is simply used by the defendant, and not resold by them.

Sales of Goods and Diversion of Customers

When a copyright work is copied and sold, the owner of copyright is entitled to recover their loss of profit caused by the diversion of trade to the defendant. Thus, in a case where the claimant was in the business of producing Christmas cards and offering them for sale to the public, the claimant was awarded the profits that the claimant was deprived by the actions of the defendant.

This is not to say that the claimant would be entitled to recover for all of the sales made by the defendants, as the claimant may not have sold as many as the infringer; whether the claimant will be entitled to recover for all of the infringing sales of the defendant depends on the circumstances of the case at hand. In the events that the particular copyright work is sold at reduced prices serves aggravate the damage suffered by the claimant.

The owner is also entitled to recover for the loss to the reputation of the original copyright work. A loss of reputation will take place where the works are sold at a reduced price, at a reduced quality or in a vulgar or distasteful fashion, such the claimants’ own sales in the future would be prejudiced.

Reproductions without Sale

Where the defendant does not trade in the goods copied, such as using photographs on a website, or uses infringing software, the method of calculation described above (which accounts for loss of profits for diversion of trade) is not the appropriate measure for calculating damages.

The proper measure in these circumstances is a reasonable license fee that the copyright owner would reasonably charge for a license to use the photographs in the particular circumstances. The award of damages will be that of a willing copyright owner and a person in the position of the notional licensee, being the defendant.

Conclusion

Simply because a copyright owner seeks to recover from business, does not prevent the business seeking recovery from the employee or consultant who was responsible for, that is, authorized the infringement by obtaining the copyright work unlawfully and making it available to the business for use.

Despite frequent claims of excessive damage by owners, they are not in a position to enforce a claim for a sum of compensation greater than the loss that they are able to prove with reasonable certainty. This process takes in a process of ascertaining on the particular facts what the copyright owner would in fact be entitled to recover at law.