Ninth Circuit Examines Copyright Liability Merch Photos Case

Section 504(c)(2) provides that, in a case where the plaintiff establishes willful infringement, “the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.” This subsection also provides that, in a case of innocent infringement, the court may reduce the award to not less than $200. (Pursuant to §412 of the Copyright Act, statutory damages are not available for any infringement of an unpublished work that began prior to the effective date of the registration of copyright in a work, or, if a published work, for any infringement occurring after publication and before the effective date of its registration, unless registration was made within three months of publication. Thus, timely registration is crucial to the availability of statutory damages.)

Friedman Background

In Friedman, plaintiff Glen E. Friedman sued Live Nation Merchandise for infringement of photographs he took of the rap group Run-DMC, alleging that Live Nation willfully infringed the photographs by distributing T-shirts and a calendar bearing images copied from the photographs. Live Nation stipulated to infringement of the copyrights in the photographs, but contested the allegation of willfulness. The U.S. District Court for the Central District of California granted summary judgment to Live Nation. On appeal, the Ninth Circuit reversed and held that there was a triable issue of fact as to whether the infringement was willful. (The Ninth Circuit also reversed the District Court's grant of summary judgment on Friedman's claim under the Digital Millennium Copyright Act, 17 U.S.C. §1201 et seq. for unlawful removal of copyright management information.)

Friedman is a well-known photographer whose works, including photographs of punk rock musicians, hip hop artists, skateboarders and others, have been published in galleries, on record covers, in a book collecting his works and on the Sony Music website. Friedman took a series of photographs of Run-DMC that appeared in his book and that he also licensed to Sony Music for use on its website. Friedman's license of the photographs to Sony Music included the requirement for Sony to include a notice of Friedman's copyright in the photographs.

Live Nation is a music merchandising company engaged in the design, manufacture and sale of clothing and other items featuring images and logos of popular music groups. In conformity with its standard procedures, Live Nation entered into a merchandising agreement with Run-DMC that allowed for the group's approval of the design and sale of merchandise bearing its image and logo, as reflected in a “Product Approval Form” signed by the group. Live Nation also produced Style Guides containing images that had been approved by the music groups for use on merchandise. The Run-DMC Style Guide, which included photographs taken by Friedman, was approved by the group for use on a wall calendar and T-shirts.

The record before the appeals court contained no evidence of how Live Nation obtained the photographs of Run-DMC used on the calendar and T-shirts. In view of Live Nation's stipulation of non-willful infringement, evidence of their provenance was not necessary to establish innocent infringement. On the issue of willfulness, Live Nation presented no direct evidence of how it obtained the photographs, relying instead on its standard clearance procedures and what it characterized as an industry practice to rely upon the artists or their representatives to clear the rights in photographs. Live Nation contended that by approving the design of the products, the artists implicitly represented that the right to use the photographs had been cleared.

The Ninth Circuit considered whether willfulness (or its equivalent, reckless disregard or willful blindness) could be inferred from the court's findings regarding inadequacies in Live Nation's internal clearance procedures. Because a determination of willful infringement is a predicate for enhanced statutory damages up to $150,000 per infringement, this is often the most heavily contested issue in the remedy stage of an infringement action. Moreover, in view of potential challenges to the adequacy of clearance procedures of other companies, the Ninth Circuit's determination could have widespread impact.

The Ninth Circuit first set forth the alternative tests to establish willful infringement: proof that: 1) “the defendant was actually aware of the infringing activity”; or 2) “the defendant's actions were the result of 'reckless disregard' for, or 'willful blindness to,' the copyright holder's rights.” There was no proof that Live Nation had actual knowledge that the right to use the photographs had not been cleared. Therefore, on appeal, the court focused on whether summary judgment on willfulness was proper under either the “reckless disregard” or “willful blindness” standard.

Live Nation's Product Approval Form requested information on the manufacturer of the proposed product, the artist represented and the suggested retail price, and also provided a space for comments. No explicit reference to clearance of the copyrights in the photographs appeared in any of the approval forms signed by the artists. The Ninth Circuit rejected Live Nation's reliance on a purported industry practice that the artists' personal manager was responsible for obtaining the rights, and the argument that by signing the Product Approval Form, the artists implicitly represented that the photographs had been cleared.

The appeals court concluded: “Given an approval process that never explicitly asks about copyrights at all, a jury could reasonably conclude that Live Nation's reliance on the artists who were the subjects of the photographs at issue to clear photographic rights, rather than on the photographers who took them — based only on a purported industry practice never reflected in any document — amounted to recklessness or willful disregard, and thus willfulness.”

The Ninth Circuit therefore held that the evidence gave rise to a triable issue of fact on willfulness.

The appeals court also considered whether, as a distributor of infringing items, Live Nation could be jointly liable for downstream infringements by non-party retailers. In relevant part, §504(c)(1) provides that the copyright owner may elect to recover “an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally … .”

Joint and Several Liability

Live Nation sold infringing merchandise to 104 separate retailers, none of whom were jointly and severally liable with each other. But each retailer was jointly and severally liable with Live Nation. The district court ruled that Friedman could recover statutory damages for 104 separate infringements. The Ninth Circuit reversed, however, holding that in order for a plaintiff to recover for downstream infringements on the basis of joint and several liability with the originating infringer, each of the downstream infringers must be joined as a defendant in the action.

The appeals court first considered whether it should apply the precedent established in a prior Ninth Circuit case, Columbia Pictures Television v. Krypton Broadcasting of Birmingham, 106 F.3d 284 (9th Cir. 1997), rev'd on other grounds sub nom. Feltner v. Columbia Pictures Television, 523 U.S. 340 (1998). There, the plaintiff sought three separate statutory damage awards based on infringement of one work by three separate television stations owned by Columbia Pictures Television. The court in that case explained 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.”

In contrast, Columbia Pictures noted that “when statutory damages are assessed against one defendant or a group of defendants held to be jointly and severally liable, each work infringed may form the basis of only one award, regardless of the number of separate infringements of that work.” Because each television station was jointly and severally liable with Columbia but not with the other stations, Columbia Pictures held that the plaintiff was entitled to three separate statutory damage awards. Under that reasoning, in his case against Live Nation, Friedman sought 104 separate statutory damage awards of $30,000 each for a total of $3.12 million. (Though Friedman initially sought statutory damages for willful infringement, after the Central District of California held on summary judgment that Live Nation's infringement was not willful, Friedman amended his damages claim to the maximum of $30,000 per infringement for non-willful infringement.)

The Central District of California had declined to follow Columbia Pictures, instead adopting the reasoning of several federal district courts, including the Southern District of New York, that rejected separate statutory damage awards for downstream infringers in the context of mass marketing in order to avoid “astronomical” and “untenable” results. (Citing, among others, Arista Records v. Lime Group LLC, 784 F.Supp.2d 313 (S.D.N.Y. 2011), which held that “[p]laintiffs are entitled to a single statutory damage award from Defendants per work infringed, regardless of how many individual users directly infringed that particular work.”) The California federal district court therefore concluded that Friedman was entitled to only one statutory damage award. It distinguished Columbia Pictures, albeit a binding Ninth Circuit precedent, on the basis that it involved only three downstream infringers.

On appeal in Friedman, the Ninth Circuit stated: “Columbia Pictures is the law of this circuit, and nothing in the opinion — or in the text of the statute itself — admits of a 'mass marketing' exception.” However, the Ninth Circuit avoided “an absurd result” for Live Nation by limiting the number of statutory damage awards to those individuals or entities Friedman had actually joined as defendants, thereby eliminating infringements by the 104 non-party downstream retailers.

The appeals court explained that its interpretation was consistent with Columbia Pictures because there all three downstream infringers had been joined as defendants; and that §504(c)(1) only provides for “an award of statutory damages for all infringements involved in the action.”

Rather than adopting a “mass marketing” exception to Columbia Pictures, the Live Nation panel sought to avoid “absurd” results in mass marketing cases by requiring joinder of each downstream infringer from whom the plaintiff sought a separate statutory damage award: “Section 504(c)(1)'s provision of separate statutory damage awards for the infringement of each work 'for which any two or more infringers are liable jointly and severally' applies only to parties who have been determined jointly and severally liable in the course of the liability determinations in the case for the infringements adjudicated in the action. A plaintiff seeking separate damages awards on the basis of downstream infringement must join the alleged downstream infringers in the action and prove their liability for infringement.”

This leaves open the possibility of obtaining multiple statutory damage awards from unrelated downstream infringers in mass marketing or mass piracy cases to the extent the plaintiff has the resources and inclination to join and prosecute claims against numerous parties.

Conclusion

The approaches of the Ninth Circuit and the Southern District of New York, as well as other district courts, diverge on the number of available statutory damage awards when there are numerous downstream infringers who are not jointly and severally liable with each other, but are jointly liable with the defendant-distributor of the infringing items. The Second Circuit has not yet decided this issue. Unless and until a uniform approach is established by the Supreme Court (which has no pending case or petition on the issue), these differences must be taken into account in forum selection.

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Robert J. Bernstein practices law in The Law Office of Robert J. Bernstein in New York City. Robert W. Clarida is a partner of Reitler, Kailas & Rosenblatt in New York City, and author of Copyright Law Deskbook (BNA).

When, as is often the case, actual copyright damages are difficult to prove, statutory damages may provide the best option for recovery. Recently, in Friedman v. Live Nation Merchandise Inc., 119 U.S.P.Q.2D (BNA) 1852 (9th Cir. 2016), the U.S. Court of Appeals for the Ninth Circuit considered, among other things, two issues greatly affecting the amount of statutory copyright damages: 1) willfulness; and 2) the number of separate awards available for downstream infringements.

Section 504(c)(1) of the Copyright Act, 17 U.S.C. §504, states:

(1) Except as provided by clause (2) of this subsection, the copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, in a sum of not less than $750 or more than $30,000 as the court considers just.

Section 504(c)(2) provides that, in a case where the plaintiff establishes willful infringement, “the court in its discretion may increase the award of statutory damages to a sum of not more than $150,000.” This subsection also provides that, in a case of innocent infringement, the court may reduce the award to not less than $200. (Pursuant to §412 of the Copyright Act, statutory damages are not available for any infringement of an unpublished work that began prior to the effective date of the registration of copyright in a work, or, if a published work, for any infringement occurring after publication and before the effective date of its registration, unless registration was made within three months of publication. Thus, timely registration is crucial to the availability of statutory damages.)

Friedman Background

In Friedman, plaintiff Glen E. Friedman sued Live Nation Merchandise for infringement of photographs he took of the rap group Run-DMC, alleging that Live Nation willfully infringed the photographs by distributing T-shirts and a calendar bearing images copied from the photographs. Live Nation stipulated to infringement of the copyrights in the photographs, but contested the allegation of willfulness. The U.S. District Court for the Central District of California granted summary judgment to Live Nation. On appeal, the Ninth Circuit reversed and held that there was a triable issue of fact as to whether the infringement was willful. (The Ninth Circuit also reversed the District Court's grant of summary judgment on Friedman's claim under the Digital Millennium Copyright Act, 17 U.S.C. §1201 et seq. for unlawful removal of copyright management information.)

Friedman is a well-known photographer whose works, including photographs of punk rock musicians, hip hop artists, skateboarders and others, have been published in galleries, on record covers, in a book collecting his works and on the Sony Music website. Friedman took a series of photographs of Run-DMC that appeared in his book and that he also licensed to Sony Music for use on its website. Friedman's license of the photographs to Sony Music included the requirement for Sony to include a notice of Friedman's copyright in the photographs.

Live Nation is a music merchandising company engaged in the design, manufacture and sale of clothing and other items featuring images and logos of popular music groups. In conformity with its standard procedures, Live Nation entered into a merchandising agreement with Run-DMC that allowed for the group's approval of the design and sale of merchandise bearing its image and logo, as reflected in a “Product Approval Form” signed by the group. Live Nation also produced Style Guides containing images that had been approved by the music groups for use on merchandise. The Run-DMC Style Guide, which included photographs taken by Friedman, was approved by the group for use on a wall calendar and T-shirts.

The record before the appeals court contained no evidence of how Live Nation obtained the photographs of Run-DMC used on the calendar and T-shirts. In view of Live Nation's stipulation of non-willful infringement, evidence of their provenance was not necessary to establish innocent infringement. On the issue of willfulness, Live Nation presented no direct evidence of how it obtained the photographs, relying instead on its standard clearance procedures and what it characterized as an industry practice to rely upon the artists or their representatives to clear the rights in photographs. Live Nation contended that by approving the design of the products, the artists implicitly represented that the right to use the photographs had been cleared.

The Ninth Circuit considered whether willfulness (or its equivalent, reckless disregard or willful blindness) could be inferred from the court's findings regarding inadequacies in Live Nation's internal clearance procedures. Because a determination of willful infringement is a predicate for enhanced statutory damages up to $150,000 per infringement, this is often the most heavily contested issue in the remedy stage of an infringement action. Moreover, in view of potential challenges to the adequacy of clearance procedures of other companies, the Ninth Circuit's determination could have widespread impact.

The Ninth Circuit first set forth the alternative tests to establish willful infringement: proof that: 1) “the defendant was actually aware of the infringing activity”; or 2) “the defendant's actions were the result of 'reckless disregard' for, or 'willful blindness to,' the copyright holder's rights.” There was no proof that Live Nation had actual knowledge that the right to use the photographs had not been cleared. Therefore, on appeal, the court focused on whether summary judgment on willfulness was proper under either the “reckless disregard” or “willful blindness” standard.

Live Nation's Product Approval Form requested information on the manufacturer of the proposed product, the artist represented and the suggested retail price, and also provided a space for comments. No explicit reference to clearance of the copyrights in the photographs appeared in any of the approval forms signed by the artists. The Ninth Circuit rejected Live Nation's reliance on a purported industry practice that the artists' personal manager was responsible for obtaining the rights, and the argument that by signing the Product Approval Form, the artists implicitly represented that the photographs had been cleared.

The appeals court concluded: “Given an approval process that never explicitly asks about copyrights at all, a jury could reasonably conclude that Live Nation's reliance on the artists who were the subjects of the photographs at issue to clear photographic rights, rather than on the photographers who took them — based only on a purported industry practice never reflected in any document — amounted to recklessness or willful disregard, and thus willfulness.”

The Ninth Circuit therefore held that the evidence gave rise to a triable issue of fact on willfulness.

The appeals court also considered whether, as a distributor of infringing items, Live Nation could be jointly liable for downstream infringements by non-party retailers. In relevant part, §504(c)(1) provides that the copyright owner may elect to recover “an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally … .”

Joint and Several Liability

Live Nation sold infringing merchandise to 104 separate retailers, none of whom were jointly and severally liable with each other. But each retailer was jointly and severally liable with Live Nation. The district court ruled that Friedman could recover statutory damages for 104 separate infringements. The Ninth Circuit reversed, however, holding that in order for a plaintiff to recover for downstream infringements on the basis of joint and several liability with the originating infringer, each of the downstream infringers must be joined as a defendant in the action.

The appeals court first considered whether it should apply the precedent established in a prior Ninth Circuit case, Columbia Pictures Television v. Krypton Broadcasting of Birmingham , 106 F.3d 284 (9th Cir. 1997), rev'd on other grounds sub nom. Feltner v. Columbia Pictures Television , 523 U.S. 340 (1998). There, the plaintiff sought three separate statutory damage awards based on infringement of one work by three separate television stations owned by Columbia Pictures Television. The court in that case explained 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.”

In contrast, Columbia Pictures noted that “when statutory damages are assessed against one defendant or a group of defendants held to be jointly and severally liable, each work infringed may form the basis of only one award, regardless of the number of separate infringements of that work.” Because each television station was jointly and severally liable with Columbia but not with the other stations, Columbia Pictures held that the plaintiff was entitled to three separate statutory damage awards. Under that reasoning, in his case against Live Nation, Friedman sought 104 separate statutory damage awards of $30,000 each for a total of $3.12 million. (Though Friedman initially sought statutory damages for willful infringement, after the Central District of California held on summary judgment that Live Nation's infringement was not willful, Friedman amended his damages claim to the maximum of $30,000 per infringement for non-willful infringement.)

The Central District of California had declined to follow Columbia Pictures , instead adopting the reasoning of several federal district courts, including the Southern District of New York, that rejected separate statutory damage awards for downstream infringers in the context of mass marketing in order to avoid “astronomical” and “untenable” results. (Citing, among others, Arista Records v. Lime Group LLC , 784 F.Supp.2d 313 (S.D.N.Y. 2011), which held that “[p]laintiffs are entitled to a single statutory damage award from Defendants per work infringed, regardless of how many individual users directly infringed that particular work.”) The California federal district court therefore concluded that Friedman was entitled to only one statutory damage award. It distinguished Columbia Pictures, albeit a binding Ninth Circuit precedent, on the basis that it involved only three downstream infringers.

On appeal in Friedman, the Ninth Circuit stated: “Columbia Pictures is the law of this circuit, and nothing in the opinion — or in the text of the statute itself — admits of a 'mass marketing' exception.” However, the Ninth Circuit avoided “an absurd result” for Live Nation by limiting the number of statutory damage awards to those individuals or entities Friedman had actually joined as defendants, thereby eliminating infringements by the 104 non-party downstream retailers.

The appeals court explained that its interpretation was consistent with Columbia Pictures because there all three downstream infringers had been joined as defendants; and that §504(c)(1) only provides for “an award of statutory damages for all infringements involved in the action.”

Rather than adopting a “mass marketing” exception to Columbia Pictures, the Live Nation panel sought to avoid “absurd” results in mass marketing cases by requiring joinder of each downstream infringer from whom the plaintiff sought a separate statutory damage award: “Section 504(c)(1)'s provision of separate statutory damage awards for the infringement of each work 'for which any two or more infringers are liable jointly and severally' applies only to parties who have been determined jointly and severally liable in the course of the liability determinations in the case for the infringements adjudicated in the action. A plaintiff seeking separate damages awards on the basis of downstream infringement must join the alleged downstream infringers in the action and prove their liability for infringement.”

This leaves open the possibility of obtaining multiple statutory damage awards from unrelated downstream infringers in mass marketing or mass piracy cases to the extent the plaintiff has the resources and inclination to join and prosecute claims against numerous parties.

Conclusion

The approaches of the Ninth Circuit and the Southern District of New York, as well as other district courts, diverge on the number of available statutory damage awards when there are numerous downstream infringers who are not jointly and severally liable with each other, but are jointly liable with the defendant-distributor of the infringing items. The Second Circuit has not yet decided this issue. Unless and until a uniform approach is established by the Supreme Court (which has no pending case or petition on the issue), these differences must be taken into account in forum selection.

*****
Robert J. Bernstein practices law in The Law Office of Robert J. Bernstein in New York City. Robert W. Clarida is a partner of Reitler, Kailas & Rosenblatt in New York City, and author of Copyright Law Deskbook (BNA).