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Fifth Circuit Rejects Majority 'Independent Economic Value' Test for Infringement Damages

By Stan Soocher
November 01, 2024

Section 504(c)(1) of the U.S. Copyright Act states that a "copyright owner may elect … 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 …." In determining the amount of a statutory award — which is based on the number of works infringed, rather than the number of times those works were infringed — "all parts of a compilation or derivative work constitute one work," the statute adds.

Most of the federal circuit courts [i.e., the D.C., First, Seventh, Ninth and Eleventh Circuits] that have addressed what qualifies either as a "compilation" or as a single creative work apply an "independent economic value" analysis that looks at the market worth of the single creation as of the time when an infringement occurs.

But in a recent ruling of first impression for it, the U.S. Court of Appeals for the Fifth Circuit rejected the "independent economic value" test in determining which individual sound recordings are §504(c)(1) "works" eligible for their own statutory awards and which are part of compilation. UMG Recordings Inc. v. Grande Communications Networks L.L.C., 23-50162 (5th Cir. 2024).

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