Copyright issues in IP law

It’s important to understand nuance

Grant's Take on IP Law

Grantland Drutchas

Grantland Drutchas, a founder and current managing partner of McDonnell Boehnen Hulbert & Berghoff, currently serves as chair of the firm’s patent trial and appeals board trials practice group and of the litigation  and appeals practice group. He also teaches in the IP program at IIT Chicago-Kent College of Law.
drutchas@mbhb.com

October 2019

Copyrights are a vitally important arrow in the quiver of IP protection, filling a gap in between patents (which protect technological innovation), trademarks (which protect holders’ marks and trade dress against customer confusion and passing off) and trade secrets (which generally protect any confidential information which has a commercial value).

Copyrights protect against outright copying of any works of authorship. We normally think of copyrights as protecting artistic works (the latest Taylor Swift song, a J.K. Rowling book or an Andy Warhol painting), the protection they offer goes deeper. Further, unlike patents, the copyright term ranges from 95 years from first publication or 120 years from creation for works for hire or the life of the author plus 70 years for other works.

As for the value of copyrights, there’s no better example than software, where copyright protection is vital particularly as the Supreme Court has circumscribed opportunities for protecting software with patents.

In a copyright decision in 2010, for example, SAP was required to pay Oracle $1.3 billion in the Oracle Corp v. SAP AG, No. 4:07-cv-01658 (N.D. Cal.). Although this judgment was ultimately reduced by the courts to $356.7 million, it remains one of the highest damages award for copyright infringement to date.

Statutory damages, in particular, are unique to copyright law; 17 U.S.C Section 504(c) permits a copyright owner to elect, “instead of actual damages and [the defendant’s] profits,” statutory damages of $750 to $30,000 “per infringed work.”

In those situations where an infringer copies a large number of works (such as the defendant in Oracle or a party downloading thousands of separately copyrighted songs from an online database), statutory damages can provide a meaningful damage alternative.

Copyright damages differ from damages for other forms of IP in connection with registration. Although copyright protection is automatic once the work is fixed in a tangible medium under the current copyright statute, registration is important.

No statutory damages can be claimed unless the work is registered prior to any infringement or within three months of creation of the work (17 U.S.C. Section 412). A recent Supreme Court case, Fourth Estate Public Benefit Corp. v. Wall-Street.com, 139 S.Ct. 881 (2019), confirmed that the work must actually be registered by the copyright office, not just an application for registration filed, before a suit can be brought in federal court absent unusual circumstances.

Further, a registration filed within five years of publication is prima facie evidence that the copyright is valid under 17 U.S.C. Section 410. In the event of pending or prospective litigation, however, the copyright office does have an expedited “special handling” registration procedure that can substantially speed up registration (see Chapter 600, Section 623, of the Compendium of U.S. Copyright Office Practices).

Additionally, a copyright owner must be vigilant; the statute of limitations for copyright claims is only three years after the claim accrued under 17 U.S.C. Section 507(b). The statute of limitations runs three years from the earliest date that the copyright owner can file suit, not from when the copyright owner first has knowledge of the infringement.

Copyright protection also has another significant difference from all other aspects of intellectual property: the concept of fair use. Fair use allows third parties to use specific aspects of a copyrighted work, subject to certain conditions.

A fair use involves the use of copyrighted material in a limited and “transformative” manner, often in the context of criticism, commentary or parody. There are four fair use criteria courts must consider under 17 U.S.C. Section 107:

  1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit, educational purposes;
  2. The nature of the copyrighted work;
  3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole;
  4. The effect of the use upon the potential market for or value of the copyrighted work.

These factors must be considered together, however, the number of words used is not alone dispositive. The Supreme Court found that the use of only 400 words from President Gerald Ford’s 200,000-word book was found to be too much to be fair use in Harper & Row v. Nation Enterprises, 471 U.S. 539 (1985), where the quotation went to the “heart of the work.”

Including a few lines from a book or song in a class report are not issues but incorporating substantial passages of a book in a commercial book raises serious problems.

As far as disgorgement of profits goes, 17 U.S.C. Section 504(b) is strongly in favor of the copyright owner. The copyright owner is only required to “present proof only of the infringer’s gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.”