What are the Penalties for Copyright Infringement?

With a small number of exemptions, infringement occurs when the exclusive rights granted by the federal copyright laws to the owner of a copyrighted work are violated. Violations can be making a copy or reproducing a work, making a derivative work of a copyrighted work (such as making a movie from a book or enhancing a software program), distributing the work to the public, doing public performances of works that can be performed (such as songs, plays and movies), displaying work publicly, and, in the case of sound recordings, performing the work publicly by means of a digital audio transmission.

Section 504 of the Copyright Act of 1976 (the “Copyright Act”) provides remedies for copyright infringement. Section 504(a) provides that infringer is liable for either: (1) the copyright owner’s actual damages and any additional profits of the infringer, as provided by Section 504(b); or (2) statutory damages, as provided by Section 504(c). Section 505 of the Copyright Act provides that, in addition to damages or lost profits, the court, in its discretion, may allow the recovery of full costs by or against any party. The court may also award a reasonable attorney’s fee to the prevailing party as part of the costs.

Under Section 504(b) the copyright owner is entitled to recover actual damages suffered by him as a result of the infringement and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. The copyright owner is required only to present proof 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.

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 under Section 504(c). The statutory damages for any one work, for which any one infringer is liable individually, or for which any two or more infringers are liable jointly and severally, is a sum of not less than $750 or more than $30,000 as the court considers just. If the court finds that the infringement was committed willfully, the court, in its discretion, may increase the statutory damage award to a sum of not more than $150,000. In a case where the infringer sustains the burden of proving, and the court finds, that the infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright, the court, in its discretion, may reduce the statutory damages to a sum of not less than $200. The statute further provides that the court shall remit statutory damages in any case where an infringer believed and had reasonable grounds for believing that his or her use of the copyrighted work was a fair use under Section 107, if the infringer was a person that normally qualifies for the fair use exemption.

For purposes of the statute, “willful” means that the defendant had knowledge that his actions constituted copyright infringement. Courts have held that this knowledge may be actual or constructive. In other words, knowledge need not be proven directly but may be inferred from the defendant’s conduct. Such was held to be the case when a defendant continued to sell infringing items after its attorney had assured the copyright owner that sales would cease.

In addition to civil penalties, there are criminal penalties for infringement. Section 506 of the Copyright Act provides criminal remedies where the infringement has been willful and either (1) for the purposes of commercial advantage or private financial gain; (2) by the reproduction or distribution, including by electronic means, during any 180-day period, of one or more copies or phonorecords of one or more copyrighted works, which have a total retail value of more than $1,000; or (3) by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution.

Penalties under 18 U.S.C. Section 2319 and 18 U.S.C. 3571 include fines up to $250,000 for individuals and $500,000 for organizations and imprisonment for up to ten years, depending on the facts of the case. In addition, a person can be liable for a fine up to $2,500 if, with fraudulent intent, he places a copyright notice that he knows to be false on any article or if he publicly distributes or imports for public distribution any article containing a false notice. There is also up to a $2,500 fine for fraudulent removal of a copyright notice and up to a $2,500 fine for anybody who makes a false representation of material fact in an application for copyright registration, such as that he is the owner of a copyright where he is not. Criminal proceedings must be commenced within three years after the cause of action arises and a civil action must be commenced within three years after a claim occurs.

Under Section 411 of the Copyright Act, an infringement suit cannot be brought unless the copyright is registered or proper application to register has been made. Under Section 412 of the Copyright Act, an owner cannot seek statutory damages and attorneys fees if the work was unpublished at the time the infringement commenced and not registered, or if the work was not registered within three months of publication, if the infringement commenced between publication and registration.

Because infringement can easily occur during the course of business, and the penalties can be severe, even if a business owner is unaware that he or she is infringing on someone’s copyright rights, a copyright audit is recommended periodically for all businesses. This involves a copyright attorney reviewing the business practices, such as its software licenses, proprietary software, music used in its business or website; website content, advertising practices and other potential problem areas unique to the business. Such audits can save the business thousands of dollars in potential liability. In addition, if the business is creating copyrighted material, it will alert the owner to protective measures that should be taken to protect its own proprietary material.