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Copyright Trolls and Willful Infringers: Not As Elementary As They Appear

· September 3, 2014

The term “copyright troll” typically is associated with Rightshaven or adult entertainment companies that rely on the threat of embarrassment to pressure alleged infringers into quick settlements. Indeed, a third of the federal courts’ copyright caseload involves pornography. For its part, the term “willful infringer” conjures up images of Kim Dotcom or other operators of “notorious markets” for infringing products.

But as two recent circuit court decisions indicate, not all copyright trolls are pornographers, and not all willful infringers are Internet piracy kingpins.

Klinger v. Conan Doyle Estate

Judge Posner of the U.S. Court of Appeals for the Seventh Circuit has written a strong opinion attacking the overly aggressive assertion of copyrights. Leslie Klinger assembled an anthology of stories written after the death of Sir Arthur Conan Doyle, creator of Sherlock Holmes, that feature Sherlock Holmes and other characters from the series. Although most of the Sherlock Holmes stories were written before 1923, and were in the public domain, the Doyle estate argued that the Holmes character continued to develop in the few stories Doyle wrote between 1923 and his death in 1930, and that the estate was entitled to license fees from authors that used the “fuller” Holmes character. Klinger refused to pay the license fee, and instead sought a declaratory judgment of non-infringement. After Klinger prevailed in the district court, the Doyle estate appealed. In June 2014, Judge Posner writing for the Seventh Circuit rejected this theory on the grounds that it would in effect allow the extension of the copyright term.

Klinger then sought reimbursement for the attorneys’ fees he incurred during the Doyle estate’s appeal. Judge Posner again wrote for the Seventh Circuit in August 2014, stressing the importance of encouraging alleged infringers to fight infringement claims rather than capitulate, even though it might be more cost-effective to do so. Judge Posner referred to copyright owners playing “their extortionate game” when they demand a license when it is unnecessary. Turning to the facts of this case, Judge Posner described the Doyle estate’s argument in the district court as “bordering on the frivolous” and its position on appeal as “quixotic.” But then he used even stronger language:

The Doyle estate’s business strategy is plain: charge a modest license fee for which there is no legal basis, in the hope that the “rational” writer or publisher asked for the fee will pay it rather than incur a greater cost, in legal expenses, in challenging the legality of the demand.

Judge Posner praised Klinger for acting as a private attorney general, “combating a disreputable business practice—a form of extortion…” Judge Posner added that Klinger had performed a public service, and explained that “the willingness of someone in Klinger’s position to sue rather than pay Doyle’s estate a modest license fee is important because it injects risk into the estate’s business model.”

Judge Posner went even further, suggesting that the Doyle estate may have violated the antitrust laws by requesting retailers “to cooperate with it in enforcing its nonexistent copyright claims against Klinger.”

Clearly, Judge Posner did not view literary genius as license to misuse copyright.

(The Seventh Circuit seems particularly hostile to predatory copyright infringement actions. In Brownmark Films v. Comedy Partners in 2012, Judge Frank Easterbrook noted that a plaintiff suing over a parody in an episode of the cartoon South Park had engaged in litigation tactics that gave it “the appearance of a ‘copyright troll’” engaged in “baseless shakedowns.”)

Psihoyos v. John Wiley & Sons

Louis Psihoyos, a professional photographer, sued publisher John Wiley & Sons for including eight of his photographs in its textbooks without authorization. The district court dismissed the infringement claims with respect to four of the photographs on the ground that Psihoyos had not registered them in a timely manner, but allowed the claims regarding the other four photographs to proceed to trial. The jury found no infringement of the copyright in one photograph, and non-willful infringement of the copyright in a second photograph, for which it awarded $750 in damages. The jury found that Wiley willfully infringed the copyrights in the remaining two photographs, awarding statutory damages of $100,000 for a photograph of a Triceratops skeleton and $30,000 for a photograph of an Oviraptor skeleton.

On appeal, Wiley did not contest the jury’s finding of willful infringement, and conceded that the jury’s award of statutory damages was not against the weight of the evidence under the instructions given to the jury. Instead, Wiley argued that the district court erred by failing to consider whether the statutory damages award was reasonably related to the proven amount of Psihoyos’s actual loss. Wiley complained that the jury’s award was “an epitome of a run-away award.”

The Second Circuit rejected Wiley’s argument, finding that although lost revenue is one factor in the setting of statutory damages, there is no requirement for “a direct correlation between statutory damages and actual damages.” The Second Circuit observed that based on the evidence presented at trial, “the jury may have viewed Wiley as a repeat infringer in need of deterrence.” Accordingly, the Second Circuit upheld awards of $100,000 and $30,000 for the infringing use of photographs that could have been licensed for $200.

Although Wiley was a repeat infringer, the district court did not view it as an intentional infringer. Rather, it considered Wiley a reckless infringer. At trial, extensive evidence was introduced about Wiley’s lack of effective internal procedures for ensuring that permissions were obtained for particular uses of photographs. In the Second Circuit, an infringement can be willful if the infringer acted recklessly.

Wiley defies the image of the willful infringer not only because it did not infringe intentionally, but also because it is so vigilant about protecting its own copyrights. Wiley was the unsuccessful copyright owner in Kirtsaeng v. Wiley, last year’s landmark Supreme Court decision holding that the first sale doctrine applied to copies manufactured anywhere in the world, and not just to copies manufactured in the United States. At a House IP subcommittee hearing in June on the first sale doctrine, Wiley urged Congress to overturn the international exhaustion rule articulated in Kirtsaeng.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.