Copyright Statutory Damages: A Remedy in Need of Reform
Abstract
Tara Wheatland & Pamela Samuelson
University of California, Berkeley, School of Law
US statutory damages are largely open-ended. When the statute was written, Congress didn’t anticipate that they’d be a jury issue, but the Supreme Court decided there was a Seventh Amendment right to a jury determination.
The basic goal: compensation, when it’s difficult to prove actual damages or when the cost of proving damages is disproportionate to the damages to be awarded. The 1909 Act specified that they were not to be a penalty, and the 1976 Act retained the compensatory aim for ordinary infringement.
Result: excessive and arbitrary awards. One case awards $10K per infringed work, another $50K for an almost identical infringement. Jammie Thomas: $9250 per song, or $222K, for 24 songs that she could have purchased on iTunes for $.99, while some jurors wanted to award $150K per song.
Other results: chilling effects on many creators, such as documentary filmmakers; aggregate awards make secondary liability an even bigger risk, chilling technological innovation.
Constitutional due process lens: BMW v. Gore and its progeny, striking down punitive awards as excessive. Bridgeport v. Justin Combs Pub’g (6th Cir. 2007): $3.5 million award on a common-law copyright infringement claim, struck down as unconstitutional. Most important factor under Gore: the reprehensibility of the conduct, which has many subfactors. In Bridgeport, only one subfactor was present—willfulness—and therefore only a 1:1 or 1:2 ratio was appropriate. Other factors: (2) disparity between harm to plaintiff and award; Campbell said that few awards exceeding a single digit ratio will satisfy due process, while Combs said the compensatory award was large and already included a punitive element; (3) comparison of award to ordinary civil penalties, which Combs said was excessive in relation to copyright statutory damages. The 6th Circuit then refused to apply Gore to a statutory damages award, Zomba v. Panorama (2007).
Most other countries don’t have statutory damages at all, aiming to compensate, though some provide exemplary damages in extreme cases using a multiplier model. Some other countries—most of them having Free Trade Agreements with the US--have statutory damages, but usually require the plaintiff to demonstrate the difficulty of proving actual damages; provide discretion to reduce the damages when disproportionate; or have other limits.
Statutory damages should be based rationally on actual damages, except in egregious cases. Extra awards for deterrence may be appropriate, but they should reference actual damages, and deterrence is less important when actual damages are already high, defendant’s profits have been disgorged, and/or fees are already being awarded.
Juries should be asked to find certain elements before awarding statutory damages above actual damages. Thus, they should be asked to first find actual damages. Then they should be given guidelines for other mitigating and aggravating factors, such as reprehensibility.
The ultimate solution is statutory reform. Statutory damages don’t serve a legitimate function, especially since they’re only available to a small subset. Plaintiffs with unregistered works have the same problems proving damages, but they still have to do it.
If we retain them, they should be available to all plaintiffs, whether the works are registered or not, as long as they approximate actual damages and there’s discretion to award zero in cases of innocent infringement.
Q: It would be useful to look at the empirics of the deterrence argument—do statutory damages deter? Registered/nonregistered case outcomes would provide some evidence (though I’d note that there are many confounding variables there).
Q: Would eliminating statutory damages encourage “efficient infringement” like “efficient breach”? Or would fees remain an issue?
A: That’s a big rationale for statutory damages. (Comment: injunctive relief plays a big role too, especially for commercial infringement.)
Q: What if there are no actual damages? If people wouldn’t pay the plaintiff’s market price—if they’re in the deadweight loss of the usual copyright scheme—and if the defendant is infringing noncommercially, so you can’t award profits either.
A: She’s not sure (comment: reasonable royalty might be one).
Search Costs in Trademark Law: What Are We Searching For And Have We Found It Yet?
Abstract
Laura Bradford
George Mason University School of Law
Search costs are now the conventional explanation for TM. But that hides a problem: divergence about what search costs are. Recent court decisions seem to assume that any information that distracts consumers looking for brands they already know, or makes them think, is a search cost. This puts TM on a collision with the First Amendment and basic competition policy. This paper argues that the problem is not the utilitarian goal of lowering search costs, but with a failure of consensus about what search costs are.
The search costs theory was developed in response to a particular problem: looking for information about a set of options before purchase of any of them (sampling). First, there’s a mismatch between the economic conception and the colloquial understanding of how consumers search and what consumers look for. When consumers have fixed opinions about known goods and know what they’re looking for, they behave differently than consumers who are unsure. Second, the market when the theory was developed was more stable, so if you were looking for a car you could readily identify the set of choices; currently, the role of identifying the set of options one wants to investigate is much larger in search, and the original search costs theory was not designed to deal with that.
Trademarks can help overcome problems of imperfect information. Driving down the costs of search leads to more search and less ignorance. The role for TMs is simply to provide a basis of comparison. You compare the prices of A, B, and C for widget W. Later works examined buyer-seller information asymmetry. Advertising can act as a signal of quality, as can warranties, transforming unobservable product qualities into information buyers can use before purchase. TMs allow buyers to attribute the signals to the right seller. TMs don’t embody info buyers already know so much as they offer ways to categorize info.
Compare to the legal literature, such as Landes & Posner. Landes & Posner are primarily concerned with the purchaser who already knows what s/he wants. TMs convey information allowing consumers to avoid search altogether; search is a bad. The consumer doesn’t have to think about the product class ever again. That’s a very different model of search! Depending on whether you think more buyers are in Period 1 (their first and only search) or Period 2 (repeat purchases), you might prefer different versions of TM law. Period 1 leads you to want more comparative information, more information about relationships.
Areas of conflict include keyword ads; initial interest confusion; dilution (Herbrozac as a low-cost way of communicating that you have an herbal antidepressant for sale versus Herbrozac as a distractor from the consumer’s not-quite-laserlike focus on getting that Prozac); and nominative fair use versus sponsorship confusion, especially with the use of logos and distinctive scripts.
The legal version ignores the information asymmetry problem that search costs theory was designed to address. Moreover, search is not in itself a bad. Reducing ignorance before purchase is a good thing, and some search can help do that. Especially now, we have faster product cycles, faster entry and exit, proliferation of new product types and categories, proliferation of information sources; using brands to filter out all other information is not welfare-enhancing. There is also a big agency problem with giving TM owners authority over filtering information, as opposed to guarding against deception of the classic type. Their interests diverge sharply from consumers.
Lisa Ramsey: Another potential area of conflict is descriptive TMs, when some people familiar with the market know about the TM meaning, but new entrants might take the terms as descriptive.
Ann Bartow: Is your concern about consumers pretextual? When we care about search costs for consumers, we might want to regulate ads directly: require disclosures, ban false advertising.
Bradford: It’s hard for the government to stay ahead of ways in which consumers get information. The marketplace is impoverished if the government says “this is what you can say about your product.” As to sponsorship, she agrees: it’s in producers’ interest for everyone to be slightly confused about how much sponsorship/permission exists in things like movies. So government regulation might be useful to define the rules there.
Chris Sprigman: Antitrust is more willing to generalize in these circumstances. Could we say that the search cost from a nominative fair use is always less than the competition benefit?
Bradford: Yes—she’d be willing to say that “internal search costs”--burdens on memory from nominative uses--are a result of search, not a cost of search, and better for competition.
McKenna: Likes the idea of differentiating between consumers at different stages, though he imagines that consumers float in and out of the stages. One of the ways in which search cost discussion is impoverished is that it doesn’t account for what qualities we’re searching for—just physical characteristics? The image of the company? Without clarity on that, we don’t know what consumers are searching for. An unauthorized use may affect a consumer’s view of a company’s moral probity; do we care?
The Linguistic and Trust Functions of Trademarks: Law and Economics Perspective
Abstract
Ariel Katz
University of Toronto
The Landes & Posner story again: TMs condense complex meanings into concise and unequivocal identifiers, and provide an incentive to maintain consistent quality. He wants to identify a broader and distinct benefit—TMs are essential to the existence of some markets.
For credence and experience goods, information asymmetries may drive high-quality products out of the market—the market for lemons. If TMs allow TM owners to build reputations, then they can solve the lemons problem and make the market stable. This “trust function” provides a framework for evaluating various rules.
If rules are consistent with both functions—condensing meaning and enhancing trust—then they are good TM rules. If they are inconsistent with both, they’re bad. If they are consistent with one but not the other, they need much more careful examination and limitation.
Classic example: passing off. This frustrates both the meaning and the trust functions. Frustrating the trust function is more problematic than frustrating the linguistic function. The consumer who can’t rely on the mark can still look for other indicia of meaning. That leads to higher search costs, but the market still exists. But if wholesale passing off is allowed, including counterfeiting other indicia of origin, then the market collapses.
Comparative advertising: using another company’s TM in advertising is legal in the US if nonconfusing, whereas it is not legal in many other jurisdictions. The American approach is normatively robust because comparative advertising is consistent with both the trust and linguistic functions: comparative ads reduce search costs by providing more information (comment: this is exactly the kind of loaded statement Bradford wants us to deconstruct).
Initial interest confusion: does it increase search costs (as when I leave the highway because of a deceptive billboard promising McDonald’s), or does it decrease them (as when trade dress of a store brand enables us to find a cheaper alternative if we want it)? His analysis suggests that, regardless of effects on linguistic function, the trust function of the mark will remain because the consumer is fully aware of the facts at the time of purchase. That doesn’t mean that IIC should never be enjoined, only that the cost calculus is different. Similarly with dilution.
(Comment: we are all in TM now circling around different ways of saying: Certain kinds of confusion just don’t count. Nominative fair use was the harbinger of this trend, a useful corrective to broad confusion uber alles/confusion in the air decisions.)
Lemley: (1) Can you think of something that harms the trust function and not the linguistic function? (2) We also need to identify the source of the costs as well as of the benefits—you’ve described the benefits of TM protection more specifically, which is useful, but before deciding about IIC we need to know what the costs of barring IIC are.
Katz: (1) Not yet. (2) Informational benefits from non-TM owners are clearly part of this story.
Q: Dilution law could preserve the trust function. Argument: A dilution law maximizes the range of products on which to apply the mark, therefore the value of the mark is maximized, therefore the incentive to invest is maximized.
Katz: He had “mental search costs”/imagination costs in mind when saying that those search costs don’t effect the trust function, because you still are unconfused. (Comment: this is like saying that low taxes increase the trust function.)
McKenna: Comparative ads can affect the linguistic function by changing the content of the information. Comparative ads can convince you that the product you thought was high-quality actually isn’t. (But it doesn’t necessarily change the density—if density is even the right word here.)
Katz: He means the quick correspondence between a term and a product: the Chicago Bulls, not the 3-time NBA winners from Chicago.
McKenna: But the benefit of that term is that you then know what it means. Comparative ads can increase your uncertainty about what that compact term means.
My take on McKenna’s argument: a successful challenge to a TM meaning makes it like “democracy,” a compact term but one with so many meanings that it’s hard to grasp all at once. Which is to say that Katz’s argument works, but must carry with it a normative argument about the difference between the TM—the signifier—and the product—the signified, in which it is ok to contest the meaning of the signified even though we might condemn attempts to interfere with the meaning of the signifier. And that’s perhaps related to the difference between “contesting”—offering alternative meanings for the product—and “interfering”—which carries with it ideas either of deception (I fool you about whether my product really is Coca-Cola) or of free-riding (I piggyback on extant meaning). But that’s not an uncomplicated divide; an advertiser will often see comparative advertising as unjustified free riding.
Perhaps we can rebut the anti-comparative advertising position by pointing out that the comparative advertiser is making an argument about product attributes by the comparison: the TM owner’s product is not unique/uniquely valuable. The “boost” the comparative advertiser gets by the reference is justified by the fact that the comparative advertiser has a competing product, or a relevant product, to offer. The pure dilutive free rider, by contrast, is not making any argument about the original product’s attributes; it is happy for your original view of those attributes to stay right in place and cast their gentle glow over the junior user.
Copyright Beyond the Right to Copy: Translations, Adaptations and Creative Reworking in 19th Century Law
Abstract
Maurizio Borghi
Brunel University Law School
Translation right has four possible states. First, the statutes and case law were silent. Second, the translation right was statutorily debarred and/or judicially denied: freedom of translation. Third: statutorily conferred with reservations: the situation in most of the 19th century. Fourth: copyright owners have translation rights.
Berne decided to extend the translation right. The first Convention, 1886, provided an exclusive right, but only for 10 years. 1896 provided the whole term, but the right lapsed if a translation wasn’t produced within 10 years of publication. 1909 provided the whole term, and then 1967 reintroduced exceptions for developing countries.
Various restrictions on the right: requirement of a notice of reservation; requirement of exercise; nationality requirements; etc. Both utilitarian and natural law approaches were offered. Translations are not, it was argued, acts of copying, but use of the author’s thoughts (Kant); they are independent works (many 19th century legal scholars); they require learning, talent and judgment. Moreover, there was a cultural interest in the spread of knowledge overwhelming the author’s interest, especially since clearing copyrights was not easy internationally and thus the author was unlikely to be harmed by the absence of a translation right.
Then the wind began to change. Translating began to be seen as reproducing. The cultural change was influenced by the international context—France and Germany lobbied for extension.
On the eve of 1908, free translation survived in Russia (not a Berne member; often mentioned as a shameful outsider), but not much else.
What did we observe? A progressive extension of author’s control, along with a conceptual shift that changed copyright law dramatically. Authors’ control over spin-offs of their works emerged as a dominant concept. This was independent from different legal traditions and from philosophies: it happened in copyright systems and author’s right systems.
What can we learn? “Building upon” existing rights needs to be carefully examined, and we should compare a conception of copyright as a bundle of exclusive rights with a competing conception of copyright as a blend of conditional rights—including use it or lose it. (Comment: possible comparison with working requirements in patent?)
Q: But isn’t it fair to say that translation does cause damage to authors? A faithful translation of A Little Prince versus a translation that Anglicized/colloquialized the original can change the way the work is understood.
A: He agrees, but legal scholars of the early 19th century didn’t, because copyright was a national matter and the translation reached a different market, not changing the conception of the work held by its original readers. (In other words, “damage” is a matter of baseline. To have damage, there has to be some interest of the author present in the foreign country.)
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