Preston Woods & Associates LLC v. RZ Enterprises USA Inc. (4:16-cv-01427)
By Matthew F. Abbott
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A recent verdict in the Southern District of Texas may put a novel issue before the Fifth Circuit concerning the scope of statutory damages available under the Digital Millennium Copyright Act (“DMCA”). Under 17 U.S.C. § 1203(b), statutory damages are multiplied by “each violation” of the DMCA, and the interpretation of what constitutes a “violation” could result in a significant increase or decrease in the amount of statutory damages awarded to DMCA plaintiffs.
Background
Plaintiff Preston Wood & Associates, LLC (“Preston Wood”) is an architectural design firm that owns copyrights in various architectural works and technical drawings. Preston Wood licensed some of its works to Defendant Urban Living, a real estate developer. The lawsuit alleges, inter alia, that Urban Living engaged in unauthorized distribution of Preston Wood’s copyrighted works as part of its marketing materials. Preston Wood further alleged that Urban Living knowingly distributed these works after removing Preston Wood’s “copyright management information” (“CMI”), in violation of the DMCA.
$28.8 million DMCA award
Following a trial in August 2018, the jury found that Urban Living had directly and contributorily infringed Preston Wood’s copyrights, and awarded Preston Wood $7,539.60 in actual damages for copyright infringement. In regard to the DMCA claims, the jury found further that Urban Living had committed 11,516 violations, based on evidence of the number of recipients to whom Preston Wood’s copyrighted works had been distributed. The jury awarded $28,790,000 in statutory damages, which represented the statutory minimum of $2,500 per violation for each of the 11,516 violations.
Judge David Hittner upheld the jury’s finding and entered judgment for the plaintiff in the amount of $28,797,539.60 which included the statutory damages under the DMCA, as well as actual damages and a permanent injunction. Defendant has stated its intent to appeal this ruling pending the disposition of currently pending post-trial motions.
Damages “for each violation” under the DMCA
Under the DMCA, 17 U.S.C. § 1203(c)(3)(B), a plaintiff electing statutory damages may recover an award “for each violation” of the statute. A significant dispute arose following trial as to what constitutes a “violation” of the DMCA. Urban Living moved for entry of judgment awarding Preston Wood $5,000 in statutory damages. Urban Living argued that, as matter of law and based on the evidence at trial, it had only committed two violations of the DMCA: first, when uploading the image of the copyrighted work to its website, and second, when sending an “email blast” containing the copyrighted work to many thousands of recipients. Urban Living asserted that the number of recipients is irrelevant in determining the number of violations, citing McClatchey v. Associated Press, 2017 WL 1630261 (W.D. Pa. 2017), in which the court found that defendant had committed a single violation of the DMCA by publishing a copyrighted photograph via its wire service. Urban Living further argued that awarding even minimum statutory damages for the 11,516 violations found by the jury would result in a windfall recovery for Preston Wood when compared to the amount of actual damages, and such award should be remitted by the district court.
In response, Preston Wood argued that the DMCA should be construed according to its unambiguous plain meaning – i.e., since the DMCA expressly prohibits “distributions” of copyrighted materials with their CMI removed, each such distribution to an individual recipient is a violation of the statute. Preston Wood further argued that McClatchey and other cases cited by Urban Living were distinguishable, were not decided on a full evidentiary record as to the nature of the distributions and did not establish a rule under the DMCA that the number of recipients of materials was irrelevant.
In its November 8, 2018 Order, the Court declined to remit the jury award, and entered Final Judgment against Urban Living for statutory damages under § 1203(b) in the amount of $28,790,000. Urban Living has subsequently moved for approval of a supersedeas bond in order to appeal, and has taken the position that the bond need only account for $23,381.85 of the $28,797,539.60 judgment. Additionally, Urban Living has moved for a new trial arguing that the jury’s finding that Urban Living violated the DMCA is supported by insufficient evidence. Both motions have been briefed and are pending before the Court.
Potential implications
If the case is appealed and the Fifth Circuit rules in favor of Urban Living, it will greatly limit statutory damages where a defendant has performed a limited number of distributive acts, regardless of how many individuals actually received the DMCA-violative materials as a result of those acts. Alternatively, a ruling in favor of Preston Wood could subject DMCA defendants to potentially tens of millions of dollars in statutory damages for a single distributive act, such as sending a single email to their mailing list. Either result will have a substantial impact on the scope of recovery of statutory damages for violations of Section 1202 of the DMCA in the Fifth Circuit.