Photo of Mohamed AmeryBy Mohamed AmeryMay 29 2017
Litigation

When should a party whose copyright is infringed opt for “statutory damages”?

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A recent case (“Auto Trader”) pitted the owner of the well-known “AutoTrader” website, a leader in the Canadian market, against a new entrant to the market, CarGurus, which has roots in the U.S.

The facts of the case are interesting but relatively straightforward.  Employing a business model used in its U.S. operations, CarGurus made use on its website of photos that it thought were the possession of various car dealers. The photos, as it turned out, however, were taken by and belonged to AutoTrader. In making use of the photos on its website, CarGurus breached AutoTrader’s copyright in the photos. AutoTrader demanded compensation under Canadian copyright law but CarGurus refused to pay, so litigation ensued. CarGurus argued a number of defences (such as fair dealing), but they were not accepted by the Court.  These defences, though interesting, are not the focus of this article.

At bottom, the Court had little difficulty in finding that copyright breaches (in fact over 150,000 of them) occurred.  The question then turned to the amount of compensation to which AutoTrader was entitled.  Under the governing Copyright Act (section 38.1), a plaintiff claiming copyright has the option of electing to seek “statutory damages” instead of actual damages.  This election must be made before judgment is rendered. 

The key reason why a party may seek statutory damages is because actual damages may be difficult to calculate. A choice to seek statutory rather than actual damages eases the evidentiary burden.  The statutory damages awarded for each copyright infringement is between $500 and $20,000.  Critically, though, the Court has discretion to lower the amount of statutory damages per infringement if the facts of the case require so, particularly where the statutory damages, if awarded, would be grossly out of proportion relative to the infringement.  Factors the Court considers in whether to exercise its discretion include chiefly the conduct/behaviour of the parties during the material times and during the lawsuit.   

In the AutoTrader case, the plaintiff sought a gargantuan amount by way of statutory damages, $76 million ($500 per infringement).  The Court deemed that to be unreasonable as it was grossly out of proportion with what actual damages would have been based on the plaintiff’s costs data.  The Court also found CarGurus to have acted in good faith. CarGurus was ordered to pay the plaintiff a little over $300,000.           

The key takeaway is that the election to seek statutory instead of actual damages must be made carefully.  A plaintiff must analyze the costs and benefits involved in both the “actual” and “statutory” scenarios. 

Invitation for Discussion

Our litigation lawyers are skilled in copyright law. If you would like to discuss this blog in greater detail, or any other business litigation matter, please do not hesitate to contact Mohamed Amery or one of the lawyers in the Business Litigation Group at Nerland Lindsey LLP.

Disclaimer:

Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.

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