Background
Derek Andrew Inc. (”Andrew”) and Poof Apparel Corp. (”Poof”) are both apparel companies. Andrew’s “Twisted Heart” clothing line is sold in high-end department stores; it is identified by a hang tag featuring a trademarked logo that was first developed and used in 2003. Andrew registered the tag with the U.S. Copyright Office on Jun 15, 2005. Poof, which sells clothing to lower-end retail stores, sold some clothing with a hang tag nearly identical to Andrew’s tag, except with the word “Poof” in place of the words “Twisted Heart.”
Andrew first discovered the infringement on May 9, 2005 and sent Poof a cease and desist letter on May 2005. Poof twice indicated that it would comply with Andrew’s demands, but failed to remove the garments with the infringing hang-tag from stores. Andrew filed a lawsuit against Poof for copyright and trademark infringement and Poof defaulted. The court denied Poof’s motion to open the default due to Poof’s failure to show “good cause.”
At the bench trial on damages, the district court determined that, as to the claims brought under the Lanham Act and state laws, disgorgement was the proper remedy and it awarded Andrew $685,307.70, representing Poof’s profits from the garments bearing the infringing hang-tag. The court also permanently enjoined Poof from infringing on Andrew’s hang-tags. As to the copyright claims, the court awarded Andrew statutory damages, pursuant to 15 U.S.C. sections 504 (a) and (c), of $15,000. Further, based on its determination that this was an “exceptional case,” the court awarded Andrew $296,090.50 in attorneys’ fees and $6,678.60 in costs. Poof appealed only the statutory damages award and the attorneys’ fees award.
Statutory Damages in the Copyright Act and the Limitations of Section 412(2).
A copyright owner can take action to protect his copyright whether or not he has registered that copyright with the U.S. Copyright office. The government wants people to register their copyrights, however. In order to encourage registration, Congress provided registered copyright owners with an added benefit. Section 504 of the U.S. Copyright Act gives registered copyright owners a damages option when they sue for infringement — they can sue for actual damages or opt for “statutory damages” instead. (Unregistered copyright owners can only sue for actual damages). Statutory damages can range $200 to $150,000, depending on various factors, particularly whether the infringement was willful or unintentional. 17 U.S.C. section 504(c). Because actual damages are so often difficult to prove in copyright infringement cases, registered copyright owners often opt for statutory damages instead.
But the statutory damages option is limited by Section 412(2), which bars recovery of statutory damages for “any infringement of copyright commenced after first publication of the work and before the effective date of registration, unless such registration is made within three months after first publication of the work.” 17 U.S.C. section 412(2). The purpose of this provision, of course, is to encourage prompt copyright registration. Court have determined that this section also encourages potential infringers to check the Copyright Office’s database before taking action. See, e.g. Johnson v. Jones, 149 F.3d 494, 505 (6th Cir. 1998).
Andrew v. Poof Apparel — Applying 412(2) to a Case of Ongoing Infringement
In Andrew v. Poof Apparel, the Ninth Circuit addressed a question that had already been addressed by several other circuit courts: How does the court define “commenced” under Section 412(2)? Put another way, does section 412 bar “an award of statutory damages for post-registration infringements when the initial act of infringement occurred prior to the effective copyright registration date”? Andrew v. Poor Apparel, 528 F.3d 696, 700 (9th Cir. 2008)
In the Andrew case, Poof Apparel used the infringing hang-tags both before and after Andrew’s registration of the copyright. The District Court had apparently determined that the post-registration hang-tags uses “were separate and distinct infringments from the pre-registration infringment.” Id. at 699.
The Ninth Circuit followed the lead of other federal courts[1] and reversed the District Court’s finding. The court quoted the following excerpt from Singh v. Famous Overseas Inc., 680 F. Supp. 533, 535 (E.D.N.Y. 1988):
Each separate act of infringement is, of course, an “infringment” within the meaning of the statute, and in a literal sense perhaps such an act might be said to have “commenced” (and ended) on the day of its perpetration [,]… it would be peculiar if not inaccurate to use the word “commenced” to describe a single act. That verb generally presupposes as
a subject some kind of activity that begins at one time and continues or reoccurs thereafter. [2]
The Andrew court determined that the District Court’s interpretation would “defeat the dual incentives of section 412″ — namely, to encourage prompt copyright registration and to encourage potential infringers to check the database before acting. 528 F.3d at 700. Accordingly, the court held that “THE FIRST ACT OF INFRINGEMENT in a series of ongoing infringements of the same kind marks the commencement of one continuing infringement under section 412.” Id. at 701 (emphasis in original).
The court determined that Poof’s pre-registration and post-registration hang-tags were essentially identical, other than being hung on different garments. Because Poof began the infringing activity before the date of registration, which was nearly two years after Andrew’s first use, and continued it thereafter, the exception of 412(2) applied and Andrew was not entitled to statutory damages. The court reversed the $15,000 statutory damages award.
The Finding of Willful Infringement Upon Default not Inappropriate
Poof Apparel disputed the award of attorneys’ fees on two grounds: (1) Andrew’s inability to get statutory damages under the Copyright Act similarly prevented an award of attorneys’ fees; and (2) the attorneys’ fees award was not appropriate under the Lanham Act.
The court first addressed the propriety of the award, outlining that the Lanham Act does allow for an award of attorneys’ fees and costs in “exceptional” cases of trademark infringement, which courts have construed as “malicious, fraudulent, deliberate or willful.” 528 F.3d at 702 (citing Rio Props., Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1023( 9th Cir. 2002)). In this case, the complaint expressly alleged willful infringement; the entry of default judgement against Poof Apparel constitutes a determination that those allegations are true. Id. The court’s determination of willful infringement was sufficient to support an award of attorneys’ fees under this provision of the Lanham Act.
However, the Ninth Circuit did agree with Poof Apparel as to the Copyright Act claim. Because Andrews did not promptly register its copyright so as to qualify for statutory damages, it similarly could not qualify for an award of attorneys’ fees under that cause of action. Id.
Because the District Court had not stated which portion of the attorneys’ fees award would be attributable to the Lanham Act violation versus the Copyright Act violation, the Circuit Court remanded the issue to the District Court to recalculate the fees award to delete any amounts attributable to the Copyright Act claims.
The Lesson — Prompt Copyright Registration Helps Complete Brand Protection
The growing line of decisions like Andrew should alert brand owners to the critical need to register all copyrights promptly. Prompt registration puts potential infringers on notice of the owner’s rights and claims. More importantly, as Derek Andrew learned, comprehensive brand protection requires both trademark and copyright registration to ensure that the maximum remedies are available to combat infringement.
ENDNOTES
[1] Bouchat v. Bon-Ton Dept. Stores Inc., 506 F.3d 315, 330 (4th Cir. 2007); Troll Co. v. Uneeda Doll Co., 483 F.3d 150, 158 (2nd Cir. 2007); Mason v. Montgomery Data Inc., 741 F. Supp. 1282, 1286 (S.D. Tex. 1990).
[2] The court also referenced the following cases in support of this same proposition: Parfums Givenchy Inc. v. C&C Beauty Sales Inc., 832 F. Supp. 1378, 1394 (C.D. Cal. 1993); Mason v. Montgomery Data Inc., 741 F. Supp. 1282, 1286 (S.D. Tex. 1990).