Digital Learning Legal Background Paper
Statutory Damages [1]
Critical discussion of copyright in the educational context often overlooks the importance of damages. The provision for statutory damages, in particular, may influence educational users’ decisions and motivate them to be excessively cautious, even where they might have a good argument for their actions under fair use or educational use exemptions.
Congress explicitly intended that statutory damages would adequately reward copyright owners for their investments and adequately deter defendants from unauthorized use of material. They can be particularly important in situations where actual damages are difficult to calculate or to prove. Because statutory damages allow plaintiffs to save litigation costs by avoiding the often-expensive task of proving elements of actual damages, they play a significant role in much copyright litigation. At times, however, statutory damages may produce a windfall for the rightsholder. Under some circumstances common in educational settings, especially where a teacher draws content from multiple works, maximum statutory damages for infringements can reach extremely high levels. Nonprofit educational enterprises can seldom risk such large damages on top of substantial legal fees. In addition, a number of factors make statutory damages awards unpredictable, further complicating educational users’ calculus of risk.
The following analysis begins with an introduction of the statutory and doctrinal framework for statutory damages and discusses their intended economic function. It then identifies some possible effects of this statutory damages regime on educational copyright users and owners.
I. Statutes and Basic Doctrine
- Purposes of Statutory Damages
As recognized by commentators and courts alike, statutory damages—like actual damages—aim to reduce incentives to violate copyright law, making the expected cost of infringing action no less than the expected cost of obtaining authorization.[2] However, insofar as statutory damages often explicitly and purposefully go much higher than actual damages, they also serve an expressly deterrent function: making infringing action more expensive, often drastically more expensive, than obtaining authorization.[3]
Congress has articulated that statutory damages, in particular, serve a number of purposes not served by actual damages. First, they allow awards of damages in excess of actual damages in order to take account of the insufficiency of actual awards—particularly in light of the difficult detection of copyright violation, possible non-profitable uses by defendants, and the burden and expense of calculating and proving actual damages.[4] Second, and more recently, Congress has indicated that greater damage awards may serve a deterrent purpose against third parties—combating, in particular, an increase in large-scale piracy enabled by new copying technologies.[5]
- Section 504(c)
Copyright statutes since the time of the first American colonies have provided for damage amounts—on various rubrics from per-copy fines to per-infringement ranges—separate from actual damages.[6] Under the 1909 Act, “in lieu” damages were available on a sliding scale when actual damages were indefinite or indeterminable. These “in lieu” damages were entirely reworked in the 1976 Act, in response to frustrations about difficulties determining when actual damages were impossible to award, and how many awards to make in instances of multiple infringements. Nevertheless, statutory damages of some sort have always been a feature of American copyright laws.
Section 504(c) of the current copyright statute[7] responded to concerns about the 1909 Act’s provisions by giving plaintiffs the option to choose statutory damages over actual damages and requiring that such damages be awarded per work infringed rather than per infringement. In pertinent part, the current statute reads:
(1) [T]he copyright owner may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for all infringements involved in the action, with respect to any one work…in a sum of not less than $750 or more than $30,000 as the court considers just. For the purposes of this subsection, all the parts of a compilation or derivative work constitute one work.[8]
The section further provides for the increase of the statutory maximum to up to $100,000 per infringed work if the defendant is shown to have acted willfully, or down to $200 per infringed work for innocent infringements.
Of primary importance to educational users, the provision on statutory damages provides in § 504(c)(2) that a court may not award statutory damages in any case where an infringer believed and had reasonable grounds for believing that his or her use of the copyrighted work constituted a fair use, if the infringer was:
(i) an employee or agent of a nonprofit educational institution, library, or archives acting within the scope of his or her employment who, or such institution, library, or archives itself, which infringed by reproducing the work in copies or phonorecords; or
(ii) a public broadcasting entity which or a person who, as a regular part of the nonprofit activities of a public broadcasting entity…infringed by performing a published nondramatic literary work or by reproducing a transmission program embodying a performance of such a work.
A great number of educational users of content fall outside of these narrowly drawn categories and, as a result, they are not exempt from possible statutory damages based on their good faith reasonable belief of fair use.[9] Additionally, though the issue has never arisen in a reported opinion, the exception does not mention good faith belief of non-infringement under any other educational exceptions as a circumstance affording total remittance of statutory damages. As such, educators with a good-faith belief that their activity is privileged only under the TEACH Act are not immune from statutory damages in the event that their judgment is incorrect.
- Calculation of an Appropriate Award
- Willful, Innocent or Regular Infringement
The first step for any court determining a proper award of statutory damages is to determine whether the infringement was “willful” or not, or “innocent” or not; while in most cases infringement will be found to be neither willful nor innocent, opposing parties often allege the contrary theories in order to increase or decrease possible damages in their favor. Both these terms have special meaning within copyright law. Although most educators, typically copying material for benevolent non-commercial purposes, would think themselves often “innocent” and never “willful,” copyright law operates somewhat at odds with this expectation.
“Willful” infringement, as defined by most courts, is action with knowledge that one is infringing copyright.[10] Though plaintiffs almost always allege willful infringement, for the most part courts require actual knowledge or reckless disregard for infringement: ineptitude, accident, or good faith belief of non-infringement in most cases will defeat a charge of willfulness.[11] However, as actually applied, the standard can be broader. In one instance, a district court ruled that the owner of a copy shop who, with political motivation but good faith belief of fair use, relied upon fair use rather than pay licensing fees for articles used in course packs, acted “willfully.”[12] Noting that the subject of fair use was an unsettled area of the law, the court of appeals reversed this finding of willfulness.[13] Though a finding of willfulness increases the statutory cap from $50,000 to $150,000 per infringed work, an award in that range is not required; a court retains its discretion to award any amount between $750 and the elevated maximum.
Contrariwise, the statute defines acting innocently as having been “not aware and [having] no reason to believe that his or her acts constituted an infringement of copyright.”[14] Thus, “innocent” infringement is that which occurs when the defendant did not know, and did not have any reason to know, that actions constituted a copyright violation.[15] Even if the defendant sustains the burden of showing good faith, however, reduction of damages is not mandatory—though the minimum damages allowable drops from $750 to $200 per infringed work, the court is free to depart from that minimum.
Because both the increased maximum damages for willful infringement and decreased minimum damages for innocent infringement are not mandatory, the distinction may make little difference in some cases. For instance, the copy shop owner found to have willfully violated a large number of copyrights in the case mentioned above was initially required to pay $5000 per infringed work; a defendant educational catalogue found to have “unintentionally” infringed six copyrights in a different case was required, also, to pay $5000 per infringed work.[16] Other non-statutory factors, and the inclinations of a particular judge or jury, may ultimately affect the amount of damages more than the codified distinctions based on state of mind.
- Non-Statutory Benchmarks
Courts analyzing a claim for statutory damages do not arbitrarily select an award within the prescribed range. Rather, in addition to considering the willful or innocent mindset of the defendant, courts traditionally consider several additional benchmarks useful to identifying an appropriate and “just” award within the statutory bounds.[17] Typically, courts consider “the expenses saved and profits reaped by the defendants in connection with the infringements, the revenues lost by the plaintiffs as a result of the defendant's conduct, and the infringers' state of mind-whether willful, knowing, or merely innocent.”[18] However, in particular cases where such factors play a prominent role, courts may also consider the conduct of the parties during the litigation itself,[19] and broad policy goals of damages and copyright generally, such as the desire to deter third-party infringers from unlawful conduct in the future.[20]
In addition to these multifarious factors, other circumstances also make statutory damages unpredictable. For one, statutory damage awards are themselves largely shielded from appellate review.[21] Furthermore, the Supreme Court recently ruled that plaintiffs have a right to seek a jury trial on the issue of statutory damages, rather than having them set by a judge.[22] Thus, as lay juries calculate statutory damagesmore often, predictability can be expected to decrease even further and there is reason to believe that juries may grant larger statutory damages awards.[23] Finally, although some courts recognize rough double or treble damages rules for statutory damages[24]—attempting to anchor statutory damage amounts to actual damages—these rules diverge between courts and, as an unofficial “benchmark” rather than statutory factor, they are unlikely to be included in jury instructions in the future.
II. Application to Educational Uses
Thus far, commentators have paid littleattention to the effect of statutory damages on educational users, although educators and librarians are acutely aware of the issue.
First and most basically, the statutory damages provisions require that minimum damages be awarded even in cases where infringers reap no profit from their activities and cause no significant losses to the plaintiff. As such, even where a teacher, student or other educational user found to have infringed copyright did so at no financial benefit to themselves, they may be liable for at least $200 per infringed work.[25]
Second, statutory damages awards can become cripplingly large in cases of multiple infringed works. Because minimum and maximum awards apply for each infringed work in a given action, courts are required to award at least minimum damages for every infringement proven. While uncommon, astronomical total awards—in the tens and hundreds of millions of dollars—are possible both as a matter of law and practice.[26] Although many awards are limited in size by restraint on the part of plaintiffs themselves, particularly against small-scale defendants,[27] no absolute maximum applies other than the per-work statutory maximum. As such, an educator found to have infringed five works even “innocently” would be required to pay a minimum of $1000, and maximum of $250,000, in statutory damages.[28] Defendants found to have infringed some number of copyrighted works, but for whom damages are remitted under the “fair use” exception of §504(c)(2), nevertheless must pay their own litigation costs.
Finally, statutory damages profoundly alter the risk-benefit analysis involved in relying on fair use or educational use exemptions. A small risk of litigation attaches to every good faith, reasonable use of material under these provisions. As discussed elsewhere, even where an educational user is confident that a use is legal, the open-ended statutory standards and judicial interpretations of them combine to make outcomes very unpredictable. The expected cost of reliance on fair use or educational use is the probability of an adverse judgment, in any given circumstance, multiplied by the expected cost of litigation and judgment, plus the additional cost of defending the litigation.
Even if the actual risk of being sued and losing is small, it is multiplied by the potential damages. Statutory damages tend to inflate expected judgments beyond actual damages and thereby increase the expected cost of fair use to educational and other users.[29] Courts in fact recognize exactly this equation at work; at a certain level of risk and expected payout—where the expected cost of relying on legal provisions for fair use or educational use exceeds the cost of a license—educational actors will prefer to rely upon licensing over their good faith assessments of the law.[30] As a result, even where most observers would conclude that an educational activity fell well within the bounds of fair use or the TEACH Act, educators may shrink from relying on their protection because of the (small) risk of (very large) statutory damages.
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[1]This legal background paper was produced as part of the Digital Learning project by the BerkmanCenter for Internet and Society at HarvardLawSchool. Primary research and drafting was conducted by Harvard Law student Ashley Aull. This work is licensed under a Creative Commons Attribution/Non-Commercial/ShareAlike License, as explained further at
[2]See, e.g., Broadcast Music, Inc. v. Star Amusements, Inc., 44 F.3d 485, 488 (7th Cir. 1995) (discussing an award of statutory damages of approximately three times actual damages as “an appropriate award to ensure that violation of the copyright laws is a more expensive option than compliance.”)
[3] See H.R. Rep. No. 106-216 (1999) (“Courts and juries must be able to render awards that deter others from infringing intellectual property rights. It is important that the cost of infringement substantially exceed the costs of compliance.”)
[4]See, e.g.William F. Patry, 2 Copyright Law and Practice 1170 (1994); Terrence P. Ross, Intellectual Property Law Damages and Remedies § 2.02[3] (2000); 2 Paul Goldstein, Copyright 12.2, at 12:34 (2d ed. 1996) (“Because actual damages are so often difficult to prove, only the promise of a statutory award will induce copyright owners to invest in and enforce their copyrights, and only the threat of a statutory award will deter infringers by preventing their unjust enrichment.”)
[5]See, e.g., H.R. Rep. No. 106-216 (1999) (discussing the Copyright Damages Improvement Act of 1999, which multiplied statutory damage awards by 150%, justified by increased international, high-tech piracy).
[6] See generally U.S. Copyright Office, Copyright Laws of the United States of America, 1783-1862 (describing colonial statutes and evolution of the first federal copyright statute). See also Lyman R. Patterson, Copyright in Historical Perspective §9 (1968) (reviewing early American copyright provisions).
[7] As originally enacted in 1976, and modified in 1988 and 1999, under the Berne Implementation Act, Pub. L. No. 100-568, 102 Stat. 2853 (1988), and Copyright Damages Improvement Act, Pub. L. No. 106-160, 113 Stat. 1774 (1999). Both the 1988 and 1999 Acts modified only the minimum and maximum damages awards, justified by the Berne Act by a need to conserve registration incentives in light of other changes to the copyright law, and by the Copyright Damages Improvement Act by a need to increase deterrents in light of growing international piracy. Both statutes also sought to adjust damages to inflation.
[8] 17 U.S.C. § 504(c)(1) (West 2006). Statutory damages are available only to plaintiffs who register their copyrights before bringing suit. See 17 U.S.C.A. § 408 (West 2006).
[9] The narrowness of the categories results from the contentious legislative process that led to the 1976 Act. Though statutory damages were themselves rather uncontroversial, and other major revisions to the act were generally accepted nearly a decade before the overall bill could generate consensus, fair use was an extremely contentious issue. As explained below, however, the narrowness of this definition has dramatic consequences for the expected “cost” of fair use to educational users outside of the specified categories.
[10] See Cable/Home Communications Corp. v. Network Prods, Inc., 902 F.2d 829 (11th Cir. 1990) (treatise cited); Peer Int’l Corp v. Pausa Records, Inc., 909 F.2d 1332, 1335 n.3 (9th Cir. 1990); Broadcast Music, Inc. v. Xanthas, Inc., 855 F.2d 233, 236 & n.7 (5th Cir. 1998).
[11]SeeNimmer on Copyright 14.04[B][3][a].
[12] Princeton Univ. Press, Inc. v. Michigan Document Servs., Inc., 855 F. Supp. 905 (E.D. Mich. 1994). Nevertheless, the court awarded only $5,000 per infringement, for a total of $30,000—far below the maximum allowed upon a finding of willfulness. The court warned, however, that continued similar conduct on the part of the copy shop would result in his being “required to pay the maximum enhancement of damages under the statute.” Id. at 913.
[13] Princeton Univ. Press, Inc. v. Michigan Document Servs., 99 F.3d 1381 (6th Cir. 1996).
[14] 17 U.S.C. § 504(c)(2) (West 2006).
[15]SeeLos Angeles News Serv. v. Tullo, 973 F.2d 791, 800 (9th Cir. 1992). See generally Nimmer on Copyright § 14.04[B][2]-[3] (describing the standards of willfulness and innocence).
[16]See Smith v. Education People, Inc., 233 F.R.D. 137, 137, No. 03-CV-1856 (RO) (December 16, 2005).
[17] Appeals courts afford trial courts significant breadth in their calculations of an appropriate award, deferring to the trial court’s determination so long as it lies within the statutory range.
[18] N.A.S. Import v. Chenson Enters., Inc., 968 F.2d 250 (2d Cir. 1992); Boz Scaggs Music v. KND Corp., 491 F. Supp. 908, 914 (D. Conn. 1980). SeealsoWilliam F. Patry, 2 Copyright Law and Practice 1173 (1994).
[19]See Patry, supra note10, at 1173.
[20]See, e.g., Fitzgerald Publishing Co. v. Baylor Publishing Co, 807 F.2d 1110, 1117 (2d Cir. 1986); United Features Syndicate, Inc. v. Sunrise Mold Co., 569 F. Supp. 1475, 1481 (S.D. Fla. 1983); Dive N’ Surf, Inc. v. Anselowitz, 834 F. Supp. 379, 383 (M.D. Fla. 1993). SeealsoTerrence P. Ross, Intellectual Property Law Damages and Remedies § 2.02[3] (2000) (indicating that courts may rely on broad policy arguments in justifying a particular award).