Damages in Kazaa?
Little flurry of debate over the last couple of days about possible damages in Kazaa. Applicants of course talking "in the billions". I made some comment about this yesterday and at the time, noting the absence of 'statutory damages' in Australia. Without a statutory damages system, damages are based on loss/harm (plus additional damages for flagrancy). But what does that mean when:
- not every download (or anywhere near every download) would be a lost sale?
- many of those downloads would not be in Australia and working out which ones were would be rather challenging to say the least?
In the case, Eagle Rock Entertainment Limited sued Caisley (one of those absent, non-responsive type respondents) for copyright infringement over two things:
- production and sale of unauthorised copies of the DVD in Australia; and
- the making and selling of master copies which were sold to entities in Spain and Brazil which then made and sold unauthorised copies in those countries.
On the question of how much harm in Australia, Tamberlin J had this to say:
there are two alternative approaches to the assessment of damages in relation to the infringements in Australia. The first is the licence fee approach. The relevant question in relation to this approach is whether the applicant and respondent are in actual competition. Where this is the case, an issue arises as to whether the respondent might have been granted a licence by the applicant if it had been sought. In a case where a licence would probably have been granted, the measure of damages can be assessed by taking account of the licence fee or royalty that the respondent would have been made to pay by the applicant for a licence. However, in referring to these general guiding principles, it is important to bear in mind that they are not immutable and that the relevant factors on which damages can be assessed are broad and extensive. An applicant is not normally under a compulsion to grant licences. If the applicant would probably not have granted the respondent a licence, the Court will take into account the losses caused to the copyright owner by the competition posed by the respondent’s sale of unauthorised DVDs. This will normally involve a consideration of any loss that the copyright owner has suffered by diminution of the sales of the copyright work or the loss of the profit that the copyright owner (or exclusive licensee) might otherwise have made.
In the present case, having regard to the extensive material before me and the applicant’s detailed submissions, I do not consider that the appropriate approach to take is one based on the licence fee that Eagle could have charged for the making and selling of the DVD. I do not consider that Eagle would, if requested, have granted a licence to Caisley or that Caisley would have paid the licence fee if he was given the choice between so doing or not using the copyright work. The two parties were in direct competition. I note that, in some instances, the authorised DVD and the unauthorised DVDs were sold from the same website. Therefore, there was a direct deprivation of profits that the applicant would otherwise have made.This reasoning on the use of licensing fees as a measure of course may not apply in full - Kazaa might argue that they wanted to go 'legit' with the gold files. Of course there is no way the applicants would have provided a license to this mob. But perhaps license fees in other online applications could be a guide...
The case in the Kazaa litigation over 'direct losses' is not as simple - a download is not equivalent to a CD - nor, arguably, to a DRM'd download.
On the master copies, Tamberlin J interestingly allowed the copyright owners to claim for the lost sales in Brazil and Spain (quite a sizeable claim, at $251,000). Could copyright owners in the Kazaa litigation claim for infringements overseas under Australian law?
And then there is 'flagrancy' damages - additional damages under s 115(4) for contumacious behaviour. And what emerges from this judgment is that the amount of flagrancy damages is pretty much a stab in the dark:
'Additional damages are at large. The assessment depends on the particular circumstances of the case. I have been referred to several cases where large amounts of additional damages in the order of $500,000.00 and $350,000.00 were awarded. In the present case, I am satisfied that there has been serious and deliberate infringement by Caisley and that the conduct falls within s 115(4). I regard the infringements and associated conduct referred to by Eagle as flagrant, deliberate and serious. In these circumstances, I consider that additional damages in the order of $90,000.00 are appropriate. In reaching this conclusion, I have taken into account the very substantial amount of damages awarded by way of the other head of damages.'
I'd be interested in anyone else's views on the damages issue...