By Lauren Gelman on September 22, 2003 at 4:29 pm
At issue was whether the copyright owner should be permitted to recover actual damages beyond the defendant’s profits, where the profits resulted from the overseas distribution of videos produced by infringing a copyright within the United States. The Ninth Circuit answered no, holding that the “narrow exception [to the Copyright Act] for the recovery of the infringer’s profits” does not include actual damages.
The Copyright Act applies only to infringements occurring within the United States; infringements outside U.S. borders are traditionally beyond the reach of U.S. courts. In this case, Reuters copied videos in New York, then distributed them through various overseas networks, including the British Broadcasting Company and the European Broadcast Union. Because the “act of infringement [was] completed entirely within the United States and … such infringing act enabled further exploitation abroad,” the court allowed the plaintiff to recover the defendant’s profits. It cited an exception to the Copyright Act as determined in Sheldon v. Metro-Goldwyn Pictures Corp., 106 F.2d 45, (2nd Cir. 1939) (“profits from overseas infringement can be recovered on the theory that the infringer holds them in a constructive trust for the copyright owner“).
However, the court found that plaintiff’s claim for actual damages fell outside the scope of the Sheldon exception. Reasoning that the exception to the Copyright Act “preserved consistency with Congress’s decision to keep the copyright laws… territorially confined,” the court questioned whether holding an infringer liable for resulting overseas infringement would deter future infringement. The court was also concerned about any possible chilling effect over-deterrence may have on “fair use of copyrighted works.”
In his dissent, Judge Silverman wrote that the ruling was inconsistent with the court’s previous decision on the topic. He stressed that in Los Angeles News Service v. Reuters Television International, Ltd. 149 F.3d 987 (9th Cir.1998) the court mandated that the ruling barring the claim for extraterritorial damages be reversed and remanded for a trial on actual damages, “with directions that if LANS elects to recover actual damages, the award of statutory damages be vacated.” Judge Silverman stated that the majority “now holds that when we said ‘actual damages,’ we didn’t mean actual damages.” He also noted that the oft-cited Sheldon case “had nothing to do” with actual damages; rather, it dealt with an appeal from an accounting. LANS, he wrote, “should have been allowed to put on its proof of its actual damages.”
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