their respective positions. A copyright owner who is forced to take depositions in various parts of the world to prove his copyright and sustain his system of distribution, where such facts are put in issue, even though the only real issue were one of license (which could have been negotiated for a few pennies or a few dollars), can sustain really serious expense in being forced to sustain his copyright against potential small infringers. Similarly, an alleged infringer may be put to great legal expense to prove that there was no appropriation as alleged. IV. OTHER CONSIDERATIONS A. WITHHOLDING REMEDIES TO ENCOURAGE REGISTRATION, DEPOSIT, ETC. This matter would be more appropriately considered in discussions of formalities, divisibility, recordation, importation, etc. B. EXEMPTIONS FROM REMEDIES (FAIR USE) This could appropriately be considered in the studies of whether certain types of uses should be expressly exempted from remedies. The 1940 Thomas bill, for example, provided such exemptions (sec. 12) in connection with: charitable performance of music under certain conditions; in the reporting of news events; the making and distribution of photographs, motion pictures, paintings, illustrations, or televised images of works of architecture, or works of art in public places; recording transcriptions or kinescopes by a broadcaster or televisor for private file and reference purposes only; translation for private study and research; making single copies of an unpublished work lawfully acquired by a library, for study and research only; making by a library of one copy of an out-of-print published work for research purposes, under elaborate regulations. C. REMEDIES IN CONNECTION WITH CONTROVERSIAL ISSUES Remedies would of course have a bearing upon other substantive issues of copyright to be considered in any general revision, and as to which separate studies are being made. We might well await the conclusion and determinations to be made in respect of these matters before considering remedies in connection with such situations. Among such matters, for example, are the 2-cent compulsory license for musical recordings, the coin-operated jukebox exemption for musical recordings, design protection under copyright, copyrightability for acoustically recorded works. I think that among other points, I have commented upon the various major issues pointed out by Bill Strauss in the recapitulation at the end of his paper. I shall await with special interest further discussion and development of this question. EDWARD A. SARGOY. By Herman Finkelstein MAY 16, 1957. I have read with much interest Ed Sargoy's letter of May 6th addressed to you and must say that I am in accord with his observations and conclusions. In addition to the reason stated by Mr. Sargoy in support of the present minimum damages provisions, please see pages 7 and 8 of the enclosed reprint of my lecture on Public Performance Rights which, I hope, states my position rather succinctly and which you may quote. Please notice particularly the first paragraph on page 7 under the heading "Importance of Minimum Damages" and the last paragraph under that heading on page 8. HERMAN FINKELSTEIN. Excerpt from pages 7 and 8 of lecture by Herman Finkelstein IV. IMPORTANCE OF MINIMUM DAMAGES Without a provision for statutory minimum damages, the performing right would be worthless. Infringements can be detected only at the precise time the performance is given. For every infringing performance that is detected thoussands are given with impunity. The Government does not furnish a police force to compel observance of the rights of copyright owners. This task must be done privately at great expense to the copyright owners. In turn, under section 101 of the act (17 U.S.C.A. [Supp. 1954]), they are allowed to recover minimum damages of $250 when an infringer is successfully prosecuted and actual damages cannot be proved.27 Counsel fees may be also awarded to the successful party (plaintiff or defendant) in the court's discretion. The provision for statutory damages is a remedial one and is neither a penalty nor a forfeiture; the purpose of statute is to provide for recovery in those cases where it is difficult to determine damages.28 The statute specifically sets forth the amount of recovery for certain types of infringement and states that "*** such damages shall in no case exceed the sum of $5,000 nor be less than $250 *** Apart from the allowance of minimum damages of $250, there is a separate provision for a recovery of $10 for every infringing performance of a musical composition. This applies only where more than 25 infringing uses of the same composition have been proved. If there are fewer than 25, the $250 minimum applies.29 Where there are more than 25 infringing performances of the same composition, the court may, in its descretion, grant $10 for each performance as a basis for assessing additional damages.30 An infringer may not avoid an award of minimum damages by proving that he could have obtained a license at a rate lower than the statutory minimum of $250.31 Nor may he preclude the award of minimum damages by a showing of the profits made from the infringement.32 When statutory damages are awarded, the action of the trial judge in assessing an amount within the limits prescribed by the statute is not reviewable.33 Under the amendment of July 17, 1952, granting recording and performing rights to nondramatic literary works, a new damage provision was inserted into the law for infringements of such works. Minimum damages for infringement by broadcast of any work referred to in section 1(c) amount to $100 where the infringing broadcaster shows that he was not aware that he was infringing and that such infringement could not have been reasonably foreseen. With rising costs the $250 minimum damage provision is not as substantial as it was when the 1909 act was enacted. However, it remains the most effective way to enforce a copyright proprietor's right and to deter wholesale infringement. By Elisha Hanson JUNE 24, 1957. The attached article, written by Mr. Strauss, is a comprehensive treatment of the basic considerations affecting possible revision of section 101(b) [17 U.S.C.A. 101(b)], respecting damages, and section 116 [17 U.S.C.A. 116], respecting costs and attorney's fees. Section 101 (b) is poorly drawn and should be revised. In revising that section, great care should be exercised in the choice of language so as to avoid the rather puzzling interpretations of the present statute (section 101(b)) by the Supreme Court. The plain meaning of the words derived from reading section 101(b) has not been followed. Distinctions made by the Court are not convincing. I refer especially to Sheldon v. Metro-Goldwyn Pictures Corp. (309 U.S. 390 (1940)) and F. W. Woolworth Co. v. Contemporary Arts, Inc. (344 U.S. 228 (1952)). THE PRESENT PROVISIONS Section 101(b) provides that an infringer is liable to pay the actual damage sustained, "as well as all the profits" derived from such infringement. Subsequently, the statute states: "or in lieu of actual damages and profits, such damages as to the court shall appear to be just, and in assessing such damages the court may, in its discretion, allow the amounts as hereinafter stated ***." The statutory limits of damages are then stated. Special provision is made for maximum and minimum damages for specified cases of infringement. Also, a guide is provided for assessing damages within the statutory limits in specified categories of works. 27 L. A. Westermann Company v. Dispatch Printing Company, 249 U.S. 100 (1919). 28 Brady v. Daly, 175 U.S. 148 (1899). Waterson, Berlin & Snyder Co. v. Tollefson, 253 Fed. 859 (S.D. Calif. 1918). 30 Jewell-La Salle Realty Co. v. Buck, 283 U.S. 202, 208 (1931); Law v. N.B.C., 51 F. Supp. 798, 799 (S.D. N.Y. 1943). 11 Widenski v. Shapiro, Bernstein & Co., 147 F. 2d 909 (1st Cir. 1945). F. W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228 (1952), However, as noted, certain interpretations which seem apparent upon a bare reading of section 101(b) have not been sustained by the courts. COURT INTERPRETATION Plaintiff's entitlement to both actual damages and all profits derived from the infringement The statute clearly states that the plaintiff may recover actual damages, "as well as all of the profits" derived from such infringement. However, in Sheldon v. Metro-Goldwyn Pictures Corp. (309 U.S. 390), the Supreme Court, referring to a House Committee Report on the predecessor to section 101(b), held, in effect, that the plaintiff in a copyright infringement suit was entitled to recover either actual damages or the profits, whichever was the greater. This conflict between the statute and the legislative intent, as stated in House Report No. 2222, is discussed by Mr. Strauss at page 5 of his article. Certainly, as pointed out by Mr. Strauss, revision of the statute is suggested. Entitlement to statutory damages where profits are proved Mr. Strauss has pointed out that the decisions of the Supreme Court in the Sheldon and Woolworth cases are in conflict. For example, the statement is made in the Sheldon case to the effect that the "in lieu" clause of section 101 (b) is not applicable where profits have been proved. Yet, the Supreme Court in the Woolworth decision, concluded its opinion with the broad pronouncement that (344 U.S. 228, 234): "We think that the statute empowers the trial court in its sound exercise of judicial discretion to determine whether on all the facts a recovery upon proven profits and damages or one estimated within the statutory limits is more just." This conflict between Sheldon and Woolworth should be resolved by revision of the statute. Imposition of damages under section 101 (b) as a penalty Section 101 (b) specifically states that the award of statutory damages "shall not be regarded as a penalty." In the Sheldon case, the Court rejected the petitioners' argument on the question of damages in language which clearly indicated the Court's view that the purpose of the statute was to compensate and not to punish. (309 U.S. 309, at p. 405): "That would be not to do equity, but to inflict an unauthorized penalty. However, when it decided the Woolworth case in 1952, 12 years after its decision in the Sheldon case, the Court spoke of the policy of the Copyright Act in terms of "discouragement to infringers", and "an effective sanction for enforcement of the copyright policy" and also said, at 344 U.S. 228, 234: "The statutory rule, formulated after long experience, not merely compels restitution of profit and reparation for injury but also is designed to discourage wrongful conduct. The discretion of the court is wide enough to permit a resort to statutory damages for such purposes." The conflict between these two expressions by the Supreme Court regarding the policy of the statute is obvious. In fact, the inconsistencies between the decisions in the Sheldon and Woolworth cases prompted Justices Black and Frankfurter to dissent in the Woolworth case. Election to grant actual damages and profits or statutory damages It is apparent from the opinion in the Woolworth case that the trial court has the election to determine, in a given case, whether to award statutory damages in lieu of actual damages and profits. The plaintiff may not even make an election at the time action is instituted. While much can be said for resting the award of damages upon the exercise of the trial court's judicial discretion, there is a sound argument that the plaintiff's entitlement should depend entirely upon whether the infringement was innocent or willful. Statutory damages within the present limits established by section 101 (b) offer an adequate remedy where the innocent infringer can show that he was not aware that he was infringing and that such infringement could not have been reasonably foreseen. In cases of willful infringement, the copyright proprietor should have the right to elect between statutory and actual damages at the time he brings his action. APPLICATION TO NEWSPAPERS AND MAGAZINES The primary application to newspapers is found in the special damage provision limiting the recovery in the case of newspaper reproduction of a copyrighted photograph. The present statute contains no special damage provision with reference to magazines. In revising the statute, this provision limiting damages should be extended to cover periodicals as well as newspapers. It should be noted also that the present statute contains no special provision limiting damages where, in advertisements, prints and pictorial illustrations, including prints or labels used for articles of merchandise, are infringed incident to publication by newspapers or magazines. An appreciation of the manner in which such violations may occur without knowledge by or responsibility of the newspaper or magazine publisher is essential to understanding why damages recoverable against newspapers and magazines should be limited in these categories for the same reasons which justify limiting recovery on reproduction of a copyrighted photograph. Practically all of what is known as general advertising is placed with newspapers and magazines for the account of advertisers either by the advertisers themselves or by advertising agencies. When placed by agencies, the agencies accept full responsibility for the payment of the cost of the advertisements sent in. When placed by the advertiser direct, the advertiser, in turn, accepts that responsibility. Inherent in such responsibility should be not only liability for payment of the cost of the advertising, but liability for any infringement of copyright incident to the preparation and publication of the advertisement. Therefore, it would appear that the statute might provide (a) for a limitation of liability upon publishers where they are innocent of infringement, and (b) different treatment for the advertiser who is responsible for the infringement, or for the advertising agency which may be responsible for the infringement, as the case may be. Newspapers and magazines process a tremendous volume of illustrated advertising material in the normal course of their business. It is impossible, without prohibitive expense, for them to make adequate copyright search prior to accepting each illustrated advertisement submitted for publication. They must rely upon the bona fides of the one who sends in the copy and the illustrations. While it is true that practically all newspapers and magazines investigate not only advertisers and advertising agencies, and also carefully screen copy which is submitted for publication as advertising to determine whether or not it complies with ethical business practices and the general business laws, it must be recognized that exhaustive copyright search cannot be made on each item of the tremendous volume received from day to day by newspapers, or, in the normal course of their operations by weekly and monthly magazines. The establishment of a limited, in fact a nominal, liability on the part of the publisher would not affect the right of the proprietor to proceed against the one responsible for furnishing infringing material to the publisher. Thus, it appears that there is a valid basis for limiting the amount of damages recoverable against both newspapers and periodicals in the case of innocent reproduction of photographs, advertising material, other pictorial data and line drawings. GENERAL REVISION OF SECTION 101 (B) Two amendments to the damage provisions have been enacted since the act of 1909 became law (Strauss, at p. 19). Both have established limited liability for innocent infringement. In addition, the desire to protect innocent infringement seems to have been a major consideration in past bills to revise the damage provisions. See Previous Proposals for Revision of the Damage Provisions, Strauss, pages 20-29. Section 104 of the act imposes criminal penalties for willful infringement for profit. Section 21 of the act also protects the innocent infringer by denying the right to damages where the notice of copyright was omitted and thereby misled the infringer. In light of the foregoing, section 101 (b) might be revised as follows: 1. In cases of willful infringement, provide that the proprietor shall be entitled to recover, at his election made at the time suit is filed, such actual damage as he has suffered, plus the net profit derived from any such infringement, or, in lieu thereof, statutory damages. 2. In cases of innocent infringement, generally, (a) where the infringer can show that he was not aware that he was infringing and that such infringement could not have been reasonably foreseen, provide that the total sum of damages recoverable shall not exceed the sum of $5,000 nor be less than the sum of $250, and (b) in cases of innocent infringement by newspapers and other periodicals, limit the damages recoverable to not less than $50 nor more than $200, in the case of reproduction of a copyrighted photograph, line drawings, prints, and pictorial illustrations, including prints or labels used for articles of merchandise, and all other copyrightable advertising. No specific comment is offered with reference to the remaining categories of limited liability for damages now contained in section 101(b). However, it is suggested that the adequacy or inadequacy of the present limitations can be determined best by examining into the culpability of the infringer in the ordinary case arising in the particular field of endeavor. For example, the suggestion that newspapers and magazines should be accorded special consideration in regard to photographs and advertising is premised upon the fact that because of the nature of the services involved the publisher is not culpable in the normal day-to-day operations which may result in an infringement. COST AND ATTORNEY'S FEES Cost and attorney's fees under section 116 I have no specific comment or suggestion with respect to section 116. The following comments *** I submit as a representative of a magazine publisher, not as an authority on copyright in all of its ramifications. There are some aspects of the law which are troublesome to us and to our writers. These, and the areas in which appropriate legislation can eliminate doubt and misunderstanding, are the source of major concern to us. The Damage Provisions of the U.S. Copyright Law.-We believe that statutory provisions are needed both to assure reasonable minimum damages and to limit the maximum recovery against innocent infringers. Actual damages, subject to a statutory minimum, should be one alternative of recovery. If profits to the infringing party are larger than damages, they should be allowed as an alternative measure. Our greatest concern lies with innocent infringement. It has been our feeling that there is a definite need for safeguards to protect the truly innocent infringer. When editorial material is submitted to a magazine publisher, there is no practical way in which the possibility of prior publication or copyright can be checked. If an innocent mistake is made and there is a statutory penalty for infringement based on copies, modern nationwide distribution techniques produce astronomical damages. That a court is unlikely to penalize an innocent and nonnegligent infringer or that is unlikely to base damages on a purely mathematical calculation, is hardly reassuring. On the other hand, it does not please us to see deliberate infringement (or publication which might reasonably have been foreseen as infringing) protected by the obvious difficulties of proving precise damages. An unscrupulous operator might well decide to take a chance on a small-scale infringement because he has reason to know that an action against him is unlikely. The copyright holder will want to protect the integrity of his publication and its editorial content by taking steps against any such unauthorized use, but if the infringer stops as soon as he is caught, what hope has the publisher that he can recover in damages enough to offset actual expense. An adequate statutory minimum award appears to be the only way that this type of deliberate or negligent small-scale infringing can be controlled. ROBERT GIBBON. |