The purpose of statutory minimum damages in copyright laws.—Copyright laws from their earliest days, both in this country and in England, have always recognized these intangible, yet very actual damages, from infringements, and that they are incapable of actual ascertainment or legal proof. They have recognized that the copyright proprietor, to protect his system of business, founded upon an exclusive right granted by statute, must resist to the utmost invasions of his grant. He must be vigilant in the investigation and detection of infringers, and prosecute his claims upon detection. The market value of a particular infringing copy, performance, or exhibition which he must so resist, may be nominal, and valued at but a few cents. Yet to suffer and permit such infringement, magnified by the potentialities for repetition in every place and section, will tend to destroy the very right granted. The work in question may be a unique and beautiful copyrighted photograph, woodcut, or engraving of the Lincoln Memorial intended for sale at 25 cents per copy. An infringer may be flooding the country with copies produced from a stolen, borrowed, or duped negative or plate so as to render the value of the copyright negligible. It may cost thousands of dollars to disclose the infringing source, and a writ of seizure under the copyright law may succeed only in proving the possession of ten infringing copies and perhaps the plate or negative print. Obviously, the basis of damages cannot be market value of the infringing copies thus found. Nor even if provable, can the proceeds be recoyered under common law rights which were abandoned on securing statutory copyright; nor will damages for conversion of the print or plate under common law, if there was a conversion, deal with anything other than the market value or depreciation in value of the physical material. As far as profits of the infringer are concerned, there are probably none provable. There remain only the minimum-damage provisions of the copyright law.

These minimum-damage provisions, which copyright laws have provided from their earliest days, are not penalties and should not be considered as penalties. The present law, the past law, and proposed laws all expressly so state. The decisions of the court upholding these minimum-damage provisions have further expressly held that these minimum-damage provisions are in no wise penalties, but are provisions for deterrence by affording some redress in the way of compensatory damages for the intangible damages sustained in protecting their method of business from destruction. In other words, the infringer can only be deterred by a realization of the fact that it does not pay; that when and if caught, he cannot merely pay the sum for the infringing article or use which he ordinarily might have paid if properly and previously contracted for in the regular course of business, but must pay in part at least toward compensating the copyright proprietor for those real and intangible damages necessarily sustained by being vigilant in the detection. This is most illuminatingly pointed out by United States Circuit Judge Denison, speaking for the circuit court of appeals in the leading case upon the subject, Westermann v. Dispatch Printing Co., 233 Federal Reporter, page 609 (affirmed in the Supreme Court, 249 U. S. Reports, p. 100). He said at page 613:

"Defendant made no profits, so far as the proofs indicated; the plaintiff's damages rested in the injury to his Morehouse contract and in the discouragement of and the tendency to destroy his system of business. To make any accurate proof of actual damages was obviously impossible.

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"It seems to us the plain meaning of the language that Congress intended that the plaintiff should not recover less than $250 damages in any copyright infringement suit not based upon a newspaper reproduction of a photograph— at least in any case where the actual damages fail to appeal so clearly and so fully as to forbid resort to the 'in lieu' clause. The necessary effect of the provision is to prohibit the award of merely nominal damages. This intent implies no undue harshness. Not only does the typical copyright infringement, if not every one, involve indirect damages almost sure to be considerable, but in few cases would one sum of $250 more than compensate plaintiff for his time, trouble and expense in detecting, following up, and prosecuting an infringement. It would seem that the words 'shall not be regarded as a penalty were added out of abundant caution, for under such a situation as usually exists on this subject the awarding of a round sum in damages is no more a penalty when the damages are liquidated by a court than when they are liquidated by a contract." (Italics mine.)

This was also the law before the 1909 act, and under the English Statutes 3 and 4 William IV, chapter 15. This is pointed out in Brady v. Daiy, 175

United States Reports, page 148, where the Supreme Court said, discussing the English statute and an English case at page 157.

"In Chatterton v. Cave, 3 App. Case, 483, 492, the court in speaking of this provision for damages said that the same 'was no doubt fixed because of the difficulty of proving with definiteness what amount of actual damage had been sustained by perhaps a single performance at a provincial theater of a work belonging to a plaintiff, while at the same time his work might be seriously depreciated if he did not establish his right as against all those who infringed upon it "."

The principle of the Westermann case was recently followed by the Supreme Court of the United States in Jewell-LaSalle Realty Co. v. Buck (Apr. 13, 1931), 283 U. S. 202.

The facts above indicated do not apply only to motion pictures. Minimum statutory damage provisions are necessary for every form of copyrighted material. This was indicated at the hearings before the Joint Committee on Patents considering the present act, prior to its adoption in 1909. At page 142 of the report of the hearings before this joint committee held in December of 1907, Ansley Wilcox, Esq., of Buffalo, speaking for the lithographing industry, said with respect to the minimum statutory damages:

"It was in view of that experience that the suggestion was made last Spring that the penalty should be cut down to a maximum not exceeding $5,000, and that there should always be a minimum penalty of some kind, which has been put into the bill as now before you at $250, so as to afford at least some compensation to a party who has to sue an infringer in another jurisdiction that something should be given to him even if he seizes only one or two copies of an infringing print or publication of any kind." (Italics mine.)

At page 362 of the report of the next series of hearings held before the same committee in 1908, there is a minute serting forth the viewpoint of the American (authors') Copyright League on the point of minimum damages, as follows: "The league also points out the desirability of including in the measure the proviso for a minimum of $250 damages, which is a feature of existing and prerious legislation, but which is not included in either the Kittredge or Smoot hiii; although both provide for a maximum somewhat below that in the existing law. such a minimum is necessary for protection in the case of limited editions of books and copies of works of art, chiefly as a deterrent to infringers and as a fair protection for those who must invoke expensive litigation to protect their rights." (Italics mine.)

The considerations applicable to unauthorized exhibitions of motion pictures, particularly with regard to provisions for minimum damages, do not differ in essence from those involved in the protection secured by copyright against trespasses upon any other form of copyrighted material. Statutory minimum damages for deterrence and redress for intangible damages have been the essence and doctrine of protection in the present and previous copyright acts. It is imperative that such provisions be retained and embodied, strengthened, if possible, in any proposed legislative amendments or revision of the present copyright law. To make any radical departure from these proven principles of deterrence and intangible redress by minimum damage provisions will emasculate the protection afforded only by copyright, and in this instance work havoc in a great industry, dealing exclusively in the production and distribution of copyrighted material for exhibition purposes, all to the injury not only of the Copyright proprietors of this material, but to the related literary, dramatic, and musical arts which provide the necessary inspiration for its production, and to the exhibitors honestly exhibiting pictures in accordance with their contracts. The national distributors of motion pictures have no desire to institute actions against exhibitors under the Copyright Law or any other law. Their interest is in securing as wide a distribution of their pictures to exhibitors throughout the country as is possible, each play date secured meaning additional rental income to reimburse them for the expense of production and distribution, and when this is taken care of, a possible profit for the risk and employment of their capital, skill, and other resources. Every unauthorized exhibition, besides exhausting a portion of the potential public patronage for the particular pictures, is a matter of concern to all distributors. It means the inability to compete among themselves for a potentially payable play date irreplaceable in a playing time market naturally limited by the number of theaters in the United States and the number of days on which they are open for business. They must control the routing, inspection, repair, and general distribution of their costly

prints, entrusted practically at all times, when not in transit, to the possession of exhibitors. They are interested in the possibilities of claims against them for damages by subsequent run exhibitors for failure to deliver the prints in time for lawfully scheduled exhibitions or whose contracted right to a prior “run” was violated by a bicycled exhibition. They are interested in maintaining a fair relationship with the honest exhibitor, who, to stay in business as a customer for their playing time, is dependent upon a fair, free competition with other exhibitors in his locality.

ALIBIS ATTEMPTED BY EXHIBITORS IN JUSTIFICATION FOR THEIR UNAUTHORIZED

EXHIBITIONS

1. That it was only an isolated instance involving but one picture, unknown to the exhibitor, and his employee's fault.-One picture per distributor, for four distributors, disclosed during a limited investigation of 4 weeks may seem, as above indicated, like a sporadic instance to any one distributor. This alibi is usually overcome by the fact that the so-called sporadic instance occurred each week. When the exhibitor claims that an employee gave the exhibition without his knowledge, he usually fails to account for the fact that he pocketed the receipts, knew his theater was open on that day, that he had not purchased or booked any other picture for that day, and that he never remitted to the distributors for such day. Nor does his carelessness, if it was carelessness, recoup for the distributors the hundreds of dollars spent in the investigation to avoid such practices and their potentialities for missouts, violation of protection, loss of markets, and injuries to other customers. 2. So-called acts of God.-These are favorite alibis. Unforeseen and unexpected snowstorms, windstorms, rains, cyclones, fires, train and automobile wrecks, have been offered as excuses under many varieties of situations. For example: (a) Caused failure of the next program (usually from another distributor) to arrive on time, necessitating holding over the old show; (b) resulted in inability to return print to exchange on the train scheduled, so might as well use it anyhow; (c) caused lack of business during regularly scheduled run, to be compensated for by holding picture additional day; (d) an adjustment by self-help, and without the knowledge of the distributor, for the delayed delivery of a previous print caused by the weather or other elements. While these excuses indicate plausible reasons for the action taken by the exhibitor, a good snowstorm, for example, can't explain a weekly policy of infringement as revealed by a general investigation. Economic necessity for raw materials never justified and never will justify a business man's appropriation thereof without the knowledge or authority of his dealer or supplier. These so-called acts of God have also served the distributors to some good. Unauthorized exhibitions were revealed in one case by the fact that the theater burned down on the day they were given, rendering the return of the print impossible and an investigation necessary.

3. A method of equalizing rentals. Some exhibitors claim that their contracts call for too high a rental for pictures, or that overages to be remitted to distributors under percentage contracts were too great; that some additional exhibitions were, in their opinion, an equitable method of equalizing or lowering their rental charges. Thus they spread their exhibition rental into additional days and pocket the additional receipts, without the knowledge of or payment to the distributors, and in the many cases of percentage contracts utterly fail even to report their receipts.

4. That he did not read his contracts.-By the necessary mechanics of this business, selling only limited exhibition rights, the schedules of the written contracts naturally specify the maximum number of days and the rental therefor. It is not possible generally to designate the play dates in the contract, but express provision is made for a specified method of designating the play dates. Thus, weeks in advance of the exhibition date, and after he has received notice from the distributor that the picture will be available for exhibition, the exhibitor designates the specific dates on which he desires to exhibit the picture. If this designation is within the terms of the contract, and commitments with other exhibitors having prior runs indicate that the dates are available, a written confirmation of the date is sent by the distributor to the exhibitor. This is a routine practice of the industry. In esse they cannot agree on play dates, the contract provides a method by which they may be selected arbitrarily. Not only is a written confirmation sent to the exhibitor, but in the routine course of the business he also receives a

written invoice describing the dates of exhibition for which payment is requested. The exhibitor, making his remittance, naturally has the invoice before him and knows the number of days for which he is remitting.

It is obvious that under the mechanics of this business an excuse of this type is unfounded, and if the exhibitor is personally without knowledge of the facts alleged, he must necessarily have designated some agent to act for him with knowledge and for whom he is responsible.

5. That he had a private oral understanding with the salesman. Since the inception of the industry, exhibitions have been licensed by way of written coutracts with the distributor. The salesman is merely the solicitor of a deal. If the exhibitor and the salesman agree on a proposition which is acceptable to the exhibitor and which the salesman believes will be acceptable to his employer, the exhibitor signs a copy of the written exhibition contract. All such contracts used in the industry state that, until approved by an executive officer of the distributor at its home office within a specified time, the copy of the contract signed by the exhibitor is merely an application for a license by the exhibitor. Obviously, the approval or disapproval of the home office of the distributor is based upon the amount of playing time of its respective pictures sold to this exhibitor as indicated by his written application. It is equally obvious that private oral understandings between a salesman and the exhibitor with regard to alleged licenses for exhibitions on additional days or at additional or other theaters which cannot see the light of being written into the contracts submitted for approval to the home office of the distributor, is a surreptitious understanding which should not be recognized morally or legally. There is no justifiable place in the mechanics of an industry where written contracts, written confirmations, written invoices, and written records generally are a necessary part of the business. A national distributor, for example, serves 10,000 accounts annually with exhibition runs on 100 or more motion pictures. Efficient distribution may require the use of 30,000 positive prints (each print averaging about eight reels, each 1,000 feet in length, for features, and two reels for short subjects). In addition to the care, inspection, repair, and routing of these prints, the particular distributor has hundreds of thousands of play dates to be contracted for, agreed upon or designated, confirmed for exhibition, billed, and paid for. Each of these dates is practically the subject of a separate bargain. Clearly the distributor must have an adequate system of written records governing these transactions, with employees trained and under the supervision of special auditors to record these transactions in routine manner.

Exhibitors have been warned time and again against private oral arrangements by their own exhibitor organizations and trade publications.

Simply stated, the matter is this:

If an exhibitor can show by any legally acceptable evidence that he acted in giving the exhibitions in question under an express or implied authorization in fact from the agent of the distributor with whom he dealt, which would justify such exhibition, the exhibition then was authorized and no infringement of the copyright. Obviously, it could not be the concern of any copyright legislation relating to infringements arising from unauthorized exhibitions.

The foregoing, therefore, should not be permitted to becloud the issues here discussed. "Unauthorized" exhibitions and "justifiable or excusable" exhibitions are contradictory terms and cannot be reconciled. The copyright law is concerned only with the "unauthorized" exhibitions.

THE BILLS NOW PENDING IN CONGRESS FAIL TO MEET THE PROBLEM OF DETERRENCE AND REDRESS FOR THE INTANGIBLE DAMAGES SUSTAINED

An experience with hundreds of claims of this nature for all national distributors during the past 5 years indicates the following:

1. Courts will necessarily award the minimum damages permitted by the law. The distributors are not in a position to prove any part of the real and actual damages sustained by them arising out of the unauthorized exhibitions of their motion pictures other than an approximation of the rental value of the infringing day in question based upon what the distributor might have charged such exhibitor in the regular course of business. Roughly speaking, in a holdover case, where the picture was held over on a third day, this would be a sum somewhat less than the pro-rata rental for the first day of exhibition.

The necessary expense which the distributors must sustain for the purpose of the investigation of the practices of exhibitors cannot be allocated specifically in legally admissible proof to the particular pictures involved in an individual action. Nor can the distributor allocate the investigation expense necessary for investigation of those shown to have been properly exhibited during the period of the investigation or if improperly exhibited, where the evidence, while morally convincing, is not in form legally sufficient because of the absence or death of available witnesses to justify the presentation of such claims in suit. Nor can such distributor calculate for the court the time of employees in the home and branch offices, such as the booker, cashier, and the manager who examined, checked, compared, and copied the records, tabulated the bookings, contracts, confirmations, invoices, and payments made by exhibitors involved in these investigations. Nor are there provisions to repay the expense of bringing witnesses hundreds of miles to the place of trial, or taking depositions of people sometimes thousands of miles away.

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Upon disclosure of an unauthorized exhibition, the distributor must proceed to protect its rights. A suit under the copyright law is not like a suit for a contract rental which often can be brought before a local justice of the peace, and disposed of by practically informal hearings within a few days. written bill of complaint for the infringement of one picture will generally involve a minimum of 2,000 words. A great number of formal allegations relating to the corporate capacity, the composition, authorship, and ownership of the work, due compliance with statutory copyright requirements relating to publication and registration, special distribution arrangements with regard to licensing, must be proved in addition to the fact of the unauthorized exhibition and the absence of an authorization. Filing fees in the Federal courts are high, ranging to as much as $75 per case in Michigan. Marshals render fees for service of papers, on a mileage basis, and often travel several hundred miles. Terms of Federal courts are held for short periods during the year in only a few cities in the district. The litigation is protracted, the procedural details trying, the place of trial often a great distance from the exchange centers where witnesses reside and which may be located in other States. Before the trial itself, the distributor has already advanced hundreds of dollars for the necessary disbursements incident to legal and procedural details.

Can the distributor proceed to take the necessary deterrent steps, possible only by commencing these necessary actions under the copyright law, where the statutory minimum damages permit awards of $50 or $100, and the distributor is obviously not in a position to offer proof calculating and apportioning its great intangible damages. This must be considered with the possibility that the exhibitor is or may render himself financially irresponsible for the purpose of avoiding payment. This will add further injury to the losses sustained.

2. There will be no deterrence of exhibitors if minimum statutory damages approximate rentals.-We must face certain obvious facts. The distributors cannot send an investigator with every print scheduled for an exhibition. They can strike sporadically in a suspected situation and make a complete investigation for a period, let us say, of 4 weeks. The complete investigation may reveal that 6 days out of 7 the exhibitor is properly using and paying for pictures. The necessary investigation of these 6 days, disclosing no evidence of improper usage, is nevertheless expensive. To limit the damages for the 7th unauthorized day to the average rental value for that day alone, would disregard the expensive investigations for 6 other days which succeeded in revealing the infringement upon the 7th day. An exhibitor revealed to be honest, will never be called upon to pay any of this expense (except indirectly in his rentals, because his dishonest competitor, by compelling these investigations, increases the general distribution cost of the industry). If the investigation reveals dishonesty, the revelation is a justification for the investigation. There is no reason, morally or otherwise, why the disclosed dishonest exhibitor should not meet in part the cost of the necessary investigations which flow from the practices of which his dishonest acts are a part.

Exhibitors realize that investigations are expensive and must necessarily be limited to a brief period. It will pay the unscrupulous exhibitor to infringe by giving unauthorized exhibitions regularly throughout the year if he is to know that when and if a limited investigation (and the possibility of striking him is remote) will reveal only a few of his violations, to pay for the violations