GRACE BLANKS
RETHINKING REMEDIES – MOVING AWAY FROM FINAL
INJUNCTIONS FOR COPYRIGHT INFRINGEMENT?
Faculty of Law
Victoria University of Wellington
2012
I Introduction
The US Supreme Court eBay Inc v MercExchange L.L.C1decision shattered expectations
about remedies for copyright infringement by rejecting the categorical presumption that
injunctions should always issue in intellectual property cases. Following this significant
ruling there has been a growing recognition that common law remedies are often capable of
providing adequate relief and many lower courts now award continuing royalties or a lump
sum for future infringements instead of a final injunction. This paper explores the eBay
decision -a catalyst for change in the way courts view injunctive relief in intellectual property
cases. It examines alternative remedies to final injunctions, particularly prospective
compensation, and compares the approach between the US and English jurisdictions. Finally,
it considers the application of these ideas in the New Zealand context, agreeing that
injunctive relief should not necessarily always be the default remedy and highlighting the
need for courts to more closely scrutinize applications for final injunctions.
II The primacy of injunctions – the ‘normal’ copyright remedy?
Usually, the motivation of a plaintiff bringing a claim of copyright infringement will be to
prevent the defendant from continuing their infringing action. It follows that there is a wellestablished expectation that injunctions will be the primary remedy. Halsbury’s Laws of
England states that injunctions are especially suitable given the nature of copyright property
and refers to them as the ‘normal’ remedy for copyright infringement. 2 There seems to be a
presumption that remedies at law will not adequately compensate the plaintiff and only
injunctive relief will suffice. New Zealand courts have demonstrated a willingness to grant
injunctions even where the defendant gives an undertaking not to infringe copyright. In
Australian Performing Right Association Ltd v Koolman McGregor J commented:3
It is true that the Court has a discretion, but the principles on which such discretion should be
exercised in copyright cases is not entirely the same as the principles on which the ordinary
equitable discretion should be exercised.
1
eBay Inc v MercExchange L.L.C 547 U.S 388 (2006).
Halsbury’s Laws of England (3 ed) vol 8 at [808].
3
Australian Performing Right Association Ltd v Koolman [1969] NZLR 273 (SC) at 276.
2
Injunctions tend to be denied only in cases where future infringement by the defendant seems
unlikely, the plaintiff is not entitled to equitable relief through laches or acquiescence, or
where the infringement is relatively minor.4
A Developments in the United States
Until quite recently, the view that successful plaintiffs in copyright cases should receive a
final injunction was also prevalent in the United States - “as a general rule, a copyright
plaintiff is entitled to a permanent injunction when liability has been established and there is
a threat of continuing violations”.5 In 2006, however, the surprising decision of the US
Supreme Court in eBay made it clear that courts should not simply grant injunctive relief as a
matter of course and emphasized that traditional equitable principles applied to injunctions in
copyright and patent cases. It stated:6
A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) the remedies available at law,
such as monetary damages, are inadequate to compensate for injury; (3) that, considering the balance of
hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest
would not be disserved by a permanent injunction.
eBay was not the first time this issue had come before the Supreme Court. “…consistently
rejected invitations to replace traditional equitable considerations with a rule that an
injunction automatically follows a determination that a copyright has been infringed.”7 On
three previous occasions it made obiter dicta statements concerning the appropriateness of
final injunctions as a remedy for copyright infringement and some members went so far as to
suggest alternatives, such as continuing royalties. The first example was Sony Corp of
America v Universal City Studios, Inc in 1981, in which the Supreme Court ultimately ruled
that manufacturers of home video recording apparatuses, such as VCRs, were not secondarily
liable for copyright infringements by users.8 The case was sent back to the trial court to
reconsider the injunction and it was suggested that a continuing royalty or future damages
could be appropriate alternatives.9 Further, in Campbell v Acuff-Rose Music, Inc, a case well
4
Susy Frankel Intellectual Property in New Zealand (2 ed) (LexisNexis Ltd, Wellington, 2011) at 320.
Universal City Studios, Inc v Sony Corp. of AM 659 f.2D 963 (9th Cir. 1981) at 976.
6
eBay, above n 1, at 391 (citing Amoco Prod. Co. v Gambell 480 U.S 531 (1987) at 542).
7
At 394.
8
Sony Corp of America v Universal City Studios, Inc 464 U.S 417 (1984).
9
At 976.
5
known for addressing fair use regarding parodies, the Court briefly commented that the aims
of copyright are “not always best served by automatically granting injunctive relief when
parodists are found to have gone beyond the bounds of fair use.”10
Finally, and most recently, the New York Times Co v Tasini11 case provided the Court with
the opportunity to reinforce the idea of continuing royalties as acceptable alternatives to
permanent injunctions. Tasini concerned a group of freelance authors who disputed the
ability of various print publishers to licence their work to electronic databases, such as
LexisNexis, claiming copyright infringement. The Supreme Court found that the exception
for “revisions” in s201 did not cover uploading the articles to electronic databases in a new
format.12 Responding to the argument from the publishers that finding in favour of the
authors would “punch gaping holes in the electronic record of history”,13 the Court opined
that “notwithstanding the dire predictions from some quarters, it hardly follows from today’s
decision that an injunction against the inclusion of these articles in the databases…must
issue.”14
Moreover, it advised that compulsory-licencing schemes in other parts of the
Copyright Act, for example s118(b), could be considered as models for distributing copyright
works and compensating authors.
Scholars have noted that cases like Campbell and Tasini had an almost negligible effect on
issuing injunctions in practice in copyright cases.15 It has been speculated that this inaction
drove the Supreme Court to explicitly state in eBay that monetary relief could be acceptable
in lieu of an injunction, indicating that lower courts should have paid more attention to its
earlier dicta.16 In the wake of the eBay decision, it is becoming more common for courts to
refuse final injunctions or only granting them after really considering whether other remedies
at law might be appropriate. There is a growing recognition in the US that injunctions should
not always be assumed to be the right result. Instead, judges are increasingly holding that a
compulsory licence will adequately compensate the plaintiff or are awarding relief for future
10
Campbell v Acuff-Rose Music, Inc 510 U.S 569 (1994) at 578.
New York Times Co. v Tasini 533 U.S 483 (2001).
12
Copyright Act, 17 USC, s201.
13
Tasini, above n 11, at 505.
14
Ibid.
15
Paul Goldstein, Goldstein on Copyright (3 ed) (Aspen, New York, 2008) at 13:42.
16
H. Tomas Gomez-Arostegui, “Prospective Compensation in Lieu of a Final Injunction in Patent and
Copyright Cases”, 78 Fordham L. Rev. 1661 (2010) at 1668.
11
infringement in the form of continuing royalties or lump sum damages as prospective
compensation.17
B Comparison with England
Discretionary though the remedy may be, it is very rare for an English court to not
automatically grant a permanent injunction to a copyright owner, should their claim be
successful. Traditionally, courts would award a permanent injunction on its own or combined
with an account of profits or damages. The injunction precluded future infringements and the
monetary award compensated the plaintiff for harms already suffered. The court could only
award monetary relief in intellectual property cases alongside an injunction and so
accordingly, all such awards was retrospective.
The vast majority of modern English cases in which forward looking damages have been
granted instead of a permanent injunction have been in relation to real property. 18 Despite
this, there have been attempts to extend prospective damages to intellectual property cases,
almost all of which have been unsuccessful.19 Banks v EMI Songs Ltd is an example of a
“wholly exceptional” copyright case in which damages were granted instead of an injunction.
The plaintiff claimed UB40 had infringed copyright song lyrics but a permanent injunction
was rejected on the basis that UB40 had been using the lyrics for over a decade; the plaintiff
was seeking compensation and not the prevention of future harm and the perception by the
court that the plaintiff only sought an injunction in order to command a price. 20 The closest
England has come to replicating the eBay decision was its dictum in Fisher v Brooker that the
court was not obliged to order an injunction and could contemplate awarding damages
instead.21
17
Gomez-Arostegui, above n 16, at 1669.
For example, Jaggard v Sawyer [1995] 2 All ER 189 (CA); Wrotham Park Estate Co. v Parkside Homes Ltd
[1974] 1 WLR 798.
19
Gomez-Arostegui, above n 16, at 1706.
20
Banks v EMI Songs [1996] EMLR at 457.
21
Fisher v Brooker [2006] EWHC (Ch) 3239.
18
C Possible alternatives to final injunctions
In the eBay case, the US Supreme Court confirmed that courts should be more circumspect
when considering applications for injunctions. Unfortunately, it did not signal what relief
successful plaintiffs should receive instead of an injunction and lower courts have resorted to
their powers at equity to come up with the alternative remedies of lump-sum future damages,
continuing royalties and giving plaintiffs the option to sue again in case of future
infringements. Another possibility would be to grant a final injunction subject to conditions.22
1 Continuing royalties
Because it is often desirous that a defendant be allowed to continue to infringe a plaintiff’s
copyright, the courts may permit them to do so as long as they continue to pay a royalty
which is set as a certain amount per creation or sale of infringing products or as a percentage
of the defendant’s revenue from the infringing product.23 The court assesses on a periodic
basis the scope of the post-judgment infringement and defendants who fail to pay the
continuing royalty can be held in contempt. This is rapidly becoming the most common, and
popular, alternative remedy.24
2 Future damages
A court may decide to award a single lump sum of damages to encompass all future
infringements for the duration of the copyright. Here, the defendant is essentially buying a
nonexclusive licence to carry on infringing. A future damages remedy differs from
continuing royalties in that the total amount is decided at judgment and it is immaterial
whether the future infringements actually take place. The amount of damages awarded at the
time of judgment will depend on evidence of the likelihood of future infringement occurring
but inevitably, it may eventually become apparent that a plaintiff has been over or
undercompensated if the infringements are of a greater or lesser scale than anticipated. A
hybrid remedy, a combination of lump sum damages and continuing royalty, is also a
possibility.25
22
For example, Virgin Atlantic Airways Ltd v Premium Aircraft Interiors Group Ltd & Anor [2009] EWHC 26.
Gomez-Arostegui, above n 16, at 1672.
24
Gomez-Arostegui, above n 16, 1672.
25
See Innogenetics, N.V v Abbot Laboratories 578 F. Supp 2d 1079 (W.D Wis. 2007).
23
3 Successive Action for Future infringements
If a court finds in favour of the plaintiff, but declines to issue an injunction or future
damages, it can simply leave the plaintiff the option of suing again if the defendant continues
to infringe. This may be preferable for plaintiffs who view ongoing royalties or future
damages as “merely a nice way of saying ‘compulsory licence’”.26 This could be considered a
default mode of relief, as if the court has granted no other remedy and the defendant
continues to breach the plaintiff’s copyright, the plaintiff has no other option but to sue again.
This is essentially what ultimately happened in the eBay case.
III Application in a New Zealand context
A The Copyright Act 1994
Under New Zealand’s Copyright Act, all relief by way of damages, injunctions, accounts or
otherwise is available to the plaintiff as is available in respect of the infringement of any
other property right.27 New Zealand courts have an express statutory jurisdiction, as well as
an inherent jurisdiction,28 to award damages in lieu of an injunction. Nevertheless, they may
display a similar unwillingness to the UK to grant future damages - what is essentially a
compulsory licence - where Parliament has not provided an express statutory basis for it. It
has been pointed out that no US statute expressly specifies the availability of the above
remedies but the Supreme Court has crafted them anyway, drawing on the common law and
relying on the premise that attempting an all-embracing statutory code would be futile.29
B Similarity in approach
The ‘traditional equitable principles’ outlined in eBay for determining whether to grant
injunctive relief bear a striking resemblance to the UK approach for obtaining interlocutory
injunctions enunciated in American Cyanamid v Ethicon Ltd,30 which adopted in New
26
Gomez-Arostegui, above n 16, at 1874 (citing Hynix Semiconductor Inc v Rambus Inc 609 F. Supp. 2d 951
(ND Cal 2009) at 986.)
27
Copyright Act 1994, s120 (2).
28
Judicature Act 1908, s16A.
29
Gomez-Arostegui, above n 16, 1680-1685.
30
American Cyanamid v Ethicon Ltd [1975] AC 396 (HL).
Zealand via Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd.31 It is a flexible test,
requiring the court to assess whether there is a serious question to be tried, weigh up the
balance of convenience and consider the overall justice of the case.32
Though the test is for interlocutory injunctions and so is focused on protecting the
administration of justice and preventing further infringement by the defendant before trial, if
the requirement that there be a serious question to be tried is left aside (because by the time
final injunctions are considered the entitlements of the parties has already been determined)
the eBay approach and the American Cyanamid test are composed of very analogous factors.
The Supreme Court in eBay expected evidence of irreparable injury and inadequacy of legal
remedies and consideration of the public interest and a weighing up of the hardships between
parties. The factors that go to the balance of convenience in the American Cyanamid test
include:33
a) adequacy of damages
b) effect on third parties
c) public interest
d) status quo
e) relative strength of the parties’ case
f) parties’ conduct.
Also significant in a copyright context is the increased importance of protecting free speech,
which may go to the “overall justice” consideration.34
The author suggests that perhaps these principles, which have developed in the special
context of interlocutory injunctions, should also be applied to the grant of final injunctions? It
is true that the adequacy of common law relief, parties’ conduct and hardship are also
considered at the final injunction stage but they are much more significant, and more closely
scrutinized, in interlocutory injunction determinations. The test for interlocutory injunctions
is necessarily more stringent than for final injunctions because at the time at which they are
31
Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC & CA).
Frankel, above n 4, at 316.
33
Andrew S Butler (ed), Equity and Trusts in New Zealand (Brookers Ltd, Wellington, 2003) at 687.
34
Frankel, above n 4, at 317.
32
being considered, the rights and entitlements of the parties are yet to be considered and the
court is concerned with balancing the risk of error. The author contends that if plaintiff’s
claim does not meet the heightened balance of convenience test from American Cyanamid
then the court should, having regard to the circumstances of the case, seriously consider
whether final injunction is really necessary. If the plaintiff cannot show that the balance of
convenience and the overall justice of the case definitively favours the issue of an injunction
then the longstanding presumption that legal remedies are inadequate to compensate
intellectual property breaches has been rebutted. This approach would bring New Zealand in
line with the developing law regarding alternative remedies for injunctions in the US.
C Adequacy of damages
As discussed above, an assumption has emerged that injunctions are the ‘normal’ appropriate
remedy for copyright infringement and that damages will hardly ever be an adequate remedy.
Especially considering recent developments regarding exemplary damages for copyright
infringement in New Zealand, this may change. It is entirely possible that some form of
damages, be it lump sum or continuing royalty, could sufficiently compensate a plaintiff for
future infringement the same way compensatory damages or account of profits compensate
for past ones, thereby rendering a final injunction inappropriate and unnecessary in some
cases.
1 Compensatory damages
The amount of compensatory damages awarded in any tort action is usually aimed at making
the plaintiff indifferent to the wrong. This can be difficult to calculate in copyright
infringement actions and courts will normally assess the amount of compensatory damages in
one of two ways: they will either apply the amount that would have been charged to licence
the work, or conduct a calculation of lost sales.35 In the difficult cases where a plaintiff is not
in the business of licensing its work or marketing it in a way that can be approximated with
the defendant’s infringing actions, the court will award a figure of “just compensation”.
There is no specified way of reaching this figure and in such situations “additional” damages
will probably be more suitable.36
35
36
Frankel, above n 4, at 322.
Ibid.
2 Additional damages
In addition to compensatory damages, s121(2) of the Copyright Act provides that:
In proceedings for infringement of copyright, the court may, having regard to all the
circumstances and in particular toa)
the flagrancy of the infringement; and
b) any benefit accruing to the defendant by reason of the infringement,award such additional damages as the justice of the case may require.
The word “additional” in the section can be read as applying to damages that are aggravated
(which are theoretically compensatory for aggravated injury) or exemplary damages (which
are a form of sanction), depending on the circumstances of the particular case. This was
confirmed in the recent case of Skids Programme Management,37 where the court of appeal
awarded $20,000 additional damages taking into account not only the flagrancy of the
copying and the aggravating actions of the defendant but also the fact that other penalties
would not have the desired punitive effect.38
As the law in New Zealand currently stands, damages are sometimes considered to be an
adequate remedy in the place of a final injunction but this is rare. Damages, especially when
both compensatory and additional damages are awarded, can effectively make the plaintiff
indifferent to past wrongs. However, in order for damages to be an adequate remedy in lieu
of final injunctions in a broader range of cases, acceptance of prospective compensation for
future infringements would probably be required. This would enable the defendant to
continue to infringe unmolested, without depriving the plaintiff of compensation.
D Is depriving a plaintiff of an injunction tantamount to imposing a compulsory licence?
One of the strongest arguments against granting damages in lieu of an injunction is that it
could be contrary to the wishes of the plaintiff, and sometimes the defendant, and this would
effectively force the parties to enter into a licencing agreement. New Zealand’s intellectual
property law grants compulsory licences only in limited cases - “compulsory licences are
37
38
Skids Programme Management v Barbara Winsome McNeill [2012] NZCA 314.
At [118].
limited because they are the antithesis of an absolute view that a property owner may refuse
to allow others access to his or her property.”39
The withholding of an injunction would create tension with this “absolute view” and further,
would undermine the choice the creators of original content have regarding whether or not
they wish to licence their copyright works at all. Plaintiffs are also likely to be concerned
about their ability to exclusively licence their work to others if prospective compensation was
granted instead of an injunction.
IV Conclusion
In summary, were New Zealand to follow the persuasive authority of the US Supreme Court,
the courts may find the law an uneasy fit. Although the eBay decision rested on traditional
equitable principles very similar to those comprising the American Cyanamid test, it would
be quite a leap to introduce prospective compensation in lieu of an injunction. Moreover,
such remedies are likely to be unpopular given the New Zealand attitude towards compulsory
licences. The purpose of this paper was not to state decisively when final injunctions should
be granted and when they should not. Rather, the aim was to draw attention to the need for
courts to screen applications for final injunctions and grant relief based on their merits and
the overall justice of the case, as opposed to over-mechanically relying on the presumption
that a successful copyright action warrants an automatic injunction.
39
Frankel, above n 4, at 181.
V Bibliography
Cases
New Zealand
Australian Performing Right Association Ltd v Koolman [1969] NZLR 273 (SC).
Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC & CA).
Skids Programme Management v Barbara Winsome McNeill [2012] NZCA 314.
England
American Cyanamid v Ethicon Ltd [1975] AC 396 (HL).
Banks v EMI Songs [1996] EMLR.
Fisher v Brooker [2006] EWHC (Ch) 3239.
Jaggard v Sawyer [1995] 2 All ER 189 (CA).
Virgin Atlantic Airways Ltd v Premium Aircraft Interiors Group Ltd & Anor [2009]
EWHC 26.
Wrotham Park Estate Co. v Parkside Homes Ltd [1974] 1 WLR 798.
United States
Campbell v Acuff-Rose Music, Inc 510 U.S 569 (1994).
eBay Inc v MercExchange L.L.C 547 U.S 388 (2006).
Innogenetics, N.V v Abbot Laboratories 578 F. Supp 2d 1079 (W.D Wis. 2007).
New York Times Co. v Tasini 533 U.S 483 (2001).
Sony Corp of America v Universal City Studios, Inc 464 U.S 417 (1984).
Universal City Studios, Inc v Sony Corp. of AM 659 f.2D 963 (9th Cir. 1981)
Legislation
New Zealand
Copyright Act 1994.
Judicature Act 1908.
England
Copyright, Designs and Patents Act 1988 (UK).
United States
Copyright Act, 17 USC.
Patent Act 1952.
Books
Andrew S Butler (ed), Equity and Trusts in New Zealand (Brookers Ltd, Wellington, 2003)
Halsbury’s Laws of England (3 ed) vol 8 (Butterworths, 1996).
Susy Frankel Intellectual Property in New Zealand (2 ed) (LexisNexis Ltd, Wellington,
2011).
Paul Goldstein, Goldstein on Copyright (3 ed) (Aspen, New York, 2008).
Journal Articles
H. Tomas Gomez-Arostegui, “Prospective Compensation in Lieu of a Final Injunction in
Patent and Copyright Cases”, 78 Fordham L. Rev. 1661 (2010).
Robert P Merges “Compulsory Licensing vs. the three “Golden Oldies”: Property rights,
contracts and markets” (2004) Policy Analysis 508.
Internet Resources
Nicola Dagg, “Injunctions in English Patent Litigation - A Big Thing or a Small, The Winner
Takes
it
All”
(May
2010)
Who’s
Who
Legal
<http://www.whoswholegal.com/news/features/article/28371/injunctions-english-patentlitigation-big-thing-small-winner-takes-all>
Gus Hazel, “Case Study - The award of damages in IP cases in New Zealand
Commentary on Stewart v Franmara Inc [2012] NZHC 548” (13 July 2012) James and Wells
Intellectual Property < http://www.jaws.co.nz/news/2012/7/13/the-award-of-damages-in-ipcases-in-new-zealand.aspx>
VI Appendix
Copyright Act 1994
120 Infringement actionable by copyright owner
(1) An infringement of copyright is actionable by the copyright owner.
(2) In proceedings for infringement of copyright, all such relief by way of damages,
injunctions, accounts, or otherwise is available to the plaintiff as is available in
respect of the infringement of any other property right.
(3) This section has effect subject to the following provisions of this Part.
121 Provisions as to damages in infringement proceedings
(1) Where, in proceedings for infringement of copyright, it is proved or admitted that
at the time of the infringement the defendant did not know, and had no reason to
believe, that copyright existed in the work to which the proceedings relate, the
plaintiff is not entitled to damages but, without prejudice to the award of any other
remedy, is entitled to an account of profits.
(2) In proceedings for infringement of copyright, the court may, having regard to all
the circumstances and in particular to—
o
o
(a) the flagrancy of the infringement; and
(b) any benefit accruing to the defendant by reason of the infringement,—
award such additional damages as the justice of the case may require.
(3) In proceedings for infringement of copyright in respect of the construction of a
building, no injunction or other order shall be made—
o
o
(a) after the construction of the building has been begun, so as to prevent the
building from being completed; or
(b) so as to require the building, in so far as it has been constructed, to be
demolished.
Word count
The text of this paper (excluding footnotes, appendix and bibliography) comprises
approximately 3,091 words.