Copyright Enforcement And Compliance In The Publishing Industries After Lowry's Reports v. Legg Mason: Top Ten Lessons - Part II

Wednesday, March 1, 2006 - 00:00

Publishers of newspapers, newsletters, magazines, journals, and other
periodicals typically rely on the sales of subscriptions and use licenses to
support and grow their businesses. When subscribers or others regularly copy and
distribute such periodicals to non-subscribers without authorization,
particularly over electronic networks such as the Internet, it can be
devastating to a publisher's business. While many and probably most subscribers
are honest and law abiding, we have found in recent years that systematic
infringement occurs surprisingly often in the business world, even within
otherwise widely respected institutions. The most striking example was the case
of Lowry's Reports, Inc. v. Legg Mason, Inc., 302 F. Supp.2d 455 (D. Md.
2004), which we litigated on behalf of the plaintiff publisher Lowry's and its
President, Paul Desmond. The resulting $20 million verdict was a watershed
moment in the publishing industry, demonstrating to copyright owners as well as
subscribers and users the potential seriousness of copyright violations, and
importance of developing and maintaining compliance programs (on the part of
subscribers and their employers) and consistent enforcement programs (on the
part of publishers).

The Lowry's saga began with an innocent phone call by a Legg Mason
ex-employee to Lowry's, inquiring how to "continue" to receive the Reports at
his new employer. Further conversation led to information that Legg Mason had
been posting Reports from a single subscriber on its internal firm-wide
intranet, distributing copies by fax, and significantly multiplying its single
subscription in related ways. Subsequently, Legg Mason failed to satisfy Lowry's
that it had conducted a sufficient investigation and disclosed all infringement,
and Lowry's declined to settle for the relative pittance of some variation of
"lost revenues." Knowing full well that Legg Mason had the resources to put up a
difficult fight - which it did - Mr. Desmond nevertheless decided to take a
stand. The jury vindicated his determination, and widespread press coverage has
spread the message that infringement is now risky business.

The Lowry's verdict has prompted many major corporations to
reexamine their copyright compliance programs and to conduct periodic audits
with respect to their subscriptions and licenses. It also has provided a
substantial tool for use in enforcement efforts by publishers. Our firm alone
has litigated and/or settled well over thirty publisher claims of copyright
infringement in the two years after the Lowry's verdict, and others no
doubt have pursued similar claims. There are some substantial lessons to be
learned from the Lowry's case and its aftermath. We have assembled a "top
ten" of these lessons; a recap of the lessons detailed in Part I of this article
and the concluding lessons follow.

1. Modern copyright law does provide the tools to meaningfully fight
infringement, even for the "little guy."

2. To take advantage of lesson number one and protect your rights, you need
to lay the groundwork with frequent and proper registrations.

3. A subscription contract can provide an important supplement to copyright
protection.

4. Provide clear, frequent, and obvious warnings at every opportunity.

5. Use available tools to detect infringement.

6. Don't tip your entire hand at the outset.

7. If you are the copyright owner, try to drive negotiations toward statutory
damages.

Another mistake that publishers and their lawyers make with surprising
frequency is, when learning of infringement, simply to request that the
infringer pay the subscription fees it should have paid to begin with, perhaps
with some premium. Perhaps this results from a lack of faith in copyright
remedies (see Lesson 1), or the good-faith intention not to "harm" relations
with a "client" subscriber.

At the outset, when informing an infringer of violations, the publisher
should frame the remedy as one of statutory damages, and discuss settlement in
the context of the range of statutory damages that the case could yield, in
light of the number of infringed works and the circumstances at issue in that
case. Inevitably the range is large and the "likely" results subjective, but
that is partly the point: no one can predict exactly what a jury will do, and an
infringer is forced to consider the possibility of a staggering award -
like the one in the Lowry's case. Moreover, in our handling of dozens of
these cases based on statutory damages demands, we have seen only one
(meaningless) instance in which an infringer cancelled his subscription out of
anger toward the approach of the copyright owner. Publishers can use
appropriately aggressive enforcement strategies - protecting one of their most
valuable assets - without risk to their reputation or good will.

8. Discuss creative fee structures in advance with your lawyer.

Lawsuits are expensive. Taking an infringement case through trial and
appeal can cost well into the millions of dollars, an amount that some
publishers realistically could not pay regardless of the potential of recovering
substantial damages and attorneys' fees at the end of the case. Moreover,
infringers may not take a small publisher seriously if it appears that the
publisher is unwilling or unable to take a claim into litigation and all the way
to trial.

Traditionally, business lawyers - particularly in large, successful law
firms - have simply billed by the hour, accumulating fees based on time
expended, independent of the result in the case. The Lowry's case,
however, has confirmed the viability of alternative fee structures, such as
contingent fee or partial contingent arrangements, in copyright cases - the
kinds of fee structures traditionally reserved for personal injury cases and the
like. Such structures allow a client to share the risk and reward (and
investment in the case) with its lawyers, and more importantly, to force the
infringer to take seriously the risk of litigation. In particular, cases
involving a large number of timely-registered works are good candidates for
alternative fee structures, and will permit a publisher to afford counsel of a
quality and reputation that it may otherwise not have been able to afford.

9. Emphasize discovery.

If you applied lesson number six, but the infringer failed to disclose
the scope of infringement or the dispute otherwise did not settle, then filing
the lawsuit will trigger discovery. We have found that discovery almost
inevitably yields evidence of more infringement than we initially knew about -
whether infringement of the publication originally at issue, infringement of
other publications of our client, or infringement of third party publications
(which further supports willfulness). Plaintiffs need to have the patience to
work their way through this lengthy and expensive process; defendants should
thoroughly investigate in advance to avoid unpleasant surprises.

Indeed, for defendants and their counsel, discovery can be a nightmare -
extremely burdensome, disruptive to business, and possibly yielding disastrous
results. In the Lowry's case, for example, Legg Mason's experienced
counsel no doubt took steps to ensure that it was aware of the full scope of
copying prior to Lowry's depositions of Legg Mason's employees. Nevertheless,
well into discovery, a deposition of a clerical employee revealed to everyone's
surprise that the copying was continuing - a fact that doomed Legg Mason's case
and was clearly critical to the jury, as evidenced by the $100,000 per work
damages for that later-discovered infringement (double the amount of the earlier
damages).

10. Choose enforcement counsel wisely to give yourself the best chance of
success.

While the success of your case may depend on all of the foregoing
factors, one of the easiest things you can do to maximize the value of your case
is to choose the right lawyer to make your claim. This may or may not be the
same lawyer who helped with your registrations or subscription contracts. While
experience in copyright, contract, or the publishing industry may be useful, it
also is critical to have the litigation experience and record to credibly demand
and obtain large settlements, and to take a case successfully through trial and
appeal. Indeed, choice of counsel may be the single most important determinant
of whether you are able to settle your case without litigation (with the
defendant desiring to avoid the risk and fight) and for an appropriate amount.
We recommend interviewing multiple lawyers, asking about their track record and
experience in similar litigations and settlements. With good counsel, you can
pursue your claims with appropriate aggression as well as wisdom and
judgment.

* * *

In summary, there are never any guarantees in copyright law, as in life,
but following these ten lessons will help put you in the best position if and
when you are faced with infringement.

Scott E. Bain, a Partner in WRF's Intellectual Property
Practice, specializes in the litigation, licensing and acquisition of copyright
and other intellectual property rights in the fields of publishing,
broadcasting, entertainment, software, consumer electronics and education. He
can be reached at (202) 719-7485. Thomas W. Kirby is a Senior
Litigation Partner handling complex, policy-oriented and appellate matters
nationwide. Counsel in more than 70 published cases, he focuses on copyright and
trademark, First Amendment, Commerce Clause and election law, as well as class
actions and commercial disputes. He can be reached at (202)
719-7062.

Part I of this article appeared in the February issue of The Metropolitan
Corporate Counsel.