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Derek Andrew, Inc. v. Poof Apparel Corp.: Ninth Circuit Assesses Copyright Damage Awards

Copyright Patent Trademark

Derek Andrew, Inc. v. Poof Apparel Corp.

9th Circuit, June 11, 2007
Slip Opinion 

The Ninth Circuit reversed and remanded in part the decision of the District Court for the Western District of Washington, which had awarded statutory damages under the Copyright Act for a copyright infringement, as well as attorney's fees. 

Under § 504(a) and (c) of the Copyright Act, a copyright owner can elect to recover statutory damages for an infringement instead of actual damages and any additional profits.  This is limited, however, by § 412(2), which bars recovery of statutory damages for "any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work."  17 U.S.C. § 412(2).  The Ninth Circuit held here that § 412 precludes recovery of statutory damages for post-registration infringements where the first infringement in a series occurred before registration.  This was the first time the Ninth Circuit had addressed the provision in the context of post-registration infringement.  In so holding, the court joined several other circuits in rejecting a reading of the Copyright Act that would allow an end run around § 412.

An overview of the case is available at The Patry Copyright Blog and by Michael Atkins of the Seattle Trademark Lawyer Blog
Filewrapper features commentary, including pictures of the trademark in question  

Andrew and Poof are both apparel companies.  Andrew's "Twisted Heart" clothing line can be found at high-end department stores; it is identified by a hang-tag featuring trademarks developed and first used in 2003, and registered with the U.S. Copyright Office on June 15, 2005.  Poof sells clothing to lower-end retails stores; it sold certain clothing with tags nearly identical to Andrew's "Twisted Heart," the only difference being the word "Poof!" in place of the words "Twisted Heart."  On May 17, 2005, Andrew demanded that Poof remove the infringing garments from stores.  Poof failed to comply, despite twice indicating intent to do so. 

Andrew sued, and Poof defaulted.  The district court awarded Andrew $685,307.70 on its Lanham (Trademark) Act and Washington state law claims, as measured by disgorgement of Poof's profits.  Andrew was also awarded $15,000 in statutory damages and - because the trial court was of the opinion that this was an exceptional case - $296,090.50 in attorneys' fees and $6,678.60 in costs.  Poof appealed.

As a matter of law, the lower court's decision would mean that Poof's post-June 15, 2005 garment shipments were separate and distinct infringements from its pre-registration infringement.  Reviewing this legal conclusion de novo, the Ninth Circuit held that the statute does not so distinguish between pre- and post-registration infringements.  Poof's post-June 15, 2005 distribution of infringing garments were ongoing acts of the initial infringement, which occurred on May 9, 2005, when Andrew first discovered it.

The court expressed concern that allowing such damages would defeat the intended purposes of §412: 1) to provide incentives for copyright owners to register their copyrights promptly; and 2) to provide incentives for potential infringers to check the Copyright Office's database.  The court also held that the district court may have erred in awarding Andrew $296,090.50 in attorneys' fees. Recovery of attorneys' fees, like statutory damages, is precluded by §412(2) if the copyrighted work is not registered prior to the commencement of the infringement. Accordingly, Andrew was not entitled to attorneys' fees to the extent that they were based upon a violation of the Copyright Act. 

An award of reasonable attorneys' fees and costs is expressly provided for, however, under the Lanham Act in "exceptional cases" of trademark infringement.  Poof defaulted to a complaint that pled willfulness, which is sufficient to establish such an "exceptional case," and thus entitlement to attorneys' fees under the Lanham Act.  However because it was unclear whether the district court's award of fees included any related to Andrew's Copyright Act claim, the court of appeals remanded and ordered the district court to clarify the basis for the award and recalculate if necessary.