No Statutory Damages Even When Post-Registration Acts Violate a Different Exclusive Right from Pre-Registration Acts

By on January 29, 2020
Posted In Copyrights

The US Court of Appeals for the Fifth Circuit has reversed a district court ruling awarding statutory copyright damages for pre-registration infringements, explaining that the statute bars such an award even when the post-registration infringement of exclusive rights of the copyright holder is different from the pre-registration act(s). Southern Credentialing Support Services, LLC v. Hammond Surgical Hospital, LLC, Case No. 18-31160 (5th Cir. Jan. 9, 2020) (Costa, J.). This case analyzes § 412 of the US Copyright Act, which bars an award of statutory damages for infringements commenced prior to registration of a copyright.

Credentialing is a process doctors must complete to practice at hospitals, and credentialing service providers verify the information doctors provide. Southern Credentialing Support Services (SCSS) began providing credentialing services to Hammond in 2010, and designed two packets of custom forms for credentialing uses by Hammond. After SCSS stopped providing services to Hammond in 2013, Hammond contracted with another provider for credentialing services and continued to use some of the forms developed by SCSS. By 2017, the new provider for Hammond had also made the SCSS forms available online. SCSS did not obtain copyright registration for its forms until 2014, after learning that Hammond was still using some of the SCSS forms. After the parties failed to resolve the dispute amicably, SCSS sued Hammond for copyright infringement.

The district court granted summary judgment in favor of SCSS as to the existence of copyrights and infringement. A bench trial was held to determine damages, and SCSS elected statutory damages in lieu of actual damages. The district court awarded SCSS statutory damages notwithstanding § 412, holding that Hammond’s post-2017 infringement by way of online distribution of the SCSS forms was “different in kind” from its pre-2017 infringing use of the forms. Hammond appealed, arguing that § 412 bars an award of statutory damages for any infringing acts that occurred prior to SCSS registering its copyrights.

The Fifth Circuit agreed with the district court’s that SCSS had valid copyrights protecting the selection and arrangement of information in its credentialing forms and that Hammond infringed those copyrights. However, the Court reversed the district court’s holding that SCSS was entitled to statutory damages.

Noting some ambiguity in the language of § 412 to the extent it could be read broadly to bar statutory damages for all future infringements if the defendant began any infringement prior to registration, or more narrowly as to bar statutory damages only for infringements beginning before registration, the Fifth Circuit found the broader reading to be the proper statutory interpretation. Under the broad reading, if a defendant began infringing sales prior to registration, § 412 would bar statutory damages not only for pre-registration infringement, but also for post-registration infringement of the same copyright by the same defendant. In contrast, under the narrow reading, the plaintiff could recover statutory damages for post-registration infringements, notwithstanding earlier infringements that predated registration. According to the Court, this ambiguity was resolved by its prior decision in Mason v. Montgomery Data (1992).

In Mason, the plaintiff published 233 maps from 1967 to 1980, and registered one map in 1968 and the remaining 232 in 1987. The defendant copied each of the 233 maps repeatedly from 1982 to 1989. The Fifth Circuit held that the plaintiff could only recover statutory damages for the defendant’s infringement of the single map that was registered in 1968, but not for the other 232 maps because the defendant’s infringement of those maps began prior to registration. In reaching that conclusion, the Court reasoned that the § 412 bar should be read consistently with § 504 of the Copyright Act (the provision authorizing statutory damages). Section 504 authorizes “an award of statutory damages for all infringements involved in the action, with respect to any one work, for which any one infringer is liable …,” and the “an award” language means there is a single statutory award “for all infringements” of a single work. According to the Court, Mason supports the broad reading of § 412 (baring statutory damages for both pre- and post-registration infringements), explaining that the narrow reading of § 412 would be at odds with the single-award-per-infringed-work rule of § 504.

The district court reasoned that Mason’s general rule did not apply, because Hammond’s pre-registration infringement and post-registration infringement were different in kind, as they violated different exclusive rights under SCSS’ copyrights—i.e., Hammond’s pre-registration infringement (copying of the forms) violated SCSS’s reproduction right (under § 106(1)), whereas its post-registration infringement (online distribution of the forms) violated SCSS’s distribution right (under § 106(3)).

However, the Fifth Circuit noted that the district court’s reasoning was rejected in Qualey v. Caring Ctr. of Slidell (E.D. La. 1996), in which the defendant had prepared derivative works of the plaintiff’s floor plans (a violation of § 106(2)) before the plaintiff’s registration of copyright, and then later distributed the derivative works to third parties (a violation of § 106(3)). The Qualey court determined that Mason’s general rule applied with equal force even when infringement occurring before and after registration violated different exclusive rights under copyright law.

Thus, the Fifth Circuit concluded that § 412 bars statutory damages when a defendant violates any one of the six exclusive rights of a copyright holder prior to registration and violates a different right in the same work after registration. Section 412, when read in harmony with § 504, prohibits statutory damages when “any infringement” precedes registration, and the statute does not distinguish between “different” infringements. As the court noted, this rule is part of the incentive for early registration that Congress created.

Practice Note: Best practice is to routinely register copyrightable works in order to preserve the option to claim statutory copyright damages.