Sunday, November 18, 2012

A Cautionary Tale of Costly Copyright Litigation Consequences: How to Win a Little and Lose a Lot

I blogged a few months ago about a case in which a former New Yorker named Catherine Leuthold sued the CBC for copyright infringement over the “honest mistake” (as the Court called it) of the unauthorized reuse of 18 seconds worth of a few of her still photographs in a documentary about 9/11. She tried to get $21,554,954.25 plus a portion of the CBC’s revenues. This astounding sum was based upon a theory, inasmuch as I can understand it, that each of the CBC’s 800 or so participating affiliated stations and Broadcasting Distribution Undertakings [BDUs] gave rise to a separate act of infringement. Not surprisingly, the Court did not agree. She was awarded $19,200 ((six times $3,200) on the basis as found by the Court that “Miss Leuthold could have negotiated a higher license fee than the initial $2,500.00 in view of the repeated usage.”

This was not a case of “theft” or “piracy”. It was apparently nothing more than six inadvertent reuses beyond the original licensed use. She recovered less than 1/1,000 of what she sought. Her initial license fee for one use was $2,500.

…an American photographer named Catherine Leuthold sought $21,554,954.25 from the CBC and one of its employees personally for the mistaken re-uses of a few of her stills from 9/11.
At the end of the day, the Court quite predictably rejected her frankly astonishing suggestion that each transmission from each of the CBC’s hundreds of “distribution undertakings” warranted separate claims for damages, and awarded $3,200 for each of six unauthorized broadcasts, to which the CBC had admitted – i.e. $19,200. Even this amount was arguably generous under the circumstances and given the evidence.

The Court reduced Ms. Leuthold’s claim of $92,998 for her alleged entitlement to a share of Newsworld’s revenue to $168.74.

I also said:
The plaintiff was awarded about 0.0009 or less than one thousandth of what she was seeking. And she has yet to learn what the costs order will be. Her counsel apparently acknowledges … that costs could be awarded against her.

By seeking so much and recovering so little (and there were other unsuccessful claims for relief), the Plaintiff  was at very great risk for costs, if the CBC had availed itself of the benefit of the Federal Courts Rules by offering a timely and strategic settlement offer – which it turns out was exactly what happened. The case lasted for seven years and there was a six day trial and a very lengthy docket of motions, etc.

The costs issue has now come home to roost. In an order and reasons for order from Justice Scott dated October 29, 2012, the Court has predictably ruled under the Federal Courts Rules that Ms. Leuthold must pay CBC double the costs it would otherwise be entitled from August 9th, 2005. That was the date that the CBC served an offer to settle to the Plaintiff for an amount of USD $37 500 USD plus interest, which Ms. Leuthold rejected. The offer also included the costs of the action up to the date of the offer on a party and party basis.

Ms. Leuthold made some headway on this costs matter in a few respects. Most notably, the Court also allowed for a deduction on account of the “vexatious conduct of the defendant s during the discovery of [individual] defendant Jerry McIntosh”. But, but none of this is very significant in light of the foregoing ruling re double cost liability. The Court also added that she must pay for:
(a) the fees and disbursements of the experts heard at the hearing;
(b) all disbursements, including travel expenses for witnesses, photocopy fees, online research fees, transcript fees for examinations for discovery and the hearing, long distance fees, fax fees, postage and courier fees and other administrative fees;
(c) interest on fees and disbursements since June 14, 2012.

It goes without saying that she is also responsible for whatever she is obligated to pay to her own lawyer.

The Court notes that Ms. Leuthold’s taxable income in 2006 was $20,661 USD. The actual amount of costs assessed for the trial and proceedings leading up to it, which will then be doubled, has not yet been determined. However, it is safe to predict that it could be many, many times Ms. Leuthold’s taxable income for 2006.

An interesting aspect of all of this is that Ms. Leuthold reportedly lived in New York on 9/11 and is now reported to be living in Maine. Security for costs is normal when a plaintiff is ordinarily resident outside of Canada. A plaintiff can avoid such an order if impecuniosity can be demonstrated and the Court is of the opinion that the case has merit. Curiously, the CBC - which is subsidized by taxpayers to the tune of more than $1 billion per year - did not ask the Court for an order for security of costs. Interestingly, Ms. Leuthold also has another action pending in the Federal Court against CABLE TV CAMROSE INC. ET AL that has been stayed pending the outcome of the CBC action.

The security for costs mechanism exists for the obvious reason that it can become much more difficult for a Defendant that has been awarded costs to collect costs from a Plaintiff outside of Canada, even if the Plaintiff has the means to pay such costs. The prospect of an order for security for costs can sometimes serve as a very useful reality check for foreign plaintiffs who may not have a strong case and/or do not fully understand the Canadian litigation system. I have used it elsewhere to precisely such effect.

Ms. Leuthold is certainly persistent and determined. She is pursuing her appeal of the substantive decision. The appeal book consists of ten volumes. This will be a costly appeal. It remains to be seen if she will also try to appeal the costs award. Depending on the outcome of all of this, she potentially may be on the hook for a great deal more costs.

Unless there is a surprise ending, it may turn out that Ms. Leutholds’ costs in this case could easily run well into at least six figures, all in order to recover a little over $19,000 when she had been offered $37,500.

While this saga is clearly not yet over, it’s safe to say once again that copyright plaintiffs may wish to consider – as I’ve often said – the old adage of “be careful what you wish for”.

HPK

2 comments:

  1. Ouch for her, but the assessment by the Court seems quite reasonable. I think this paragraph pretty much sums it up:

    [48] The Court disagrees with the Plaintiff’s argument that the importance of the issue meant that her decision to litigate the issue was reasonable. Given the offer from the Defendants, the Plaintiff’s decision to forego the offer and risk spending large amounts of money litigating a claim is not necessarily reasonable.

    At the end of the day, the Court did recognize there was an infringement of her copyright, awarded her a fair amount based on the value actual deemed infringement - an amount that was about half of what she might have got in a settlement. I think its a really good example of a reasonable assessment of copyright value in an infringement case, rather than an over application of statutory damages that are divorced from market reality.

    My curiosity still remains though her legal legal strategy assessment in pursuing this matter for this long at this length, surely knowing that the legal and court costs would be considerable. Is it a lottery-like hope for US-style jackpot justice, or some really misguided sense of ownership and the scope of her entitlement under copyright? Will she appeal? Was this a contingency-fee case? That is something I'd like to see a documentary about.

    Thanks for posting the update - really enjoyed your coverage and commentary on this case. And Rule 420 on 2x costs - who knew?

    Anon 2:22 from Ottawa

    ReplyDelete
  2. Came across this while looking up a similar recent decision out of the USA as described on Ars Technica.
    Its the case of the photographer who was at the Haiti earthquake, tweeted his photos for consideration for newswire pickup, somebody else claimed them and sold them to AFP/Getty, and part of Getty's response was to claim that uploading to Twitter implied there was a license to use them free of charge (still trying to figure out their reasoning/interpretation of the Twitter terms of service that bore that fruit of logic.)
    http://arstechnica.com/tech-policy/2013/11/photojournalist-gets-1-2-million-in-damages-for-images-cribbed-from-twitter/

    It looks like US courts are also taking a reasonable assessment based on the value of the actual deemed infringement. It still begs the fundamental question though - if every instance of use of the copyrighted photo constitutes infringement, is it theoretically fair to seek compensation for each instance? If the courts are going to take a view of "enough is enough" or make a "reasonable assessment of copyright value" when infringement instances are multiplied through networks/automated distribution systems, what are the rules or guidelines for making those assessments? I read both cases and didn't get a clear sense of what those criteria are or the basis for deeming some infringements less actionable than others. Caching aside, Is a fleeting or automated or electronic replication infringement or not?

    So many questions.

    ReplyDelete