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.

As I said shortly after the decision:

…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