• The Real Dollars At Stake: Don't Overlook The Value Of Protecting Your Copyrightable Materials
  • May 31, 2011 | Author: J. Alexander Hershey
  • Law Firm: Thorp Reed & Armstrong, LLP - Pittsburgh Office
  • In the recent decision in William A Graham Company, d/b/a The Graham Company v. Thomas P. Haughey and USI MidAtlantic, Inc., No. 10-2762, Slip Op. (May 16, 2011), the United States Court of Appeals for the Third Circuit addressed the significant relief available to a prevailing plaintiff in a commercial copyright case. While copyright cases often result in injunctive relief preventing the defendant from continuing to infringe the copyrighted work in question, the court’s decision in Graham demonstrates the sizable monetary relief that a prepared copyright owner can win for the infringement of commercially valuable works.

    The Graham Company is an insurance brokerage that had employed Thomas Haughey until 1991, when he left to work for USI, a competing insurance brokerage firm. Haughey took with him two binders of materials that were protected under copyright law and that described Graham’s insurance products. Between 1992 and 2005, USI and Haughey made use of the materials in their competing sale of insurance products, but Graham did not discover their acts of infringement until 2005.

    At trial, Graham did not pursue its own actual damages or available statutory damages. Instead, Graham sought to recover the “profits of the infringer” as allowed under the Copyright Act. The jury found that USI and Haughey had earned gross revenues of $32 million and $3 million, respectively, in connection with their infringement of the protected Graham materials. After deducting revenues that were not directly attributable to the protected works, the jury awarded $16,561,230 and $2,297,397 against USI and Haughey, respectively. The trial judge then awarded $4,112,859 and $570,542 in prejudgment interest on each of these awards.

    On appeal, the Third Circuit first refused to find the damages award excessive. While the defendants contended that their sales had arisen predominantly from efforts unrelated to the protected works, the court refused to set aside the jury verdict in light of Graham’s evidence that the materials where heavily integrated into the defendants’ sales methods.

    The Third Circuit then similarly upheld the trial judge’s sizable pre-judgment interest award. The court found that the purposes behind the general rule in favor of pre-judgment interest - including making the victim whole and preventing unjust enrichment to the perpetrator - are well aligned with the Copyright Act’s provision for the recovery of an infringer’s profits.  In short, to deny pre-judgment interest would grant the defendant a windfall for the time-value of the infringement profits. Finally, the court affirmed the award of pre-judgment interest for the entire period of infringement beginning in 1992, when the claim first accrued, rather than beginning in 2004, when the infringement was discovered by Graham. Thus, the Third Circuit affirmed the trial court’s total award of over $23,000,000.

    The message of the court’s decision in Graham is clear - there is real money at stake for any owner of copyrightable materials. To be sure to take advantage of the protection available under copyright law, any author or owner of copyrightable material should do two things. First, the owner must register its protectable work product, marketing materials, operational guidelines, internal manuals, software and other creative works with the U.S. Library of Congress - a required precondition to filing a lawsuit. Second, the copyright owner should be vigilantly aware of what materials former employees, competitors, or other third parties may have taken and what remedy the law will provide, through an injunction or damages award, for any unlawful infringement.

    With the modern economy’s emphasis on information, business methods, and marketing materials, failing to take these steps may leave substantial money and the value of protectable copyright assets lost and unrecoverable down the road.