How Are Damages Assessed for Copyright Infringement?

We earlier asked who owns the copyright in downloaded or uploaded photos. Below, we turn our attention to how the court assesses damages for copyright infringement under the Copyright Act 1968 (the Act).

What are the Remedies Under the Copyright Act?

The Act sets out the remedies for image copyright infringement under Part 5. Relevantly, section 115 contains actions for infringement and s116 explains the rights of a copyright owner concerning infringing copies.

1) Under section 115(2), the remedies available are:

• An injunction; and
• Either damages or an account of profits.

Importantly, under s 115(3), if the defendant establishes that at the time of infringement, he or she wasn’t aware, or had no reasonable grounds to suspect their actions constituted copyright infringement, the plaintiff can only claim for an account of profits (otherwise known as innocent infringement).

2) The court may award additional damages under section 115(4) and have regard to the following:

• Flagrancy of the infringement; and
• The need to deter similar infringements; and
• The defendant’s conduct after the infringement occurred or after the defendant was informed of the alleged infringement; and
• Whether the infringement involved the conversion from hard copy or analog into a digital or electronic machine-readable form; and
• Any benefit the defendant receives because of the infringement; and
• All other relevant matters.

3) Under section 116, the remedies available are:

• Conversion; or
• Detention.

Damages or An Account of Profits?

Damages and an account of profits are alternative remedies. The difference between the two is that damages are concerned with the money lost or potential money lost as a result of a defendant’s infringing conduct. An account of profits looks at instead the profits that a defendant gained as a consequence of the infringement. The plaintiff (copyright owner) decides which remedy to pursue.

How to Calculate Damages?

The purpose of an award of damages is to compensate the plaintiff for the loss suffered as a result of the infringement (Interfirm Comparison (Aust) Pty Ltd v Law Society of New South Wales). The court calculates damages as the depreciation caused by the infringement to the copyright’s value (International Writing Institute Inc v Rimila Pty Ltd  (1994) 30 IPR 250; Polygram Records Inc v Raben Footwear Pty Ltd (1996) 35 IPR 426).

The court measures the depreciation of the copyright’s value by the fees the infringing party would have paid the copyright owner if they used work lawfully, such as the license fee or the royalty fee.

If the copyright owner and the infringing party are competitors, it is appropriate to use the amount of the license fee or the royalty fee to account for lost profits. This is also true if, for one reason or another, the copyright owner:

• Wouldn’t have accepted a license fee from the infringing party; or
• Wouldn’t have given permission to use the work; or
• The plaintiff can’t provide proof of damage.

In these instances, the court will treat the damages payable as being “at large”. The court must be satisfied that some loss has occurred before it proceeds to attempt to determine the damages on any other basis (Aristocrat as discussed in Monte v Fairfax case). 

How to Calculate Account of Profits

An Account of Profits aims to prevent the unjust enrichment of the defendant. The plaintiff is entitled to the amount of profit the defendant makes through the infringing act. A proportion of overheads, including fixed costs, may be deducted from the profit the defendant is required to account for where the costs are attributed to production and sale of the infringing product. The appropriate position will vary according to the business’ particular characteristics. Items such as rent and interest may also be deducted in appropriate circumstances.

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Questions about damages for copyright infringement? Ask our intellectual property lawyers.