v28 #2 Cases of Note — Copyright

by | Jun 28, 2016 | 0 comments

Statutory Damages and Other Cool Contract Stuffpdf

Column Editor:  Bruce Strauch  (The Citadel)


Yes, Americans will indulge in tattoos.  Indeed, it takes an edgy rebel to go without one today.

Tattoo Art is a Virginia company with copyright on hundreds of colorized “tattoo flash” designs — original designs on a poster to give tattoo parlor customers ideas.

For when you’re blind drunk and getting that first tat of course.

So they wouldn’t have to pay to register hundreds of individual works, Tattoo Art put them into 50-sheet “Books” and did one registration for each book.  It then licensed the designs for, of course, tattoos, but also for those must-have cell phone covers and t-shirts.

Indeed, the very foundations of the American economy.

In December 2005, TAT licensed from Tattoo Art specified flash drawings for airbrushed tattoos.  Which is to say temporary ones.

For those not drunk enough or too timid to permanently stamp themselves with a steadily blurring hackneyed design.

There were quarterly royalty statements from gross sales, a minimal payment of $6,000 and blah-blah.

There was an initial term of three years and then an on-going year-to-year unless one party wanted to quit.  If TAT quit, it could dispose of finished inventory.  However, if Tattoo Art terminated TAT for breach, TAT had to end all sales.

TAT more or less admitted to all this, but claimed there was an oral modification eliminating the minimum payment and allowing TAT to sell off inventory even if terminated for breach.  This agreement was made before the final acceptance went down.

Which is to say, TAT admitted it signed the contract despite its claim of alteration.  TAT claims it understood the signed page was to be attached to a “revised” contract.  Which never came.  And TAT did nothing about it.

In fact, TAT made three of the four quarterly payments in 2006 for a grand total of $653.  Out of the minimal $6,000.

And of course you can see what’s coming.  Also what a pathetic business airbrushed tattooing is.

There was no further communication between the parties until 2009.  Meanwhile, TAT had changed the coloring of some of Tattoo Art’s designs and displayed them on its Website.  And — dum-da-dum-dum — it labeled them TAT “Original Collection.”

This was followed by prodding from Tattoo Art and “the check’s in the mail” excuses from TAT.  Whereupon Tattoo Art terminated TAT for breach and told them to quit using the designs forthwith.  TAT ignored it and went its merry way.  Tattoo Art sued.

TAT pled affirmative defenses of fraudulent inducement, unclean hands and equitable estoppel.

Hmm.  I suppose dealing in tattoo art is unclean.  Ha-ha. Joke.  But what kind of a lie would induce you into such a contract?  Our flash art will help you finally meet girls?

Tattoo Art won summary judgment and an order of $18,105.48 for breach of contract plus $480,000 statutory damages under the Copyright Act for the altered designs.


Well, that’s the end of their business.  But lawyers can and will appeal if paid, so why not spend your money on that.

The Appeal

And so we find ourselves before the Fourth Circuit in Richmond.

Summary judgment is granted when there’s no material dispute as to the facts so no jury is needed.  A judge can rule as a matter of law.  Fed. R. Civ. P. 56(a).  Tattoo Art had the burden of showing the absence of an issue of material fact.  It achieved this by showing the signed contract and evidence of TAT not making payments.

TAT said a material fact was raised by its claim of an oral modification to the contract.  The court said nope.  Nothing in the record, documents, depositions, affidavits, whatever, showed a contrary agreement.

This is kind of a round-about way of stating the Parol Evidence rule that claims of oral agreements prior to or simultaneous with the executed written one are not admissible in evidence.  If the contract says “cow,” why should we let a silver-tongued liar testify they really meant “horse.”  The writing is in front of us and is quite clear.

The court also noted a merger clause which said the written “Agreement constitutes the entire agreement and understanding between the parties” and any changes had to be in writing “signed by both parties.”

The court also noted that the initial term was three years.  The Statute of Frauds requires a written contract for any agreement that can’t be performed in one year.  Which they had.  But the oral agreement was … well … oral and thus contrary to the Statute.

Copyright Infringement

And TAT was indeed an infringer.  The license agreement permitted them to create stencils and promote them.  There was no permission to modify or alter.  Plus, when they ceased to make quarterly payments they were in breach and were to stop all sales.

For damages, Tattoo Art was entitled to actual damages or statutory damages under 17 U.S.C. § 504(c)(1) which can be fairly hideous — from $750 to $30,000 per infringement “as the court considers just.”  If the infringement was willful, which this was, the damages can jump to $150,000 per.

For some odd reason, the district court couldn’t find willfulness.  And this despite TAT labeling its infringement “Original Collection.”

But how many infringements?  Tattoo Art wanted each recolored image to be a separate violation.  But the district court found the “Books” to be compilations which for damage purposes consitute but one work.  Xoom, Inc. v. Imageline, Inc., 323 F.3d 279, 285 (4th Cir. 2003);  Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 130 S. Ct. 1237 (2010).

Then the court did agree the infringement fell closer to the willful end than the innocent end of $750 to $30,000 and set the damages at $20,000 x 24 infringements.

On appeal, TAT argued that the $480,000 was grossly disproportionate to any actual damages suffered by Tattoo Art.

Which while true, is interesting given that TAT was pretty clearly willfull and should have been up in the $150,000-each  range.

The 4th Circuit held that TAT was arguing that the Congressional authorization under the Copyright Act was “constitutionally excessive” and found this an “unavailing argument.”



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