Licensing infringement is the act of using another person's protected intellectual property (IP) without permission. Copyright infringement is tried in federal court and governed by the U.S. Legal Code, Title 17.

Obtaining copyright protection gives the copyright owner the exclusive right to display, adapt, perform, reproduce, distribute, or otherwise use an original work. Creations that can be copyrighted include but are not limited to photos, artwork, software, articles, books, and songs.

Typically, the creator of a copyrighted work owns the copyright, but he or she can license or assign the rights to another company or individual. If the author uses his or her own work after assigning the copyright to a publisher or anyone else, he or she can subsequently be sued for infringement.

When a party wants to use copyrighted material, he or she must negotiate for a license agreement with the owner of the copyright. These agreements typically limit the type of use allowed; for example, distribution or adaptation may not be covered under the agreement.

Non-commercial works are often licensed for a flat fee, while commercial works typically command a percentage of the licensee's revenue for selling the work in question.

A free copyright license does not constitute a contract. That's because nothing of value is being given in exchange for the license. However, any use outside the license constitutes infringement.

Breach of Licensing Agreement

The breach of a licensing agreement is sometimes, but not always, considered copyright infringement. If the licensee fails to pay royalties as agreed, the copyright owner can void the licensing agreement and sue for damages. If the material is used after the licensee has been notified of the contract cancellation, this constitutes infringement.

Using the work in an unauthorized manner, such as adapting it into another language, is also considered infringement.

Licensees can rarely sue for patent infringement by third-parties, even when they hold an exclusive license. The exception is when the patent owner cooperates with the licensee or when the license grants all substantial rights. Patent holders can be sued for infringement for actions that were exclusively granted to licensees.

Penalties for Infringement

Copyright infringement carries monetary damages calculated based on the number of instances and the estimated lost profits as a result. The court may also order restitution for court costs and damaged reputation. Statutory damages can range from $200 to $150,000, though penalties higher than $30,000 are typically limited to cases of willful infringement. Copyright holders can also seek an injunction, which stops the infringing party from using the work in question.

Copyright infringement can also result in criminal penalties, including up to five years in prison according to the U.S. Department of Justice. Repeat offenders could be sentenced to 10 years in prison. The typical offense includes damages, legal fees, and up to one year in prison.

Copyright cases are considered criminal when:

  • The infringement was intentional for financial gain.
  • The value of the infringement exceeded $1,000.
  • A movie, album, or other commercial work was shared over the internet before its release.

Statutory damages for registered works with the U.S. Copyright Office can be up to $150,000 per act, without consideration of actual monetary damages. A registered copyright owner can elect statutory damages instead of actual damages.

Trademark and trade secret cases for breach of contract can carry exemplary damages beyond actual damages. Treble damages can be awarded in trademark and patent cases.

The Patent Act and Lanham Act allow attorney fees to be recovered, which is more common when a breach of contract action is successful.

Duckweed USA Example

A company called Duckweed USA licensed a patent for a renewable, clean, and affordable substitute for petroleum made from vegetable oil, wastewater, or algae. They used the technology covered by the patent to develop manufacturing facilities.

The patent's creator, Rudolph Behrens, attempted to lure investors to back his company, BEAR Oceanics, instead of funding Duckweed. Duckweed subsequently sued for patent infringement. Behrens countersued on the grounds that he couldn't infringe upon his own patent.

The court found that the licensing agreement actually gave Duckweed the right to sue for patent infringement.

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