Statutory Damages: Everything You Need to Know
Statutory damages refer to standard payments that compensate for injuries, losses, or civil violations.7 min read
2. Statutory Damages: What Are They?
3. Why Are Statutory Damages Important?
4. Common Mistakes
5. Frequently Asked Questions
What Are Statutory Damages?
Statutory damages refer to standard payments that compensate for injuries, losses, or civil violations. These statutory damages:
- Allow plaintiffs to vindicate their rights;
- Quicken lawsuits since they don't need as much proof as actual damages; and
- Offer both a punitive and compensatory resolution.
Statutory Damages: What Are They?
Considered a sort of civil fine or punishment, statutory damages typically result from contract lawsuits. State statutes govern these damages. Therefore, the amounts and guidelines vary by state or local jurisdiction.
Cases that commonly result in statutory damages include:
- breaches of intellectual property or copyright law,
- public policy violations,
- and tax evasion.
Courts can also avoid statutory damages for consumer rights violations, civil rights violations, and some lawsuits between landlords and tenants. Examples of common statutes and statutory damages include:
- Anti-Counterfeiting Consumer Protection Act: Damages for selling or making counterfeit goods range from $1,000 to $200,000. They can go up to $2 million for willful use.
- Anti-Cybersquatting Consumer Protection Act: Damages for pirating a domain name range from $1,000 to $10,000. They can go up to $100,000 for willful piracy.
- Cable Piracy Act: Damages for a pirating cable communications range from $1,000 to $100,000.
- Cable Privacy Act: Damages for cable providers who violate privacy and disclosure requirements equal $100 a day per violation or $1,000.
- Copyright Act: Statutory damages for copyright violations range from $750 to $30,000.
- Fair and Accurate Credit Transactions Act: Damages for failing to comply with disclosure requirements range from $100 to $1,000. Using false pretenses to obtain a credit report can bring statutory damages of up to $1,000.
- Fair Debt Collection Practices Act: Damages for debt collection violations are up to $1,000 per day.
- Stored Communications Act: Damages for violating electronic privacy start at $1,000. Plaintiffs may also sue for actual damages.
- Telephone Consumer Protection Act: Damages for certain solicitations by phone or fax equal $500 per violation.
- Lanham Act: Damages for trademark violations, including unfair competition, infringement, and willful dilution, range from $1,000 to $250,000.
- Truth in Lending Act: Damages for a lending violation are linked to the lender's financing charges.
- Worker Adjustment and Retraining Notification Act: Damages for failing to give 60 days' notice of layoffs or closings for certain businesses equal up to $500 a day for up to 60 days.
Why Are Statutory Damages Important?
To receive statutory damages, plaintiffs don't have to prove they lost a certain amount. Instead, they only have to prove the defendant has violated the law. However, the judge may decide to award damages that reach only what the two parties anticipated when they made the agreement.
In addition, statutory damages differ from compensatory or actual damages, which aim to reimburse one party for a breach or a violation of the law. To receive actual damages, the plaintiff must give proof of lost revenue.
The amount a plaintiff receives in statutory damages can be larger than the real financial loss. A judge may opt for statutory damages that give the defendant a bigger financial penalty if the actual damages seem to be small.
In most cases, statutes don't offer guidance for deciding on an amount within a range of damages. This can cause disproportionate awards and due process concerns, as the following examples illustrate:
- St. Louis, I.M. & S. Ry. Co. V. Williams: The court awarded $75 in statutory damages for instances of harm worth 66 cents each. After considering the interest of the public and the scale of the offense, the court determined the award reasonable.
- BMW of North America, Inc. v. Gore: The court awarded both $4 million in statutory damages and $4,000 in actual damages. Later, the court reduced the statutory damages to $2 million. It claimed the jury had multiplied the base amount by nationwide figures rather than local figures. This case was not considered exceptional since the defendant was found to have committed economic harm but not physical harm.
- State Farm Mut. Automobile Ins. Co. v. Campbell: The court awarded both $145 million in statutory damages and $1 million in actual damages. The court later reduced the amount, claiming the case should only consider the defendant's actions against the plaintiff.
- Philip Morris USA v. Williams: The court awarded both $79.5 million in statutory damages and $821,000 in actual damages. However, the court later reduced it to a less excessive amount. It claimed that due process prevented the court from punishing a defendant for harming nonparties.
- Sony BMG Music Entm't v. Tenenbaum: The court awarded the plaintiff a total of $675,000 in statutory damages, or $22,500 a song. After labeling the damages excessive, the court reduced the award to $2,500 per song, or $67,500 total.
- Capitol Records v. Thomas-Rasset: The court awarded $1.92 million in statutory damages. Several appeals later, the court reduced the award to $1 million, or $62,000 per song.
- Arista Records LLC v. LimeWire LLC: The court rejected calculated statutory damages that totaled $1.4 billion for 11,000 songs, citing an excessive award. Eventually, the parties settled for $105 million.
- Bateman v. American Multi-Cinema, Inc.: The court originally rejected class certification but eventually reversed its decision, despite damages between $29 and $290 million.
- Pursuing actual damages instead of statutory damages. Plaintiffs can pursue either statutory or actual damages. Since statutory damages are easier to obtain and may be higher, many plaintiffs prefer them.
- Neglecting to register a copyright. To pursue statutory damages for copyright violation, the plaintiff must have registered the copyright within three months of publication or before the violation happens. If you don't do this, you may only be able to pursue actual damages. Courts usually deny infringement claims for violations that start before copyright registration and continue afterward.
- Failing to understand how aggregation of parties can affect statutory damages. Many statutes predate the internet and don't take its scope into effect. As a result, some cases have resulted in extensive statutory damages to compensate for hundreds or thousands of infringers. Aggregation of parties can also affect lawsuits that may result in statutory damages. If the total amount of damages is unreasonably high, such as in Ratner v. Chemical Bank New York Trust Co., Leysoto v. Mama Mia I, and Parker v. Time Warner Entm't Co., many courts have denied class certification for cases.
- Failing to understand how aggregation of claims can affect statutory damages. In some copyright cases, aggregation of claims has become a big issue, especially in the case of infringers who freely copy content online. For instance, in L.A. Times, Inc. v. Free Republic, the plaintiffs received a $1 million award for illegal use of copyrighted content online. In Blizzard Entertainment, Inc. v. Alyson Reeves, the plaintiff received over $85 million after the defendant's website allowed free access to the video game World of Warcraft. In UMG Recordings, Inc. v. MP3.com, the plaintiff received over $53 million for file-sharing infringements.
Frequently Asked Questions
- Are Statutory Damages Considered Penalties?
The Copyright Act of 1909 states that statutory damages are not penalties. But the Copyright Act of 1976 removes that clause. Recent interpretations clarify that the Copyright Act has always held that courts should not subject statutory damages to defendant-protective consequences.
However, a punitive purpose has always been allowed. Some legal experts argue statutory damages are designed to discourage certain behaviors. Therefore, they are punishments by definition.
- Are Statutory Damages Available Around the World?
No, statutory damages don't exist in most European Union countries. However, these nations make it easier to pursue actual damages without limits.
- Can a Plaintiff Receive Multiple Awards of Statutory Damages?
Section 504 (c)(1) of the Copyright Act lets the copyright owner receive only one grant. When infringers act together and violate the same copyright more than once, the plaintiff may only be able to get statutory damages for a single case of infringement.
- How Do Courts Determine Statutory Damages Within a Range?
When a range applies, few guidelines exist to help courts decide how much to award the plaintiff. Some judges attempt to calculate the actual costs, since many legal experts believe statutory damages should not equal a windfall. Other judges refuse to consider actual damages since statutory damages should show standard amounts.
- What Is a Willful Infringement?
Few guidelines define willfulness, so this term remains ambiguous. Many legal experts specify that an infringement should be considered willful only in exceptional cases. This generally refers to when defendants act maliciously, when a large risk exists, or when an organized attempt to violate the plaintiff's rights takes place.
- What Is Fair Use?
This is a common defense for copyright infringement. Since its definition can be flexible, its defensive potential isn't always certain. For instance, in Paramount Pictures Corp. v. ReplayTV, the company that eventually acquired the defendant considered removing the infringing features from the device, which allowed users to skip commercials and share TV programs online. Since the legality of a fair use defense made the outcome uncertain and the potential statutory damages were staggering, the company was proactively forced to limit what may have been revolutionary tool.
- Can Statutory Damages Exceed Standard Amounts?
Yes. For a copyright case, statutory damages are usually between $750 and $30,000. A court may decrease the amount to $200 if it finds the infringer wasn't aware of the copyright. Statutory damages may be disallowed if the infringer believed in a fair use setting or if the infringer works for a nonprofit educational or broadcasting company.
A court may increase the amount to $150,000 if it finds the defendant violated copyright on purpose. A court may also award higher than normal damages if it determines the infringer didn't have reasonable grounds to believe the use wasn't violating a copyright. These damages can equal what the infringer should have paid for use during a period of up to three years.
The Lanham Act also allows for higher damages in the case of willful trademark infringement or the use of counterfeit marks. In Playboy Enterprises v. Universal Tel-A-Talk, the court determined that advance notice of trademark registration doesn't preclude statutory damages for trademark infringement.
- Can Plaintiffs Recover Attorney Fees?
Typically, plaintiffs who receive statutory damages can recover attorney fees in exceptional cases. However, the definition of exceptional varies. In K and N Engineering, Inc. v. Bulat, the plaintiff could not recover fees. In Louis Vuitton Malletier S.A. v. Ly and Coach v. Treasure Box, Inc., the plaintiffs could recover attorney fees, suggesting this may decide future cases.
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