Fifth Circuit Holds that Mitigation is Not an Absolute Defense to Statutory Damages for Copyright Infringement and DMCA Violations

January 31, 2020 – Article

In Energy Intelligence Grp., Inc. v. Kayne Anderson Capital Advisors, L.P., 2020 U.S. App. LEXIS 1347, __ F.3d __ (5th Cir. Jan. 15, 2020), on an issue of first impression, the Fifth Circuit held that a mitigation defense is not an absolute defense to statutory damages for copyright infringement or DMCA violations.

Energy Intelligence Group (“EIG”), an energy news publisher of Oil Daily, sued Kayne Anderson Capital Advisors (“KA”) for copyright infringement and DMCA violations for copying and distributing issues of Oil Daily in violation of the subscription license agreement and copyright law. In a nut shell, between 2004 and 2014, Jim Baker at KA routinely shared his Oil Daily access with other KA employees and third parties.  KA initially purchased one license and received access to one copy of Oil Daily and then copied and distributed each issue to several of its personnel in-house. When EIG learned of this violation, KA purchased a license for five copies and then copied and distributed 20 copies internally and to third parties. In copying and distributing the unauthorized copies, KA changed the PDF file name of the issue from “DE” followed by the YYMMDD date format to “123.”

EIG sued for copyright infringement and DMCA violations, for alteration of copyright management information, seeking only statutory damages on all claims. KA asserted a mitigation defense arguing that EIG learned of KA’s infringement in 2007 but did nothing to investigate or dissuade KA from the infringement. EIG filed a pretrial motion arguing that KA could not invoke a mitigation defense as a complete defense – in other words, regardless of whether EIG could reasonably have avoided or prevented KA’s acts, EIG should receive statutory damages within the mandated ranges for each infringed work and each DMCA violation. The district court denied the motion.

At trial, KA persuaded the jury that EIG could reasonably have avoided almost all the copyright and DMCA violations at issue. EIG received nothing for those violations and received $15,000 in statutory damages for 39 infringed works, which totaled approximately half a million dollars. Based on the Copyright Act’s and DMCA’s fee-shifting provisions, as well as KA’s Rule 68 motion, the district court awarded EIG $2.6 million in attorney’s fees and $21,000 in costs. Both parties then appealed and the appeals were consolidated.

On appeal, among other issues, EIG argued that a failure to mitigate cannot preclude liability for statutory damages altogether. It urged the Fifth Circuit to instate an award to EIG of $25,752,500 ($15,000 for each of 1,646 works infringed plus $2,500 for each of 425 DMCA violations.

The Fifth Circuit held that mitigation is not an absolute defense to statutory damages under the Copyright Act and the district court erred when it ruled otherwise. Energy Intelligence, supra, Slip op. at *27. The Fifth Circuit reasoned that mitigation applies to post-injury consequential damages, and statutory damages have a significant deterrent and punitive purpose beyond a compensatory purpose. As a result, statutory damages under the Copyright Act are distinct from the type of damages that are typically calculated according to rules of mitigation.

The court also held that mitigation is not an absolute defense to DMCA statutory damages claims because DMCA statutory damages are intended in part to deter wrongful conduct, and Section 1203 does not require statutory damages to be linked to actual damages. Id., Slip op. at * 30.

The Fifth Circuit also held that the PDF file names of Oil Daily constituted copyright management information (CMI) within the meaning of § 1202(c). It ruled that a digital file name may be CMI “if it is ‘conveyed in connection with copies’ of the underlying work and contains a ‘title or other information identifying the work.’” Id. (citing 17 U.S.C. § 1202(c)(1)). Evidence at trial indicated that the “DE” naming convention was “information identifying” each Oil Daily newsletter. 

The Fifth Circuit also held that the district court properly denied KA’s late-filed motion to refer to the Copyright Office pursuant to § 411 the issue of whether inaccurate information was knowingly included on an application for copyright registration.    The court held that § 411(b) does not require immediate referral to the Copyright Office to determine the materiality of alleged inaccuracies, and the district court did not clearly err when it concluded that EIG did not knowingly include inaccuracies in its copyright registration applications. Id. Slip op. at *31-34.

“The district incorrectly instructed the jury that EIG could ‘not recover for any item of damage that they could have avoided through reasonable effort.’” Id., Slip op. at *38. The Fifth Circuit was unable to ascertain from the record whether the jury would have awarded $15,000 per infringed work if it had been properly instructed on the issue of mitigation, so the court vacated the judgment and remanded the case for the district court to determine the proper amount of statutory damages for each of the 1,614 infringed works. Id. As for the DMCA violations, the Fifth Circuit entered judgment in favor of EIG in the amount of $2,500 for each of KA’s 425 DMCA violations, or $1,062,500. Id., Slip op. at *38-39.