IP Law Daily, COPYRIGHT—7th Cir.: Group registrants, beware: Use of a convenient Copyright Office procedure might limit the scope of statutory damages, (Apr 3, 2023)

By Matthew Hersh, J.D.

Collecting multiple works into a single group registration might lead a factfinder to conclude that the works did not have independent economic value.

The fact that a graphic artist registered a series of her works with the Copyright Office in two separate groups rather than individually could be a factor in determining whether she was entitled to statutory damages for each of those works or only for the two groups, the U.S. Court of Appeals for the Seventh Circuit has held. The court, in reversing and remanding for the second time a $3.6 million judgment in favor of the artist, also found that the district court had overlooked a wide range of other evidence that could have limited the statutory damages award based on the two groupings as opposed to each of the individual works (Sullivan v. Flora, Inc., March 31, 2023, Eve, A.).

The dispute has a long pedigree in the courts. A health products company named Flora released two new products and launched advertising campaigns for each. As part of the two campaigns, the health products company licensed 33 separate illustrations from Amy Sullivan, a graphic artist. All went well until the graphic artist discovered that the health product company was continuing to use her images well beyond the initial advertising campaign. She sued, and a long battle ensued.

The graphic artist resoundingly won round one. A central question at trial was the question of statutory damages. Under the Copyright Act, a creator who prevails in an infringement lawsuit is entitled to elect damages in the form of statutory damages, an amount that can range from as low as $250 to as high as $150,000 for each individual work that is infringed. But the Act also provides that if multiple works are merely parts of larger compilation, then the entire compilation is treated as a single work for statutory damages purposes. So did the author create 33 individual works or simply two different compilations—one for each ad campaign—in this case? The trial court decided the former, and a jury followed suit, awarding the artist a whopping $3.6 million in statutory damages.

But the victory did not last long. The Seventh Circuit, finding that the trial court had instructed the jury on the wrong legal standard for statutory damages, reversed and remanded. The trial court focused exclusively on the manner in which the graphic artist had registered her works with the Copyright Office, concluding that she did so in a manner that implied that each work was a separate individual piece of art. But that was the wrong test, the court of appeals held. Instead, the court of appeals concluded, the correct test was whether each of the 33 works had its own “independent economic value”—that is, whether they had value only as a collective whole or whether they could, as another circuit court had put it, “live their own copyright life.”

And thus the case went back to the trial court—but with the same results. The trial court, refusing to reopen discovery or reconvene another jury, stood by its original opinion and granted summary judgment to the artist on the statutory damages issue. Even under the “independent economic value” test, the trial court concluded, the record before the court supported a finding that each of the 33 illustrations was a separate work. The award would therefore stand.

The health products company appealed once more, leading to this opinion.

Statutory damages. The court of appeals reversed and remanded once again. The central question in this appeal, again, was whether the artist was entitled to collect statutory damages on each of the 33 works or if she was limited to one award for each of the two advertising campaigns that her works supported. The trial court stood by its initial finding, and refused to reopen discovery or even to reconvene a jury to help it decide the matter. This was error, the court of appeals found.

The trial court’s principal error, the court of appeals found, was that it overlooked evidence propounded by the health products company that could have supported a conclusion that there were only two works at play and not 33. Perhaps the most important, in the court’s view, was the fact that the artist had taken advantage of the group registration process—a process designed by the Copyright Office to reduce the burden on registrants—to file only two different registrations forms, one for each advertising campaign. This issue had provoked a split in the courts to date, the court observed. Under First Circuit and Second Circuit precedent, the court noted, the fact that a registrant opts for the more convenient group registration option has no bearing on whether those works should be treated collectively or individually for statutory damages purposes. Under Ninth Circuit precedent, by contrast—backed by the Copyright Office’s own Compendium of Copyright Practices—the option selected by the registrant, while “not controlling,” could still be considered by the court. The Ninth Circuit had the better view, the Seventh Circuit found.

Many other factors supported this conclusion, the court of appeals held. For one thing, the court noted, the artist grouped the two works into two separate invoices, each one corresponding to one of the advertising campaigns. That could support the argument that the individual works did not have independent economic value, the court found. Second, the court of appeals observed, the artist did not appear to have made any effort to market the works individually on platforms (such as Etsy) on which she had marketed other works. Third, the court noted, many of the illustrations created by the artist had been created specifically for the health products company and even contained its logos and other marks. Finally, the court noted, several of the illustrations appeared to be exclusively “background textures,” that is, illustrations that appeared to be only one solid color. While none of these factors was determinative, the court opined they were enough to make a jury issue on the issue.

The Case is No. 21-2296.

Attorneys: Harry E. Van Camp (Dewitt LLP) for Amy Lee Sullivan, d/b/a Design Kit. Steven P. Fallon (Greer, Burns & Crain, Ltd.) for Flora, Inc.

Companies: Flora, Inc.

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