Yesterday's post discussed whether there is a right of contribution among defendants for damages paid for copyright infringement. Today's post discusses whether there is a right of indemnification under such circumstances. Indemnification does not seek to apportion the amount of damages paid among the defendants, but rather seeks to have one defendant make the other whole for all damages paid: if A sues B and B pays 100% of the damages, B may, under indemnification, seek to have C pay back B for all the damages B paid to A. Judge Posner has written:
"The economic explanation for the complete shifting of liability from one joint
tortfeasor to another that is brought about by indemnity is
straightforward. In an alternative-care case we do not want both
tortfeasors to take precautions; we want the lower-cost accident
avoider to do so. The liability of the other is a backstop in case
insolvency prevents the threat of tort liability from deterring
the primary accident avoider. Hence the need for a mechanism
that will, where possible, shift the ultimate liability to the most
efficient accident avoider; indemnity does this."
Economic Analysis of Law 190 (6th ed. 2003).
Unlike claims of contribution, courts have upheld state law claims for indemnification, arising out of state common law or statute. In Foley v. Luster,249 F.3d 1281 (11th Cir. 2001), the Eleventh Circuit upheld against a preemption argument, a state common law claim to indemnification. As with contribution claims in copyright cases, the right of indemnification was asserted as a cross-claim. After the plaintiffs settled , the cross-claim went forward, with a jury finding indemnification was required. A post-trial motion to dismiss on the ground of preemption was filed and denied. The Eleventh Circuit affirmed the denial, holding that the extra element test for preemption did not apply, allegedly, because indemnification “does not concern the rights of a copyright holder. Rather, it concerns the allocation of responsibility between copyright infringers.” But that is true of contribution too, the right to which has been held preempted. The court of appeals’ other rationale that the extra element test applies only to exclusive rights is also erroneous: preemption covers both rights and remedies, and it seems fairly obvious that a right to shift payment of damages is a right involving remedies. Indeed, this is precisely why all courts have held such matters are exclusively federal for violation of federal torts.
This does not mean, however, that the right to indemnification for paying infringement damages is preempted. It is my opinion, such a right is not preempted because the right or remedy is not equivalent to any granted under the Copyright Act and does not arise under the Copyright Act: once payment is made to the copyright owner, the federal interest in extinguished.