The Fourth Circuit's Self-Inflicted Wound

If bad cases make bad law, it is also true that sometimes easy cases can make bad law too when courts don't exercise the discipline that the situation requires. Courts are flooded with meritless suits brought against motion picture studios or against other deep pocket defendants either by pro se plaintiffs or on behalf of delusional, talentless individuals who believe, wrongly, that they have been ripped off. In such circumstances, a swift end to the litigation is the only answer. The failure to do so leads to enormous wasted resources, by courts, by defendants, and when a jury is empaneled, by ordinary citizens.

The litigation brought by Frederick Bouchat is, in my opinion, Exhibit #1 in a lack of discipline leading to subsequent disaster. Bouchat, a security guard in Baltimore, believed that the Baltimore Ravens had infringed a design he claims to have created for the team's logo. He sued the team and the NFL's licensing arm. In my opinion, there was no evidence of access and the thus the case should have been summarily dismissed. In my opinion, the case was a shakedown. But, applying the fatally flawed theory of striking similarity, the case went to a jury. The jury found liability, and the Fourth Circuit affirmed in an awful decision that drew an excellent dissent by Judge King, 228 F.3d 489 (4th Cir. 2000), amended by and pet. for reh'g en banc denied. 241 F.3d 350. Judge King's dissent is the best thing yet written on why striking similarity is inherently inconsistent with basic copyright principles, and as to the facts in Bouchat, devastating to the plaintiff's claim and the majority opinion.

Meanwhile, the district court ruled that Bouchat was not entitled to claim statutory damages for failure to register before infringement. Bouchat understandably did not claim damages for his unpublished design but did claim defendant's profits. The trial court limited his claim to revenue from the sale of products reproducing the logo, and excluded revenue from things like beers sales, etc. A second jury ruled plaintiff had suffered no damages and awarded him zilch. The Fourth Circuit dutifully affirmed this too, 346 F.3d 514 (4th Cir. 2003).

Meanwhile, Bouchat brought four different suits naming hundreds of other defendants. The captions in these cases run to three and a half pages single space. All of this could and should have been prevented by never letting the case go to the jury in the first case. By not exercising the correct discipline, the Fourth Circuit has caused the waste of many millions of dollars in legal fees, lost time, and wasted juror's time. Having dug themselves into a hole of their own making, they had to find a way out, but in doing so, they made confronted some difficult damages issues, a point noted by Judge Niemeyer's concurring opinion. The latest case is from Wednesday, Bouchat v. Bon-Ton Department Stores, 2007 WL 3015736 (4th Cir. Oct. 17, 2007).

The latest slew of claims were brought against so-called downstream defendants: licensees of the original defendants: advertisers, publishers of magazines, video game makers, trading card makers, etc. In these cases, Bouchat claimed statutory damages based on these defendants infringement after registration, and he claimed actual damages. The district court, sweeping away a threatened tsunami of Bridgeport-like dimensions, held that all of these later suits were barred by claim preclusion. The Fourth Circuit once again affirmed.

Now recall that Bouchat did not seek actual damages in the first action and could not have (successfully) claimed statutory damages either because the first two defendants had infringed (or so the jury held) before registration; not so for the later defendants. The court of appeals wove (their word) all of the claims into one action: while the court held that Bouchat was not "legally obligated" to join the later defendants in the first action (after all, they only engaged in conduct later), he was precluded from suing what they described as joint tortfeasors in successive actions. According to the court of appeals, "[e]ach time a licensee copied the [logo], Bouchat's copyright was infringed and two parties were responsible: the licensee who made the copy and NFL[] and the licensees, who used the logo with NFL[]'s authorization. Because NFL[] and the licensee were at fault together for the licensee's violation, they are jointly and severally liable for any damages the violation caused." A different approach, one taken by the concurring opinion, was to focus on Bouchat's concession that all the parties were in privity.

Interesting issues also also with the statutory damages claim. The downstream defendants were alleged to have infringed after Bouchat's registration, and thus Bouchat was not facially excluded from collecting such damages from them. The district courts held though that "the date on which NFL[] first infringed was the date on which the infringement by the licensees commenced because the NFL[] approved all of the licensees' infringing acts." In reaching this novel result, the court stated that "Section 412 cannot be read in isolation." Why not? Well, the court said, "Because the statute does not distinguish between 'one infringer ... liable individually' and 'two or more infringers ... liable jointly and severally,' we must treat these two categories of infringers identically when assessing their statutory damage liability. The statute thus subjects a licensor-licensee to the same tracing rule that would apply to either one as an individually liable infringer." This despite the court's acknowledgment that "Of course, NFL[] is not a party in today's cases, and none of the licensees appear responsible for NFL[]'s initial act of infringement since none aided in designing the [logo]."

Judge Niemeyer's concurring opinion takes a different tack; for him the only thing that saved the court from "almost irresolvable issues presented by this multi-party licensing infringement case" was Bouchat's concession that the licensee defendants were in privity with the original defendants. Judge Niemeyer believed that the Act does not address such situations, situations that occurred at what he called the "subatomic level." Judge Niemeyer used the example of an infringing book sold my multiple bookstores to illustrate his concern over what he described as unintended exposure to liability, but it appears he failed to appreciate that statutory damages are awarded per work, not per infringing copy made. He did though raise an interesting hypo: what if the copyright owners files first against the publisher of the infringing work, electing statutory damages, and then later sues bookstores, electing statutory damages? Is there claim preclusion? Judge Niemeyer believed the answer turned on whether there was privity among the parties.