23 Dec, 2008 | Posted by: photosource





When the Defendent declares Bankruptcy . . .



Wilful Copyright

Infringement



By Joel Hecker, Esq.




We all know that these are uncertain economic times. Photographers may be faced with clients, or others, who fail to pay outstanding bills or who just use photographs without consent.

When the photographer pursues the matter, there is a good possibility that some of these entities will wind up in Bankruptcy Court. A recent case has clarified when the debtor will not be discharged in Bankruptcy Court when the photographer has a claim for wilful copyright infringement.

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“To prove wilful infringement, the Plaintiff must
prove by a preponderance of the evidence that the
Defendants knew that they were infringing the
Plaintiff’s copyrights or that they acted with reckless
disregard as to whether they were doing so…”
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The case, In the Matter Barboza, was decided by the United States Court of Appeals for the Ninth Circuit on appeal. The case involved the distribution of Spanish language films. After a trial, a jury found the defendants guilty of wilful copyright infringement, awarding statutory damages of $75,000 for each of ten videos, plus costs and attorney’s fees, in all totaling $893,077.

The jury returned a guilty verdict after the judge instructed the jury that the following was the test to determine liability for wilful copyright infringement:

IT PAYS TO BE DUMB

“To prove wilful infringement, the Plaintiff must prove by a preponderance of the evidence that the Defendants knew that they were infringing the Plaintiff’s copyrights or that they acted with reckless disregard as to whether they were doing so. If you conclude that the Defendants were reasonable and in good faith believed that they were not infringing the Plaintiff’s copyrights, then you may not find that they wilfully infringed those copyrights.”

This instruction is a customary one in a copyright infringement law suit. The Plaintiff must prove either that the defendant knew that they were infringing, or that the defendant acted with reckless disregard as to whether they were doing so. The jury in this case did not indicate which of the two grounds led to its verdict since either ground was sufficient.

After judgment was entered, the defendant filed for bankruptcy. The plaintiffs requested that the bankruptcy court have the judgment declared nondischargeable in bankruptcy since they claimed it was a debt resulting from a “wilful and malicious” injury under the statute.

The Circuit Court of Appeals analyzed the difference between the tests to determine wilful copyright infringement under the Copyright Act and for nondischargeability under the Bankruptcy Code. Under the Copyright Act, the test is the one set forth above (knowing acts or wilful disregard). The Bankruptcy Code test, however, is more stringent. It prohibits discharge of a debt for “wilful and malicious injury by the debtor.” Accordingly, there must be a finding of both wilfulness and “malicious injury.”

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