In 2019, Justice Fuhrer held that Rallysport Direct’s copyright in 1,430 photographs had been infringed by its former authorized wholesaler. Rallysport, an American company that sells aftermarket automotive parts and accessories both to wholesalers and direct to consumers, had several employees take thousands of photos of those parts and accessories which were then hosted on its website. The cost of producing those photos is about $109 USD per photo, and the cost of acquiring the products featured in all the photos ranged from $224,055 to $240,059 USD.
Rallysport’s former authorized wholesaler scraped photos from Rallysport’s website for the wholesaler’s use to promote its own business. When Rallysport found out, it objected to the use of its photos and terminated its relationship with the wholesaler. In response, the wholesaler continued using the photos and Rallysport commenced a copyright infringement claim. During the proceeding, the wholesaler’s principals incorporated a new entity and transferred the wholesaler’s website content to the new entity.
In 2020, after finding Rallysport’s copyright had indeed been infringed, Justice Fuhrer considered Rallysport’s claim for statutory damages of $500 per work infringed. She concluded that $250 per work was reasonable, reducing the amount requested in part based on the wholesaler’s website being a single medium, and awarding $50,000 in punitive damages for the wholesaler’s attempt to make itself judgment-proof. The resulting award was $357,500 CAD in statutory damages and $50,000 CAD in punitive damages. The wholesaler appealed the damages award to the Federal Court of Appeal.
This month, the Federal Court of Appeal dismissed the wholesaler’s appeal of the damages award. The Court observed that in awarding statutory damages it is to consider the good or bad faith of the defendant, the parties’ conduct before and during the proceedings, and the need to deter future copyright infringements. In awarding $250/photo, Justice Fuhrer had considered the Trader Corp v. CarGurus case of Justice Conway, which “based its statutory award assessment in part on a rough per-work estimate of the labour costs involved in producing those photos”. In the Trader case, the evidence showed that Trader’s cost of creating the photos at issue (of which there were about 152,500) was about $118,864. Here, Rallysport’s evidence was that it had spent between $388,494 and $404,479 USD for the total production and product acquisition costs associated with the photos at issue.
In the Federal Court of Appeal’s analysis of the wholesaler appellant’s arguments, it noted that Trader did not support the wholesaler’s proposition that statutory damages must be linked to actual damages suffered (holding instead that it supports the proposition that statutory damages can be awarded even if no monetary damages are suffered and no business is lost by the plaintiff). It also observed that the appellant quoted from both the majority and dissenting opinions of the Supreme Court in Whiten v. Pilot Insurance Co., which did not support its argument that statutory damages under the Copyright Act must be linked to actual damages suffered. The appellant having failed to establish that Justice Fuhrer made any error in reducing the statutory damages from $500 to $250 per work, and not a lesser amount, that ground of appeal was dismissed.
Regarding punitive damages, in brief reasons of two paragraphs, the Court of Appeal noted there was “no merit to the appellants’ argument that the punitive damages were awarded for the same conduct or based on one of the same factors [in the statutory damages analysis].” In view of the palpable and overriding error standard of review applicable to this finding of fact regarding the appellant’s conduct being tantamount to judgment-proofing, the Court noted that the appellant made no attempt to challenge that particular finding of fact on appeal. Accordingly, no error was established and that ground of appeal was dismissed. The appeal was ultimately dismissed in its entirety, with costs. It seems the “race” is now over - unless the wholesaler appellant tries to get one last lap before the Supreme Court of Canada. Stay tuned!
This article was originally published on the OBA’s Information Technology and Intellectual Property Law Section’s articles page.