Copyright Damages Based on Revenues Earned from Sale

Damage experts are often asked to calculate copyright damages based on revenues earned from the sale of products and services other than the copyrighted work.

The copyright statute establishes monetary remedies available in copyright infringement cases.1 Section 504 states:

The copyright owner is entitled to recover the actual damages suffered by him or her as a result of the infringement, and any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. In establishing the infringer’s profits, the copyright owner is required to present proof only of the infringer’s gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.2

The Copyright Act provides for distinct monetary remedies—actual damages and recovery of wrongful profits made by the infringer. Typically, for a copyright owner to make a valid claim for lost profits, or an accounting of the infringer’s accused profits, the copyright owner must have suffered harm as a result of the infringement, and recoverable profits must be attributable to the infringement. A copyright owner is entitled to recover actual damages suffered as a result of the infringement. Accepted methods for computing actual damages include lost profits, injury to the market value of a copyrighted work, and lost royalties, among others. Plaintiff has the burden of establishing a causal connection between the infringement and actual damages.

For instances when the alleged copyright infringer does not sell the copyrighted work, courts typically hold that the copyright owner has the burden of proving indirect revenues, and the defendant the burden of proving deductible costs. When the defendant generates only “indirect” profits from the infringement, it is my understanding there is a two-step framework for recovery. First, the copyright owner must prove a causal link between the alleged infringement and the profit the copyright owner is attempting to recover. The copyright owner must prove that, but for the infringement, the alleged infringer would not have captured accused sales of products other than the copyrighted work. Second, once causation is established, and the copyright owner has proven the amount of “indirect” sales revenue generated by the copyrighted work, the defendant bears the burden of establishing deductible costs.