August 1989 notice, he had no reason to believe that the September 1990 notice would revoke the licenses. Furthermore, De Luna claims that Fox's acceptance of Luna's December 1990 check terminated any license revocation.
I reject De Luna's arguments. He cites no authority for the proposition that plaintiffs' August 1989 notice established a course of dealing or business practice, nor that it was sufficient to create a triable issue of fact as to plaintiffs' intent to revoke the licenses, a proposition rejected in a similar case before the Ninth Circuit. See Peer Int'l Corp. v. Pausa Records, Inc., 909 F.2d 1332, 1334 (9th Cir. 1990), cert. denied, 498 U.S. 1109, 112 L. Ed. 2d 1100, 111 S. Ct. 1019 (1991). Nor does plaintiffs' acceptance of Luna's December 1990 check, which Fox endorsed "Without prejudice as to claims of underpayment" and deposited into escrow, raise a genuine issue of fact over whether plaintiffs intended to revoke the licenses. Id. at 1334-35. Moreover, it is unreasonable for De Luna to argue, as he does, that plaintiffs should have returned to Luna the December 1990 check, when Luna appeared to still have owed plaintiffs over $ 200,000. Most importantly, De Luna's argument loses all credibility in light of the fact that Luna continued to make and/or distribute phonorecords of the seven compositions at issue even after being served in this action. Abel De Luna cannot, after the lawsuit was filed, claim that he did not know that plaintiffs intended to revoke the licenses.
Likewise, I reject defendant's estoppel defense. In order to establish estoppel in a copyright infringement action, it must be shown that (1) plaintiffs knew of defendant's infringing conduct; (2) plaintiffs intended that their conduct should be acted on, or behaved in such a way that defendant had a right to believe that plaintiffs so intended; (3) defendant is ignorant of the true facts; and (4) defendant relied on plaintiffs' conduct to defendant's detriment. Lottie Joplin Thomas Trust v. Crown Publishers, Inc., 456 F. Supp. 531, 535 (S.D.N.Y. 1977), aff'd, 592 F.2d 651 (2d Cir. 1978).
Plaintiffs do not dispute that they had knowledge of Luna's infringing acts. Plaintiffs' conduct, however, gave defendants constructive notice that the viability of the licenses was in question, and Luna and its president De Luna therefore should have taken positive steps to determine the true condition of the relationship. In any event, De Luna cannot escape the fact that Luna continued to make and distribute the infringing phonorecords for at least six month after suit was filed, when any claim of detrimental reliance should have ended.
Except for plaintiffs' knowledge of the infringing acts, De Luna has offered no evidence from which a trier of fact could reasonably conclude that plaintiffs intended defendants to believe that the licenses were not terminated, or that defendants did not understand the true facts. For the above reasons, De Luna's estoppel defense fails.
De Luna's equitable defense of laches also fails. Plaintiffs brought this action in December 1992, just over two years after Fox sent Luna the September 1990 notice. The mere passage of time between plaintiffs' knowledge of an infringing act and the filing of a suit is insufficient to establish laches as a bar to litigation. Some prejudice to the defendants must be added to the delay for it to ripen into laches. Lottie Joplin Thomas Trust v. Crown Publishers, Inc., 456 F. Supp. 531, 534 (S.D.N.Y. 1977), aff'd, 592 F.2d 651 (2d Cir. 1978). De Luna suffered no such prejudice.
Plaintiffs repeatedly put Luna on notice that the continued viability of the licenses was in question; for example, by depositing the December 1990 check from Luna into an escrow account and by rejecting and returning the series of post-dated checks sent from Luna to Fox in July 1990. In light of these facts, defendants assumed the risk of continuing to make and distribute the phonorecords after the September 1990 notice. Moreover, there is no defense to Luna's continuing its activities after the filing of this suit, when the certainty of plaintiffs' intent to terminate could not be disputed. Defendants' unclean hands preclude De Luna from raising a laches defense. N.L.R.B. v. Springfield Hosp., 899 F.2d 1305, 1312 (2d Cir. 1990).
Having found an infringement of plaintiffs' copyrights, I must now determine the appropriate remedies. Plaintiffs request statutory damages, attorneys' fees, and injunctive relief.
A. Statutory Damages
A copyright owner is entitled to recover the actual damages it suffered as well as any profits made by the infringer attributable to the infringement. 17 U.S.C. § 504(b). Alternatively, under 504(c)(1) of the Act, an owner may elect to recover statutory damages in lieu of other forms of monetary relief. Statutory damages may awarded in amounts not less than $ 500 or more than $ 20,000 for each work infringed, as the court considers just. 17 U.S.C. § 504(c)(1). Where the infringement was committed willfully, a court may increase the award of statutory damages to a maximum of $ 100,000 per work infringed. 17 U.S.C. § 504(c)(2). Plaintiffs here have elected to recover statutory damages.
1. Willful Infringement -- A copyright infringement is willful within the meaning of 504(c)(2) for purposes of enhancing statutory damages if a defendant knew that his or her actions constituted an infringement. Fitzgerald Publishing Co. v. Baylor Publishing Co., 807 F.2d 1110, 1115 (2d Cir. 1986); RSO Records, Inc. v. Peri, 596 F. Supp. 849 (S.D.N.Y. 1984). A defendant's knowledge may be actual or constructive, Fitzgerald at 1115; in other words, defendant's knowledge may be inferred from his or her conduct. N.A.S. Import, Corp. v. Chenson Enterprises, Inc., 968 F.2d 250, 252 (2d Cir. 1992). "Reckless disregard of the copyright holder's right (rather than actual knowledge of infringement) suffices to warrant award of the enhanced damages." N.A.S. Import, 968 F.2d at 252; see Lauratex Textile Corp. v. Allton Knitting Mills, 519 F. Supp. 730, 733 (S.D.N.Y. 1981).
For the same reasons that I reject Abel De Luna's defenses, I find that his infringement of the seven compositions was willful. Plaintiffs have established directly through Abel De Luna's testimony that defendants received the September 1990 notice terminating the licenses at issue unless Luna paid its overdue royalties. Nevertheless, defendant Luna, with Abel De Luna's knowledge, continued to make and distribute the previously licensed and unlicensed phonorecords, even some several months after this action was commenced. De Luna Dep. at 66-68, 156-58. Moreover, as an author of musical compositions himself and an experienced musical publisher "for about 10 to 12 years," who distributed "all the major labels of Spanish music," De Luna Dep. at 9-14, 38-39, Abel De Luna's conduct in ignoring the revocation of Luna's licenses demonstrates, if not actual knowledge, reckless disregard for plaintiffs' copyrights. See Fallaci v. New Gazette Literary Corp., 568 F. Supp. 1172, 1173 (S.D.N.Y. 1983) (inferring willfulness from fact that defendant who published a newspaper article without authorization was himself a publisher of a newspaper).
2. The Amount of Statutory Damages -- Statutory damages should bear some relationship to the actual damages suffered. RSO Records, 596 F. Supp. at 862. Congress's provision allowing for a greater award where willful infringements are found, however, indicates that statutory damages serve the dual purposes of the Copyright Act -- compensation and deterrence. Id. Courts have used a variety of factors to fix the amount of statutory damages, including "fair market value of the rights infringed, revenue lost by the plaintiff and profits gained by the defendant, the infringer's state of mind, and deterrence of future infringement." Basic Books, Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522, 1544 (S.D.N.Y. 1991) (citations omitted).
Before me is a paucity of information on which to base the award of statutory damages. Neither side has ventured an estimation of the fair market value of the rights infringed, nor of the revenue lost by plaintiffs, nor of the profits gained by defendant as a result of the infringements.
The dollar amounts repeatedly quoted in plaintiffs' submissions to the court are somewhat irrelevant. Plaintiffs have emphasized Luna's total liability uncovered by the audit performed by Prager & Fenton in 1989: the initial finding of liability in the amount of $ 722,165.51, reduced to $ 354,948.41 after the auditors revised their findings (of which, by my calculations, defendants paid $ 122,917.11
, leaving a total remaining liability through 1988 of $ 232,031.30). This amount, however, represents Luna's underpayment of royalties for several hundred musical compositions, not owned by the plaintiffs. Judging by the schedules affixed to the Prager & Fenton's audit, see Aff. of Abraham Kahaner, Ex. 1, the amounts Luna owed for the seven compositions at issue are as follows: $ 213.65 for "Ambicion"; $ 69.91 for "Dos Amores"; $ 370.99 each for "Mi Soldadita" and "Se Marcho"; $ 531.59 for "?Y Como Te Va Con El?"; $ 2,384.16 for "Angel in the Morning"; and $ 166.64 for "You Decorated My Life." The total owed, then, for the compositions at issue for the period through 1988 was $ 4,107.93; this figure, however, does not include unpaid royalties for the years after 1988.
Plaintiffs have urged that upon a showing of willfulness, they are entitled to the maximum amount of statutory damages, $ 100,000 per infringed work, for a total of $ 700,000. Plaintiffs misstate the law in this circuit. Statutory damages are not intended to provide a plaintiff with a windfall recovery. Warner Bros., Inc. v. Dae Rim Trading, Inc., 677 F. Supp. 740, 769 (S.D.N.Y. 1988) (citing Lottie Joplin Thomas Trust v. Crown Publishers, 592 F.2d 651 (2d Cir. 1978). Plaintiffs also misstate the law when they argue that because the maximum amount of statutory damages for a non-willful infringement is $ 20,000, that figure should also represent the minimum amount of statutory damages upon a finding of willfulness. See, e.g., Twin Peaks Prods., Inc. v. Publications Int'l, Ltd., 996 F.2d 1366, 1381-82 (2d Cir. 1993) ("the District Court's award of $ 15,000 for each work infringed is sustainable with or without a finding of willfulness").
Because of defendant Abel De Luna's willful infringement of plaintiffs' copyrights and his continued infringement after the initiation of this action, I find that substantial statutory damages are warranted to deter him from future misconduct. I am mindful, however, of the small amount of actual damages suffered by plaintiffs, of the hardship to defendant personally, and of the liability he continues to face. As a result, I assess statutory damages in the amount of $ 10,000 for the infringement of each of the licensed works, and more for the infringements of the unlicensed compositions because there is no excuse for De Luna's failure to serve the notice of intent to seek the compulsory licenses for those works or for using Temi's work in a derivative format without permission. Hence, I award $ 15,000 for the infringement of the unlicensed composition of EMI and $ 25,000 for the infringement of Temi's composition.
B. Attorneys' Fees and Costs
Plaintiffs request reasonable attorneys' fees and costs pursuant to 17 U.S.C. § 505. Until recently, this Circuit awarded attorneys' fees to prevailing plaintiffs as a matter of course (although not to prevailing defendants), see In Design v. K-Mart Apparel Corp., 13 F.3d 559, 567 (2d Cir. 1994), because such practice was thought to "encourage the assertion of colorable copyright claims and to deter infringement ...," Diamond v. Am-Law Publishing Corp., 745 F.2d 142, 148 (2d Cir. 1984), and thus to best serve the policies of the Copyright Act. The Supreme Court rejected this approach in Fogerty v. Fantasy, Inc., 127 L. Ed. 2d 455, U.S. , 114 S. Ct. 1023 (1994), holding that prevailing plaintiffs and prevailing defendants must be treated alike when courts consider awards of attorneys' fees, and emphasizing that attorneys' fees are not to be automatically awarded to the prevailing party under § 505, but "only as a matter of the court's discretion." Id. at 1033.
In dictum, the Fogerty Court suggested several nonexclusive factors that courts may consider in awarding attorneys' fees, "so long as such factors are faithful to the purposes of the Copyright Act," id. at 1033 n.19, including "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence," id. (quoting Lieb v. Topstone Indus., Inc., 788 F.2d 151, 156 (3d Cir. 1986)). In this case, where I have made a finding of willful infringement, which infringement continued for months after the initiation of this action, and where defendants apparently need to be deterred from future infringement, I find that an award of attorneys' fees is warranted.
It is well established that when awarding reasonable attorneys' fees, courts should "'consider the amount of work, the skill employed, damages at issue, and the result achieved.'" N.A.S. Import, Corp. v. Chenson Enters., Inc., 968 F.2d 250, 254 (2d Cir. 1992) (quoting Oboler v. Goldin, 714 F.2d 211, 213 (2d Cir. 1983) (per curiam)); see Screenlife Establishment v. Tower Video, Inc., 868 F. Supp. 47, 53 (S.D.N.Y. 1994). Attorney for plaintiffs did not submit such information to the court; I will therefore consider separately submissions for attorneys' fees. To that end, plaintiffs are directed to submit an accounting in accordance with the above standards by no later than April 21, 1995; De Luna can respond by May 5, 1995; any reply brief is due by May 12, 1995.
C. Permanent Injunction and Destruction of all Infringing Copies and Materials
Section 502 of the Copyright Act provides that a court may "grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright." 17 U.S.C. § 502(a). "The Copyright Act provides the owner of a copyright with a potent arsenal of remedies against an infringer of his [or her] work, including an injunction to restrain the infringer from violating his [or her] rights [and] the impoundment and destruction of all reproductions of his [or her] work made in violation of his [or her] rights ...." Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 433-434, 78 L. Ed. 2d 574, 104 S. Ct. 774 (1984). Generally, a plaintiff must show the threat of continuing violation in order to be entitled to injunctive relief. Basic Books. Inc. v. Kinko's Graphics Corp., 758 F. Supp. 1522, 1542 (S.D.N.Y. 1991).
In the instant action, liability has been determined and there remains a viable threat that Abel De Luna will continue to infringe plaintiffs' copyrights in the future given the nature of his past infringements and his retention of some of the articles used to infringe plaintiffs' copyrights. For these reasons, a permanent injunction will issue and plaintiffs' request is granted that all infringing copies and materials in Abel De Luna's possession be destroyed.
For the reasons stated above, plaintiffs' motion for summary judgment is granted. I direct the Clerk of Court to grant a permanent injunction restraining defendant Abel De Luna personally, through Luna Music Corporation, formerly known as Luna Records, Inc., or through any other corporate entity over which he exercises control or from which he derives a financial interest in the exploitation of copyrighted works, from making and distributing phonorecords, or derivative works, of "Dos Amores," Certificate of Registration of a Claim to Copyright No. Ep 311056; "Ambicion," Certificate of Registration of a Claim to Copyright No. Eu 793580; "?Y Como Te Va Con El?," Certificate of Copyright Registration No. PA 279 244; "Se Marcho," Certificate of Registration of a Claim to Copyright No. Efo 149119; "Mi Soldadita," Certificate of Registration of a Claim to Copyright No. Eu 796986 and Certificate of Renewal Registration No. RE 550-739; "Angel of the Morning," Certificate of Registration of a Claim to Copyright No. Ep 232016; and "You Decorated My Life," Certificate of Copyright Registration No. PA 5-228 [hereinafter, the "seven compostions"]; and from otherwise infringing plaintiffs' copyrights in the seven compositions, and ordering Abel De Luna to deliver up for destruction all copies of the infringing phonorecords of the seven compositions in his possession, custody and control as well as all plates, molds, matrices, mothers, stampers, pressers, winders and any other means for making infringing copies or phonorecords. The Clerk of the Court is further directed to enter judgment awarding statutory damages in the amounts of $ 20,000 to Peer International Corporation; $ 10,000 to Peermusic Ltd.; $ 10,000 to Leo Musical, S.A.; $ 10,000 to Editorial Musical Latino Americana, S.A.; $ 15,000 to EMI Blackwood Music Inc.; and $ 25,000 to Temi Combine, Inc.
The Court will enter judgment separately on the question of attorneys' fees.
Dated: New York, New York