Volume V

Issue : 3: February 8, 2007

• Israeli Court Rules Operation of Foreign Gambling Website a Criminal Offence Under Israeli Law
• Patents for Dynamic Web Pages Undergo Re examination
• Federal Court Awards Maximum Statutory Damages for Copyright Infringements
• Political Attack TV Ads Potentially Breach Copyright Act
• New Jersey Appeals Court Strengthens Privacy Rights of Internet Users
• U.S. First Sale Doctrine Applies to Audiobooks
• eBay Bans Auctions of Virtual Goods
• U.S. Courts Frequently Cite Wikipedia
• Italian Court Decriminalizes Not for Profit Downloading
• WTO Finds U.S. Non-Compliant with its Internet Gambling Decision
• Canadian Tax Authorities to Use Software to Catch Online Tax Evaders
• U.S. Court of Appeals Rejects Bid to Overturn Copyright Extensions for "Orphaned" Works

Home > Volume V > Issue 3: February 8, 2007 > Federal Court Awards Maximum Statutory Damages for Copyright Infringements

Federal Court Awards Maximum Statutory Damages for Copyright Infringements

In a decision handed down on January 16, 2007, Federal Court of Canada Judge Sean Harrington awarded Microsoft Corporation $500,000.00 in statutory damages, $20,000.00 each for the 25 copyright infringements by the defendants. Since the Copyright Act was amended in 1997 to include statutory damages, ranging from $500.00 to $20,000.00 per infringed work, this is the first time a Canadian court has awarded the maximum statutory damages for a counterfeiting case.

Justice Harrington also awarded Microsoft $100,000.00 in punitive damages from the corporate defendants, and $100,000.00 from the individual defendants who are the directing minds of the corporate defendants. The punitive damage awards are the highest in a Canadian counterfeit case to date.

However, the application by Microsoft for a broad permanent injunction was refused by the Court.

The defendants have appealed the decision.

History

In 1997, Microsoft received reports that Inter-Plus, a Quebec software reseller, was selling original equipment manufacturer (OEM) versions of its products on a stand-alone basis. Under the Microsoft business model, OEM versions are only to be distributed bundled with PCs and other computer hardware. Microsoft notified Inter-Plus that such sales were contrary to Canadian copyright law, and that many of the products distributed by Inter-Plus may be counterfeits. Upon analyzing products sent by Inter-Plus, Microsoft confirmed that the products were indeed counterfeits.

The RCMP and the Montreal Police executed search warrants at Inter-Plus in 1998 and 2000 respectively, seizing CD-ROMs and other products. However, the Crown prosecutor declined to press criminal charges on both occasions.

In August, 2000, Microsoft filed a civil suit in the Federal Court of Canada for copyright and trade-mark infringements against the two Quebec number corporations that own Inter-Plus, and against Adam and Carmelo Cerrelli, two individuals who are the directing minds of the number companies. In its statement of claim, twice amended to include additional copyright infringements, Microsoft sought statutory damages and punitive damages from the defendants, and a broad permanent injunction.

Judgment

Damages

In his judgment, Justice Harrington explained his reasons for awarding the maximum statutory damages for each of the infringed work. Section 38.1 of the Copyright Act allows the copyright owner to elect to recover an award of statutory damages with respect to each work that was infringed. An election for statutory damages does not affect the copyright owner’s right to exemplary or punitive damages.

In determining the amount of statutory damages, the Court must take into account whether the defendants have demonstrated that they were not aware, and had no reasonable grounds to believe, that they had infringed copyright. Another factor to be considered is what amount of damages would be proportional to the infringement.

Justice Harrington held that the defendants had not satisfied him that they had reasonable grounds to believe they had not infringed copyright. He further held that awarding a maximum of $20,000.00 in statutory damages for each of the 25 infringements, totaling $500,000.00 was proportional and necessary to deter other infringements of the copyrights in question.

Justice Harrington also held that he was satisfied that the defendants’ conduct was outrageous and that Microsoft was entitled to punitive damages of $100,000.00 from the two number companies jointly and severally and an additional $100,000.00 from Carmelo Cerrelli.

Permanent Injunction

Microsoft asked the Court to permanently enjoin the defendants from dealing in, now or in the future, counterfeit versions of Microsoft’s products and related material, and dealing in counterfeit marks. The court granted this portion of the Application. However, Justice Harrington stated that he could not grant the following injunctions sought by Microsoft:

1. related corporations such as Ivorcom be specifically named in the permanent injunction, notwithstanding that it was not a defendant in this case;
2. the injunction extend to anyone who becomes aware thereof, notwithstanding that that person may not be related to the defendants, much less under their control;
3. the injunction extend to current Microsoft copyrights not identified in the action, and even to copyrights which have not yet been registered;
4. the injunction prohibit the defendants from dealing in any Microsoft programs, including genuine Microsoft CD-ROMs or other material, which are not properly packaged and accompanied by the related components Microsoft requires its authorized dealers to package together, such as front-liners, back-liners, end user license agreements, client access licenses, certificate of authenticity, certificate of authenticity labels, and manuals.

In rejecting Microsoft’s request to expand the injunction to non-parties, Justice Harrington held that injunctive relief is discretionary, and it would be overzealous to purport to permanently enjoin non-parties; the injunction would be ex parte as against them and they would be entitled to move to set it aside.

As to the injunction covering copyrights not specifically identified, Justice Harrington declined to extend the subject matter of the injunction to copyrights not specifically alleged in the proceedings.

On the issue of Microsoft asking the Court to enjoin the defendants from dealing in Microsoft products other than those packaged and licensed to Microsoft’s satisfaction, Justice Harrington remarked that Microsoft is in effect seeking an order that Inter-Plus be kept out of the grey market, and in his opinion, the Copyright Act cannot be invoked to support Microsoft’s current business model.

For a copy of the decision, visit:

Microsoft Corporation v. Cerrelli et al. Microsoft Corporation v. Cerrelli et al.