Let’s suppose that you have not registered your copyright in a book with the U.S. Copyright Office and you find someone has infringed your copyright by copying substantial portions of your book.  Let’s also suppose you are able to prove that the alleged infringer has infringed your work and you have notified the alleged infringer regarding the infringement of your copyright. Let’s further suppose that you cannot prove that the infringement caused you lost sales, lost opportunities to license, or diminution in the value of the copyright.

In most cases, it is desirable to negotiate with the alleged infringer from the position that you are entitled to statutory damages for the copyright infringement.  If you are not entitled to statutory damages, can you recover actual damages? Can you prove that a license to produce the portions of your book has a fair market value for actual damages?  Can you receive payment by the alleged infringer of the fair market value of the portions of your book illegally copied as recovery for actual damages? Can you get a licensing fee as fair market value for actual damages for the copyright infringement?  The answer to all these questions is YES!

Under 17 U.S.C. § 412, no award of statutory damages or of attorney’s fees shall be made for—(1) any infringement of copyright in an unpublished work commenced before the effective date of its registration; or (2) any infringement of copyright commenced after first publication of the work and before the effective date of its registration unless such registration is made within three months after the first publication of the work.  If you did not register your copyright before the infringement occurred or within three months after the first publication of the work and the infringement occurred, you will not be entitled to statutory damages.

Since you are not eligible for statutory damages, you will have to negotiate with the alleged infringer for your actual damages and any additional profits of the alleged infringer.  Under 17 U.S.C. § 504, the copyright owner is entitled to recover the actual damages suffered as a result of the infringement, and any profits of the alleged infringer that are attributable to the infringement and are not taken into account in computing the actual damages. In establishing the alleged infringer’s profits, the copyright owner is required to present proof only of the alleged infringer’s gross revenue, and the alleged infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work. See 17 U.S.C. § 504.

While you may recover actual damages and profits for the alleged infringement, the award of the alleged infringer’s profits examines the facts only from the alleged infringer’s point of view. On Davis v. Gap, Inc., 246 F.3d 152, 159 (2d Cir. 2001).  If the alleged infringer has earned a profit, this award makes him disgorge the profit to ensure that he does not benefit from his wrongdoing and the award of the owner’s actual damages looks at the facts from the point of view of the copyright owner; it undertakes to compensate the owner for any harm he suffered by reason of the infringer’s illegal act. See generally Fitzgerald Publ’g Co. v. Baylor Publ’g Co.,807 F.2d 1110, 1118 (2d Cir. 1986); Walker v. Forbes, Inc.,28 F.3d 409, 412 (4th Cir. 1994); On Davis v. Gap, Inc., 246 F.3d 152, 159 (2d Cir. 2001).

Because of the alleged infringement, you may not claim unreasonable amounts as the license fee.  The amount of damages may not be based on “undue speculation”.  In other words, the question is not what you would have charged, but rather what is the fair market value.  In order to make out your claim that you have suffered actual damage because of the alleged infringer’s failure to pay the fee, you must show that the portions taken had a fair market value. Thus, the courts have considered the market value of the uncollected license fee as an element of “actual damages” under § 504(b).  See On Davis v. Gap, Inc., 246 F.3d 152, 166 (2d Cir. 2001). In On Davis v. Gap, Inc., 246 F.3d 152, 172 (2d Cir. 2001), the Court concluded that Section 504(b) permits a copyright owner to recover actual damages, in appropriate circumstances, for the fair market value of a license covering the infringing use.

Based on the above scenario, you should try to negotiate with the alleged infringer as to a fair market value of a license covering the copied portions of your book.  In the negotiations with the alleged infringer, your fair market value cannot be speculative and should be based on prior licensing or licensing by others of similar works.  If the negotiations break down or the fair market value cannot be agreed to with the alleged infringer, you will need to register your copyright on the book with the U.S. Copyright Office before you can sue for infringement.  Under 17 U.S.C. § 411, no civil action for infringement of a copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made.  Although registration of a U.S. copyright typically takes nine months, you can expedite the registration by requesting “Special Handling” when you apply for your copyright registration.  Under the U.S. Copyright Office rules, Special Handling is granted based on prospective litigation and payment of the fee.  Once the U.S. Copyright Office receives a request for Special Handling and it is approved, the copyright application is processed typically within five working days. However, the U.S. Copyright Office makes no guarantee that the copyright application can be processed within this time frame.

In summary, if you are able to prove infringement of your copyright even though it is not registered and you notify the alleged infringer of the copyright infringement, you will not be entitled to statutory damages and will only be able to recover actual damages.  Although you cannot show that the infringement caused lost sales, lost opportunities to license, or diminution in the value of the copyright, you can still negotiate for the fair market value of a license covering the alleged infringing use.  The fair market value cannot be speculative and should be based on prior licensing or licensing by others of similar works.  Therefore, the lesson to be learned is that you can still recover actual damages for copyright infringement, but the better practice is to register your copyright with the U.S. Copyright Office before the infringement occurs so that you can recover statutory damages.