Desire v. Manna Textiles: Assessing impacts on multiple-defendant copyright suits

Earlier this year, the 9th U.S. Circuit Court of Appeals altered the statutory damages landscape in cases involving multiple defendants. In Desire, LLC v. Manna Textiles, Inc., 2021 DJDAR 1147 (9th Cir. Feb. 2, 2021), the court held that a plaintiff could only receive a single statutory damages award where one upstream infringer was jointly and severally liable with multiple, downstream codefendants. Desire's request for rehearing en banc was recently denied.

The case originated after Manna Textiles recreated a fabric sold by Desire that displayed a copyrighted floral print. Manna Textiles sold the recreated fabric to three garment manufacturers, and the manufacturers in turn sold clothing made from the fabric to three retailers. Desire sued each link in the chain of distribution -- resulting in seven individual defendants. A jury eventually found in favor of Desire and awarded $480,000 in statutory damages. Rather than limit the jury to a single damages award, the court permitted the jury to issue separate awards for different combinations of jointly liable defendants.

Several defendants timely appealed and challenged the lower court's ruling that Desire could recover more than a single damages award. Defendants argued that total damages should have been capped at the $150,000 statutory damages limit for infringement of a single copyrighted work because all defendants were jointly and severally liable with Manna Textiles.

The 9th Circuit, in a split opinion, agreed. The majority based its decision on Section 504(c) of the Copyright Act, which states that a copyright owner may recover "an award of statutory damages for all infringements involved in the action, with respect to any one work ... for which any two or more infringers are liable jointly and severally." The majority's analysis turned on a parsing of the word "any" within the phrase "any two or more infringers." The majority found that the district court was wrong to assume that complete joint and several liability among all defendants was necessary to limit damages to a single award, since such an interpretation would render the word "any" superfluous and run afoul of the intent behind Section 504(c). Instead, the majority found a single award appropriate so long as one defendant -- e.g., an upstream distributor -- is jointly and severally liable with all other defendants.

Judge Kim Wardlaw dissented and argued that the majority's interpretation of Section 504(c) is contrary to prior 9th Circuit rulings in Columbia Pictures Television v. Krypton Broadcasting of Birmingham and Friedman v. Live Nation Merchandise. In Columbia Pictures, unauthorized airings of "Who's the Boss?" on three different stations were found to justify three separate statutory awards even though the same defendant owned each station. In Friedman, Live Nation sold infringing merchandise through 104 separate retailers and the court observed that, in theory, there could have been 104 separate awards if each retailer had been joined as a defendant and found jointly and severally liable with Live Nation. Judge Wardlaw characterized the majority opinion as a step in the "opposite direction" from established precedent. The majority disagreed and sought to distinguish the prior cases.

Potential Impacts of the Decision

The specter of statutory damages up to $150,000 per work incentivizes filing of copyright litigations and provides plaintiffs with tremendous negotiating leverage, even in cases where actual harm is minimal. These effects are often multiplied in cases involving online distribution of content, where numerous works may be at issue and/or the presence of multiple, jointly liable content suppliers presents plaintiffs with an opportunity to stack multiple statutory awards. The Desire ruling has the potential to impact such cases in several ways, including the following:

• Reduced forum shopping. The 9th Circuit's 1997 ruling in Columbia Pictures was perceived to create a circuit split with respect to interpretation of Section 504(c). Indeed, other popular venues for copyright litigation, including courts in the 2nd Circuit, have long interpreted Section 504(c) as only allowing a single award per work in multi-defendant cases. See Arista Records LLC v. Lime Group LLC, 784 F. Supp. 2d 313, 319-20 (S.D.N.Y. 2011). The perception that 9th Circuit courts were more likely to allow multiple statutory awards attracted plaintiffs to file in the circuit, even when parties' ties to the venue were tenuous. This phenomenon has led to fights over personal jurisdiction where litigants recognize that the maximum available damages can vary widely based on where the case is tried. While 9th Circuit copyright damages law still differs from other circuits in other respects, the Desire ruling should reduce forum shopping in multi-defendant copyright cases.

• Filing of separate suits. Another potential outcome of the case -- and one that was actually addressed by the panel -- is that enterprising plaintiffs may now elect to file separate lawsuits against different defendants in order to maximize the number of statutory damages awards available for the same infringing acts. The Desire majority recognized that this is a problematic outcome and at odds with the purpose of the Copyright Act. As a result, the court suggested that district courts may address the issue of multiple lawsuits against jointly liable infringers through freely granting requests for consolidation or, where cases are brought in different districts, granting transfer pursuant to 28 U.S.C. Section 1404(a) and then consolidating related cases.

• Reduced damages awards. When evaluating the amount of statutory damages per work, the factfinder has wide discretion -- damages range anywhere from $750 per work to $150,000 per work for willful infringement. In situations where plaintiffs choose to sue defendants in separate suits, the Desire opinion has the potential to reduce the amount awarded in each suit. Specifically, the 9th Circuit suggested that defendants should "argue to the jury that their liability for statutory damages should be materially lessened" where a plaintiff is seeking redress in multiple suits. And, given this guidance from the 9th Circuit, district courts should freely allow defendants to present evidence of simultaneous suits as a tool for reducing each award. Additionally, in Desire, the 9th Circuit put a stake in the ground with regard to the use of statutory damages -- explaining that the purpose of statutory damages should be "as a substitute ... for actual damages ... and should not provide copyright owners a windfall." It will be interesting to observe whether the court's admonition regarding the policy underlying statutory damages causes lower courts to better ensure that statutory damages awards are tied to actual harm suffered by a plaintiff. 