Sixth Circuit affirms copyright infringement award against karaoke disc makerJune 26, 2007

In a decision today, the Sixth Circuit affirmed an award of $806,000 in statutory damages plus attorney fees in a copyright case. The case was brought by a copyright holder against a manufacturer of karaoke discs incorporating the compositions to which the plaintiffs held the copyright.

The court upheld the award and finding of willful infringement over the defendant's challenges under the Due Process Clause of the Fifth Amendment and the Eighth Amendment, as well as its contention that it was engaged in fair use.

More details of Zomba Enters., Inc. v. Panorama Records, Inc. after the jump.

The plaintiffs, Zomba Enterprises and Zomba Songs, hold the copyright rights to a variety of musical compositions, including songs performed by pop music performers such as 98 Degrees, *NSYNC, Backstreet Boys, and Britney Spears.

The defendant, Panorama Records, produces discs in a format known as CD+G, meaning "compact disc plus graphics." Panorama would sell discs with the background music and lyrics for the top hits in several genres over the previous month for use with karaoke machines.

The plaintiffs sued for copyright infringement. Shortly after the case was filed, the parties agreed to a consent order restraining Panorama from distributing or otherwise exploiting any karaoke package that incorporated Zomba's compositions. Unfortunately, Panorama breached this order, and resumed selling discs.

Eventually, the district court found Panorama liable for willful copyright infringement, rejected Panorama's defenses, and awarded Zomba $806,000 in statutory damages, $76,456.16 in attorney fees and $1,058.91 in costs. Panorama appealed.

The Sixth Circuit first addressed Panorama's fair use defense. The court considered the four statutory fair use factors from 17 U.S.C. § 107:

1. The purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
4. the effect of the use upon the potential market for or value of the copyrighted work.

The court found that each factor favored a finding of no fair use. As to the first factor, Panorama's use was minimally transformative, and its purpose was commercial in nature. The court noted that the works at issue, musical compositions, "fall within the core of the copyright's protective purposes," so the second factor also supported the plaintiff. Regarding the third factor, Panorama took the entirety of the works, also weighing against a finding of fair use. Finally, the effect on the market weighed against fair use, as Zomba had previously licensed the works for use in karaoke. Accordingly, Panorama's fair use defense was rejected.

The court also affirmed the finding that Panorama's infringement was willful, based on its conduct disobeying the consent order. As a result, the statutory damage award of $31,000 per song was reasonable.

Finally, the court rejected additional defenses focusing on the amount of the damages. The Sixth Circuit held that the award could not constitute an "excessive fine" under the Eighth Amendment, because that clause only applies to amounts paid to the government, not civil damage awards. The court also rejected Panorama's due process defense, finding that the amount of the award was not "so sever and oppressive as to be wholly disproportioned to the offense and obviously unreasonable." As a result, the award of damages was affirmed.

The court likewise affirmed the award of attorney fees, even though the district court did not explicitly consider the factors outlined in Fogerty v. Fantasy, Inc., the relevant Supreme Court case on the subject. The relevant factors include:

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.

The parties had briefed the issue and the Fogerty factors, and the Sixth Circuit found that even though the district court did not "precisely recount its assessment of the factors, it was alerted to them," and thus affirmed the award.

To read the full decision in Zomba Enters., Inc. v. Panorama Records, Inc., click here.