Defendant Line Financial Health Network operates a financial app called Beem. On February 20, 2023 – about two months before tax returns were due – Line Financial published, on its website, a blog post that included a photograph of Kurt Cobain superimposed with the text “Remember Kurt Cobain on his birthday. Also remember to file your taxes! it's free!” (The image is reproduced in the court's opinion.) How did this happen? One of Line Financial's vendors had downloaded the photo from WallpaperCave, a crowd-sourced site that invites “wallpaper enthusiasts” to share and download “tons of collections of awesome wallpaper.” Believing that the photo was “free to use,” the vendor cropped and overlaid the photograph with graphics and text. Why Line Financial chose to feature Kurt Cobain over other celebrities born on February 20 (including Rihanna, Olivia Rodrigo, and Trevor Noah) is anyone's guess.

Plaintiff Joe Giron is a professional rock‑and‑roll photographer (with an impressive portfolio) who shot and owns the copyright in the photo of Cobain. After discovering the blog post, Giron sued Line Financial for copyright infringement. Last week, Judge Edward M. Chen (N.D. Cal.) granted summary judgment to Giron as to prima facie copyright liability (the court giveth), but granted summary judgment to Line Financial’s as to the absence of actual damages, recoverable profits, and willfulness (and the court taketh away).

Come As You Are … But Not Without A License

To establish a prima facie case of direct copyright infringement, a plaintiff must prove (1) ownership of the copyright in the allegedly infringed work and (2) violation of at least one exclusive right granted to copyright holders under 17 U.S.C. § 106. Here, Giron easily established a prima facie case of copyright infringement: his ownership of the copyright in the photo was not disputed, and Line Financial admitted that its vendor had downloaded and modified the photo, and that Line Financial had displayed the photo on its website, all without a license. Accordingly, the court granted summary judgment to Giron as to prima facie copyright infringement. (The court did not consider Line Financial’s affirmative defenses of unclean hands and copyright misuse, which were not the subject of the summary judgment motions.)

Damages … Nevermind! 

Under the Copyright Act, a copyright owner may recover (1) actual damages resulting from the infringement (17 U.S.C. § 504(b)), and (2) any profits of the infringer that are attributable to the infringement, to the extent not taken into account in computing actual damages. (17 U.S.C. § 504(b)), or (3) in lieu actual damages and profits, statutory damages. (17 U.S.C. § 504(c)(1).) Line Financial’s motion for summary judgment attacked Giron’s right to recover damages under all three theories. 

1.        Actual Damages. To measure actual damages, courts often look to lost licensing revenue or, in appropriate cases and when supported by objective market evidence, a hypothetical license fee. Here, the court found that Giron had presented absolutely no evidence supporting an award of actual damages. Even though the court had ordered the parties to exchange information concerning licensing and damages, Giron failed to produce licensing comparables, rate sheets, prior licenses, or other market evidence. Nor did Giron identify any concrete monetary loss tied to the challenged blog post. Giron’s sole evidence was his declaration asserting that unauthorized use of his photo diminished its exclusivity and, therefore, his ability to license it in the future. The court found this insufficient:

“Plaintiff's claim that a single publication of the Photograph in a blogpost advertising tax services – with no relation to music generally or Cobain particularly and for which there is no evidence of notoriety – would materially impair Plaintiff's ability to license this work to others appears unduly speculative.”

2.        Profits. Section 504(b) of the Copyright Act permits a copyright owner to recover profits of the infringer that “are attributable to the infringement” (emphasis added). Those profits can be direct – e.g., if an infringer copies and sells the plaintiff's copyrighted work in its entirety, such as when a vendor on Canal Street sells pirated copies of movie screenplays – or indirect – e.g., if an infringer includes the plaintiff’s copyrighted work in advertising that ultimately generates sales for the infringer. (For more on indirect profits, see this post and this post.)

Direct profits were not at issue in this case since there was no allegation that Line Financial had sold Giron’s photo or otherwise directly profited from it. Giron’s theory for indirect profits was that (1) the use of his copyrighted photo on the blog generated clicks for Line Financial’s tax filing application, (2) those clicks generated revenue, and (3) a portion of that revenue was attributable to the infringing use of the photograph. To establish indirect profits, a copyright-holder must proffer “sufficient non-speculative evidence to support a causal relationship between the infringement and the profits generated indirectly from such an infringement” (citation omitted). The court held that Giron had not proffered any evidence, much less non-speculative evidence, to support his theory of a causal connection between the use of the photo and Line Financial's profits. On the contrary, the evidence in the record supported that there were few (if any) clicks on the blog post and that the tax service advertised in the blog post had never turned a profit because its expenses far exceeded revenue. 

3.        Statutory Damages. Courts are authorized to award statutory damages between $750 and $30,000 for each work infringed; however, if the copyright owner demonstrates that the infringement was willful, the court has discretion to award up to $150,000 per work. (17 U.S.C. § 504.) To prove willfulness, a plaintiff must show (1) that a defendant had actual awareness of the infringing activity, or (2) defendant had reckless disregard or willful blindness to the copyright holder's rights. 

The court granted summary judgment to Line Financial on lack of willfulness because Giron had not proffered evidence to support actual knowledge, reckless disregard, or willful blindness on the part of Line Financial. On the contrary, the court held that the evidence in the record –including Line Financial’s instruction to its vendor to use only free images to illustrate the blog, the vendor’s (mistaken but apparently good faith) belief that the photo was free to use, and Line Financial's prompt removal of the photograph upon receipt of a DMCA takedown notice – supported that Line Financial's infringement was not willful. 

Nirvana Deferred

The case is not entirely over. Line Financial’s affirmative defenses – unclean hands and copyright misuse – remain unresolved (although they seem like longshots). Giron may pursue statutory damages, with a maximum possible recovery of $30,000, and also can seek an award of attorneys’ fees. Still, after the court’s ruling foreclosing recovery of actual damages, profits and enhanced statutory damages, the prospect of a substantial recovery is more remote. I wouldn't be surprised if the case settles.