LOS ANGELES NEWS SERVICE, Plaintiff-Appellant, v. REUTERS
TELEVISION INTERNATIONAL LIMITED; VISNEWS INTERNATIONAL
(USA) LIMITED; REUTERS AMERICA HOLDINGS, INC.; REUTERS
AMERICA INC., Defendants-Appellees.
No. 02-56956
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
April 22, 2003, Submitted, * Pasadena, California
August 21, 2003, Filed
O'SCANNLAIN, Circuit Judge:
We must decide whether a news organization may recover actual damages under
the Copyright Act for acts of infringement that mostly occurred outside the
United States.
I
The copyrighted works at issue here ("the works") are two video recordings,
"The Beating of Reginald Denny" and "Beating of Man in White Panel Truck," which
depict the infamous events at Florence Ave. and [**2] Normandie Blvd. during
the 1992 Los Angeles riots. Los Angeles News Service ("LANS"), an independent
news organization which produces video and audio tape recordings of newsworthy
events and licenses them for profit, produced the works (and two other
videotapes not at issue here) while filming the riots from its helicopter. LANS
copyrighted the works and sold a license to rebroadcast them to, among others,
the National Broadcasting Company ("NBC") network, which used them on the Today
Show.
Visnews International (USA), Ltd. ("Visnews") is a joint venture among NBC,
Reuters Television Ltd., and the British Broadcasting Company ("BBC"). Pursuant
to a news supply agreement between NBC and Visnews, NBC transmitted the Today
Show broadcast by fiber link to Visnews in New York; Visnews made a videotape
copy of the works, which it then transmitted via satellite to its subscribers in
Europe and Africa and via fiber link to the New York office of the European
Broadcast Union ("EBU"), a joint venture of Visnews and Reuters. The EBU
subsequently made another videotape copy of the works, and transmitted it to
Reuters in London, which in turn distributed the works via video "feed" to its
[**3] own subscribers.
LANS sued Reuters Television International, Inc., Reuters America Holdings,
Inc., Reuters America, Inc. (collectively, "Reuters"), and Visnews for copyright
infringement and certain other claims not relevant here. The district court
subsequently granted Reuters and Visnews partial summary judgment on the issue
of extraterritorial infringement, holding that no liability could arise under
the Copyright Act for acts of infringement that occurred outside the United
States. L.A. News Serv. v. Reuters TV Int'l, Ltd. (Reuters I), 942 F. Supp.
1265, 1268-69 (C.D. Cal. 1996). However, the district court held that Visnews's
act of copying the works in New York was a domestic act of infringement n1 and
rejected a claimed defense of fair use. Id. at 1269, 1271-74.
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n1 Visnews's transmission of the works to the EBU New York office was not
infringement, however. Id. at 1270-71.
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The district court further concluded that LANS had failed to prove [**4] any
actual damages arising domestically and that damages arising extraterritorially
were unavailable under the Act, which meant that LANS was limited to statutory
damages. Id. at 1274-75 & n.7. n2 After a bench trial [*928] on the issue of
statutory damages, the district court awarded LANS a total of $ 60,000. L.A.
News Serv. v. Reuters TV Int'l, Ltd. (Reuters II), 942 F. Supp. 1275, 1283-84
(C.D. Cal. 1996).
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n2 The Copyright Act provides that the owner of an infringed copyright may
elect "at any time before final judgment is rendered" to receive a fixed sum of
statutory damages instead of the usual remedy, "actual damages and [the
infringer's] profits." 17 U.S.C. § 504(c)(1).
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LANS appealed the district court's ruling on actual damages, and Reuters and
Visnews cross-appealed the fair use ruling and the statutory damages
calculation. We subsequently reversed the district court's actual damages
ruling, disagreeing with its interpretation of the [**5] Copyright Act's
extraterritorial application. L.A. News Serv. v. Reuters TV Int'l, Ltd. (Reuters
III), 149 F.3d 987, 992 (9th Cir. 1998). We concluded that although the district
court was correct to hold that the Copyright Act does not apply
extraterritorially, an exception may apply where an act of infringement is
completed entirely within the United States and that such infringing act enabled
further exploitation abroad. Id. at 991-92. Relying on Sheldon v. Metro-Goldwyn
Pictures Corp., 106 F.2d 45 (2d Cir. 1939), aff'd, 309 U.S. 390, 84 L. Ed. 825,
60 S. Ct. 681 (1940), which held that profits from overseas infringement can be
recovered on the theory that the infringer holds them in a constructive trust
for the copyright owner, we reversed the grant of summary judgment. Reuters III,
149 F.3d at 991-92. We held that "LANS [was] entitled to recover damages flowing
from exploitation abroad of the domestic acts of infringement committed by
defendants." Id. at 992.
Turning to the other issues, we affirmed the fair use ruling and the
statutory damages calculation. Id. at 994-96. However, we vacated the award of
[**6] statutory damages so that LANS could make a new election on remand. Id.
at 995 & n.8. After the Supreme Court denied certiorari, Reuters TV Int'l, Ltd.
v. L.A. News Serv., 525 U.S. 1141, 143 L. Ed. 2d 41, 119 S. Ct. 1032 (1999), the
case returned to the district court, where Reuters and Visnews moved for summary
adjudication of the claim for actual damages. They asserted that the Reuters III
decision permitted LANS to recover only Defendants' profits attributable to
extraterritorial infringement -- not actual damages for injuries the
infringements caused LANS overseas. Reuters and Visnews further asserted that no
factual dispute remained as to the amount of such profits.
After a hearing, the district court agreed with Reuters and Visnews on both
points and granted the motion. The court concluded that Reuters III had held
only that LANS could recover any profits or unjust enrichment from domestic
infringers, on the theory that the infringers held such profits in a
constructive trust for LANS. "To permit [LANS] to recover damages other than
Defendants' profits or unjust enrichment," the court stated, "would . . .
effectively permit [LANS] to [**7] recover damages for extraterritorial acts of
infringement."
Having determined that LANS could recover only Defendants' profits, if any,
the district court concluded that Reuters and Visnews had reaped no such profits
from their infringement. The court held that LANS's "speculative" testimony
about the competitive advantage that exclusive footage gives a subscription
broadcaster was insufficient to create a factual dispute. It accordingly granted
the motion for summary adjudication. In its order, the district court stated
that LANS could elect to take the $ 60,000 in statutory damages awarded in
Reuters II and affirmed in Reuters III. In its haste, LANS timely appealed to
this court, but failed to make the required election as to statutory damages.
Because there was no "final decision," we dismissed for lack of jurisdiction.
LANS subsequently cured the jurisdictional defect by making such election, and
refiled its appeal with this court.
[*929] II
LANS claims that the district court erred by disallowing recovery for actual
damages. LANS, however, does not challenge the court's further conclusion that
LANS had failed to show that Reuters and Visnews had earned any profits from the
[**8] overseas infringement. Summary adjudication was therefore appropriate if
the district court correctly concluded that LANS could not recover actual
damages for overseas effects of Defendants' infringement.
A
Both parties engage in detailed exegesis of our opinion in Reuters III. On
LANS's reading, the Reuters III court's use of the term "damages" is
dispositive. The statute uses "actual damages" and "profits" separately and
distinctly, and provides that an infringer may recover both (in the ordinary
case). LANS asserts therefore that the Reuters III court should be read as
having meant what it said: "damages" means actual damages.
But LANS's interpretation does not fit with the context in which the Reuters
III court discussed the recoverability of "damages." There, we relied on Judge
Learned Hand's opinion in Sheldon and discussed damages entirely in the context
of that case, which dealt exclusively with the recovery of the defendants'
profits.
The Sheldon court had previously affirmed the defendants' liability for
infringing the plaintiffs' copyright by incorporating their play into a movie.
Sheldon v. Metro-Goldwyn Pictures Corp., 81 F.2d 49, 54-56 (2d Cir. 1936). [**9]
After a remand, the defendants appealed the district court's decision to award
the plaintiffs all the defendants' profits from exhibiting the motion picture.
Sheldon, 106 F.2d at 48. The Second Circuit, inter alia, determined that the
profits traceable to overseas exhibition of the infringing movie should be
included. Although "at first blush it [seemed] that [the overseas profits]
should be excluded" because the overseas exhibition of the infringing movie was
not tortious under American copyright law, the court nonetheless concluded that
the plaintiffs could recover the overseas profits under a different theory,
based on one defendant's having made the negatives in the U.S. Id. at 52. The
court elaborated:
The negatives were "records" from which the work could be "reproduced,
" and it was a tort to make them in this country. The plaintiffs
acquired an equitable interest in them as soon as they were made,
which attached to any profits from their exploitation, whether in the
form of money remitted to the United States, or of increase in the
value of shares of foreign companies held by the defendants. . . . As
soon as any of the profits [**10] so realized took the form of
property whose situs was in the United States, our law seized upon
them and impressed them with a constructive trust, whatever their
form.
Id. The Sheldon court relied exclusively on this rationale in holding that the
plaintiffs could recover the defendants' profits from overseas exhibition. n3
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n3 Before considering what could be included and excluded in the tally of the
defendants' profits, the Sheldon court specified that the plaintiffs would take
only one-fifth of the net profits. Id. at 51.
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As Sheldon considered only an award of profits, it is counter-intuitive that
a court applying Sheldon's rationale, but using the word "damages" as the
Reuters III court did, was referring consciously to "actual damages" as opposed
to "profits." Indeed our prior holding in Reuters III, based on the Sheldon
constructive trust theory, demonstrates that we did not use the term "damages"
in that formal sense. Rather, we used "damages" as a shorthand [**11] either
[*930] for both the forms of relief that 17 U.S.C. § 504(b) makes available,
i.e., actual damages and defendants' profits, or only the recovery of defendants
' profits. Understanding which applies requires closer analysis of Sheldon and
its progeny.
B
Of course, Sheldon did not explicitly deal with the issue of actual damages.
But as LANS points out, there is some support in the Second Circuit's post-
Sheldon case law for the recovery of extraterritorial actual damages once an act
of domestic infringement is proven.
The most direct support for such position comes from Update Art, Inc. v.
Modiin Publ'g, Ltd., 843 F.2d 67 (2d Cir. 1988), in which the Second Circuit
considered an Israeli newspaper's unauthorized reproduction of a poster
copyrighted in the United States. Id. at 68-69. Update Art held, albeit without
much discussion, that the defendants had failed to make any showing that the
initial copying of the poster had occurred abroad; thus, in the case's
procedural context, n4 the court concluded that the "predicate act" of domestic
infringement had occurred and that Update Art had stated a viable copyright
[**12] claim. Id. at 73. The court also affirmed the award of "damages accruing
from the illegal infringement in the Israeli newspapers." Id.
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n4 The defendants had consistently failed to respond adequately to discovery
requests, and the magistrate judge accordingly entered summary judgment against
them on the issue of damages. Id. at 70. The circuit court affirmed that
sanction. Id. at 72.
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Update Art, however, is distinguishable from LANS's claim in a couple of
important respects. First, several issues of the newspaper in which the
infringing reproduction appeared were circulated in the United States. Id. at 73
& n.6. Second, and more importantly, the amount of damages awarded by the
district court was based on defendants' profits. Id. at 70 & n.4. Finally, the
panel did not even discuss the distinction between damages and profits, much
less cite Sheldon. n5 Rather, it merely concluded that the damages award could
[**13] stand despite the extraterritoriality issue, which the magistrate judge
had not considered in calculating the amount. Id. at 70.
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n5 The court did however cite to one of Sheldon's offspring, Robert Stigwood
Group Ltd. v. O'Reilly, 530 F.2d 1096 (2d Cir. 1976).
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LANS also relies on a district court case, Famous Music Corp. v. Seeco
Records, Inc., 201 F. Supp. 560 (S.D.N.Y. 1961). There, Famous Music sued Seeco
for making infringing tape recordings of its copyrighted musical work, which
Seeco then exported to foreign countries, where records were manufactured from
the tapes. Id. at 564. Applying the Copyright Act of 1909, which was superseded
in 1976 by the present Act, the Famous Music court held Seeco liable "by reason
of its joint tort in manufacture of the tapes sent abroad," and awarded "such
royalties as may be found in favor of plaintiffs by reason thereof." 201 F.
Supp. at 570.
LANS is correct that the Famous Music [**14] court did award relief
equivalent to what the current Act would term actual damages. n6 However, Famous
Music's only analysis of the issue of extraterritoriality [*931] came in a
brief statement: "A holding . . . that a copyright has no extra-territorial
effect, does not solve this problem of manufacture since plaintiffs seek to hold
defendant for what it did here rather than what it did abroad." Id. at 569.
Moreover, it is incorrect to characterize this case as an application of the
Sheldon rationale, as the court never mentioned Sheldon.
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N6 Reuters and Visnews argue that Famous Music was consistent with the
constructive trust theory because a constructive trust attached to the
infringing master tapes and in turn to any records made overseas from those
tapes, meaning that the remedy the district court awarded was simply the value
of that property held by defendants in constructive trust for plaintiff. This
argument, however, stretches the term "profits" beyond reason in order to
include records never sold and still in the defendants' possession.
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C
On the whole, we conclude that Reuters III adhered very closely to our
decision in Subafilms, Ltd. v. MGM-Pathe Communs. Co., 24 F.3d 1088 (9th Cir.
1994) (en banc). Subafilms reaffirmed that the copyright laws have no
application beyond the U.S. border, id. at 1095-98, and expressly took no
position on the merits of the Update Act court's apparent willingness to award
damages, id. at 1094; see id. at 1099. n7 LANS's appeal thus presents the
precise question that Subafilms reserved, Reuters III, 149 F.3d at 991, and as
the prior panel recognized, such question should be resolved in light of the
principles the en banc court laid down.
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n7 Subafilms also suggested that federal question jurisdiction under the
copyright laws may not be coextensive with legislative jurisdiction under those
laws, i.e., the reach Congress has chosen to give to American intellectual
property statutes. See id. at 1091 n.5 (analogizing to Hartford Fire Ins. Co. v.
California, 509 U.S. 764, 813, 125 L. Ed. 2d 612, 113 S. Ct. 2891 (1993)
(Scalia, J., dissenting), an opinion that discussed the distinction in the
context of the antitrust laws, which do have some extraterritorial application).
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The import of such principles counsel a narrow application of the adoption in
Reuters III of the Sheldon exception to the general rule. In particular, the
Sheldon constructive trust rationale includes a territorial connection, see
Sheldon, 106 F.2d at 52, that preserves consistency with Congress's decision to
keep the copyright laws -- presumably including § 504, which prescribes remedies
-- territorially confined. Moreover, no rational deterrent function is served by
making an infringer whose domestic act of infringement -- from which he earns no
profit -- leads to widespread extraterritorial infringement, liable for the
copyright owner's entire loss of value or profit from that overseas
infringement, particularly if the overseas infringement is legal where it takes
place. See Subafilms, 24 F.3d at 1097-98 (warning of the disruption to American
foreign policy interests and to the policy of domestic enforcement expressed in
the Berne Convention that extraterritorial enforcement would cause). Moreover,
the resulting over-deterrence might chill the fair use of copyrighted works in
close cases.
LANS counters that the assessment of damages [**17] based on a domestic act
of infringement having had consequences in foreign territories is legitimate
under "traditional tort principles." However, it offers no direct support for
the proposition that those principles compel the extension of relief -- legal or
equitable -- beyond the boundaries where Congress declared that liability stops.
n8 Its policy arguments to the contrary seem largely a complaint about the
failure of Congress to make the copyright laws -- those creating both rights and
remedies -- applicable extraterritorially. n9
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n8 On this point, LANS cites Famous Music, 201 F. Supp. at 568-69, but that
case applied "traditional tort principles" in adjudicating liability rather than
in imposing damages.
n9 See, e.g., Jane C. Ginsburg, Extraterritoriality and Multiterritoriality
in Copyright Infringement, 37 Va. J. Int'l L. 587 at 598 (1997) (criticizing
Reuters III for creating a parallel arbitrary distinction).
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III
Accordingly we read Reuters III [**18] to allow only a narrow exception for
the recovery [*932] of the infringer's profits to Subafilms's general rule
against extraterritorial application. We conclude therefore that the Copyright
Act does not provide LANS recovery for actual damages resulting from Reuters's
and Visnews's infringement. n10
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n10 There are also several evidentiary rulings that the parties dispute on
appeal, all of which relate to the extent of damages. Because we agree with the
district court that LANS may not recover actual damages, and because we reverse
an erroneous evidentiary ruling only if the admission or exclusion of the
evidence was prejudicial, see, e.g., Maffei v. N. Ins. Co., 12 F.3d 892, 897
(9th Cir. 1993), we need not reach the evidentiary issues.
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AFFIRMED.
DISSENTBY: Barry G. Silverman
DISSENT: SILVERMAN, Circuit Judge, dissenting:
In our previous decision, L.A. News Serv. v. Reuters Television Int'l, Ltd.
(Reuters III), 149 F.3d 987 (9th Cir. 1998), we decided the very issue the
majority [**19] now re-decides the other way. At that time, we identified the
issue as whether "a plaintiff may recover actual damages accruing from the
unauthorized exploitation abroad of copyrighted work infringed in the United
States." Id. at 989. We held that it could. Our mandate said, "We REVERSE the
ruling barring the claim for extraterritorial damages and REMAND for a trial on
actual damages, with directions that if LANS elects to recover actual damages,
the award of statutory damages be vacated." Id. at 997.
The majority now holds that when we said "actual damages," we didn't mean
actual damages, but only whatever profits the infringer might have realized.
This new holding is not only at odds with our previous holding, but it fails to
take account of the fact that the Copyright Act itself specifically uses the
terms "actual damages" and "profits" separately and distinctly. n1 The district
court should have allowed LANS to do what we said it could do -- prove its
actual damages. For that reason, I respectfully dissent.
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n1 17 U.S.C. § 504(b):
(b) Actual Damages and Profits. -- The copyright owner is entitled to
recover the actual damages suffered by him or her as a result of the
infringement, and any profits of the infringer that are attributable
to the infringement and are not taken into account in computing the
actual damages.
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At this stage of the case, the majority's reliance on Sheldon v.
Metro-Goldwyn Pictures Corp., 106 F.2d 45 (2d Cir. 1939), is puzzling. In
Sheldon, the question of what constitutes "actual damages" wasn't an issue or
even discussed. Sheldon was an appeal from an accounting. The sole question was
whether the plaintiff could recover the profits earned by the defendant from its
foreign exploitation of a motion picture that infringed the plaintiff's stage
play, profits that were discovered during the accounting. The court held that
the plaintiff could, on a constructive trust theory. "Actual damages" had
nothing to do with the case.
SubaFilms Ltd. v. MGM-Pathe Communs. Co., 24 F.3d 1088 (9th Cir. 1994) doesn't
shed light on this problem, either. It merely holds that there is no recovery
under American copyright law for infringements that do not occur within the
United States. True enough, but as we previously held in Reuters III, "actual
damages" can be recovered when the infringement occurs wholly within the United
States. Reuters III at 992, 997. That's exactly what happened here, and why we
reversed for a trial at [**21] which LANS would be allowed to prove its actual
damages, if any. This is not a novel concept. See Update Art, Inc. v. Modiin
Publ'g, Ltd., 843 F.2d 67, 70 n.4 (2d Cir. 1988); Famous Music [*933] Corp. v.
Seeco Records, Inc., 201 F. Supp. 560 (S.D.N.Y. 1961).
There are any number of ways to compute actual damages. Neither the Copyright
Act, nor our prior decision in this case, nor any other case, limits the
calculation of actual damages to only the infringer's ill-gotten profits. LANS
should have been allowed to put on its proof of its actual damages, as we
previously held it could. I would remand for a trial on actual damages (just as
we did last time) except this time, I would add that we really, really mean it.