Many infringers argue that they don’t owe, even at minimum, a license fee for a infringing use because the copyright owner wouldn’t have licensed the use, even if asked for permission in the first place. But that’s not correct. Instead, as the Court of Appeals for the Ninth Circuit recently held in Oracle v SAP, 12-16944, U.S. Court of Appeals for the Ninth Circuit (San Francisco):
We have never required a plaintiff in a copyright infringement case to show that it would have licensed the infringed material. We decline to impose such a requirement now. A copyright holder has the right to refuse to license its work and should not be penalized for exercising that right. See Stewart v. Abend, 495 U.S. 207, 228–29 (1990). If we were to require a copyright holder to demonstrate that it would have been willing to grant a license as a condition for recovering damages based on the fair market value of the license, the perverse result would be that some of the most assiduously protective copyright holders would be unable to recover the fair market value of their wrongfully appropriated copyrighted property.
Some would argue this is contrary to copyright goals, but the U.S. Supreme Court explained in Stewart:
“. . . [A]lthough dissemination of creative works is a goal of the Copyright Act, the Act creates a balance between the artist’s right to control the work during the term of the copyright protection and the public’s need for access to creative works. The copyright term is limited so that the public will not be permanently deprived of the fruits of an artist’s labors. See Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417, 429(1984) (the limited monopoly conferred by the Copyright Act “is intended to motivate creative activity of authors and inventors by the provision of a special reward, and to allow the public access to the products of their genius after the limited period of exclusive control has expired”). But nothing in the copyright statutes would [495 U.S. 207, 229] prevent an author from hoarding all of his works during the term of the copyright. In fact, this Court has held that a copyright owner has the capacity arbitrarily to refuse to license one who seeks to exploit the work. See Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932).
So, if a copyright owner wouldn’t have licensed a work, what should a court award as a license fee if statutory damages aren’t available for an infringement? In Oracle, the court looked for “hypothetical-license damages.” It stated:
An award of hypothetical-license damages is appropriate “provided the amount is not based on ‘undue speculation.’” Polar Bear Prods., 384 F.3d at 709 (quoting McRoberts Software, Inc. v. Media 100, Inc., 329 F.3d 557, 566 (7th Cir. 2003)). The touchstone for hypothetical-license damages is “the range of [the license’s] reasonable market value.” Id. “The question,” therefore, “is not what the owner would have charged, but rather what is the fair market value.” Jarvis v. K2 Inc., 486 F.3d 526, 534 (9th Cir. 2007) (quoting On Davis, 246 F.3d at 166). Thus, we do not ask what the owner would like to have charged if unconstrained by reality, but what a willing owner actually would have charged after negotiation with the buyer. That is, fair market value is based on “‘an objective, not a subjective, analysis.’” Jarvis, 486 F.3d at 534 (quoting Mackie v. Rieser, 296 F.3d 909, 917 (9th Cir. 2002)).
But the plaintiff/copyright owner still has a burden to proving what that hypothetical license fee might be, such as by showing past license fees charged or offered for similar uses by the copyright owner or others, expert testimony, or any other methodology and evidence that might make sense to a court for the situation. Whatever method you use, don’t let the infringer off the hook by claiming that you wouldn’t have granted a license for the infringing use.
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