CBS/Paramount sues to stop Axanar
- Thread starter Richard Baker
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Burnett just tweeted this reaction to the Captain America: Civil War trailer:
How long before Alec bans him for violating the first commandment?
Whose Kevin Feige?
It is very tedious when someone posts that to questions. Would've been easy to say "producer of the new Captain America movie."
The Four Years War has been released - here is a youtube link to it (not available in your country)
Well, none of us have fool-proof crystal balls here, and C/P have been virtually silent on this matter beyond what is stated in the original complaint (which will be obsolete once they file the expected amended complaint.) So I will admit that your guess as to how things will turn out is as good as mine. But that being said, I don’t see a great likelihood of C/P demanding return of donor money for two reasons:
1. As I stated before - relations between Axanar and its donors is not C/P’s concern. I think that C/P’s goal remains, and has always been, just to shut down Axanar as a “Star Trek” product. This is borne out by their initial complaint - which frankly seemed a bit half-hearted as it was most likely filed with the expectation that AP would fold without a fight. Now that Axanar has put up a fight, C/P may dig in and drop a carload of claims on them - but, again, to get the point across of “we’re serious, don’t mess with C/P”, not to decimate everyone involved for the sheer “wrath of God” joy of it.
2. I think we all overvalue what C/P would be able to recover from a jury if it won every copyright claim at trial - and that has a real bearing on what C/P could demand of Axanar in a settlement. The Copyright Act measure of damages is “plaintiff’s profits attributable to the infringement plus damages actually suffered by defendant.” (More on that second part later) Even though it’s clear that most donations and costs of goods (coffee) sold (“revenue”) are attributable to the infringement (everyone donated because of the ST connection, probably the same for the coffee), the “revenue” is not the same as the “profits attributable to the infringement”. The law specifically permits the defendant to deduct from revenue expenses of production/cost of goods (and other GAAP amounts), along with any revenue amounts that are attributable to factors other than the infringing goods themselves. (17 USC Sec. 504(b) - “In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and ... profit attributable to factors other than the copyrighted work.”
(Simple example - I make counterfeit DVDs of ST movies - it costs me $5 per DVD to make the copies and $1 per copy to ship them, and I charge $8 per copy. My revenue is $8/copy - but the law allows me to deduct my $6 in copying and shipping costs to arrive at the $2 profit I made. Plaintiff gets $2 per copy - the profit attributable to the infringement.)
So while we may “see” revenue (donations) of $1.5 million, C/P is probably not entitled to recover $1.5 million. They are basically entitled to recover whatever is left over after Axanar makes all deductions from revenue permitted by law (such as money spend on production to date, costs of the coffee and packaging, creation of models, and other allocable expenses.) And so what leverage does C/P have to force Axanar to pay back 100% of the donations if Axanar knows C/P would only get a fraction of that from the court if Axanar simply refused to settle?
As to the other possible amounts of recovery :
“Actual damages” - I don’t see any other “actual damages” C/P has suffered - they are pissed at Axnar, but haven’t been hurt by Axanar, other than the cost of attorneys. So I think this adds “zero” to money that would give leverage to force Axanar to give money back to donors.
“Attorneys fees” - the Copyright Act says that fees “may” be awarded, not “must” be awarded, so it is within the discretion of the judge. But C/P would keep any attorneys’ fees awarded, not tell Axanar “nah, don’t pay us, give it back to the donors instead. So I also think this adds “zero” to money that would give leverage to force Axanar to give money back to donors.
“Statutory damages” - a real wildcard, as the court can award as little as $100 per infringed work up to $150,000 per infringed work, or anywhere in between. But I don’t see statutory damages being on the high end of the scale here - the max amount is usually reserved for literal copying of a whole work, not “taking one small piece from this work (a character from one episode), and one piece from this other work (a ship design shown onscreen for 2 minutes out of a 48 minute show). Though the copying across multiple works was immense here in the aggregate, a judge could find the amount copied from any individual work was arguably small on a “per infringed work” basis and award correspondingly low statutory damages. So I don’t think statutory damages is going to “raise the pot” so much higher that C/P suddenly has leverage to say “settle and give $1.5 million back to the donors or you will be liable to us for much more”
And even if C/P could get the max statutory damages - why does anyone think they would tell AP to give it back to the donors rather than keep it themselves?
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Hey - please know that everything I say here is meant in a “friendly discussion” tone - I’m not trying to “school ya” or prove you wrong, because my crystal ball is no better or worse than yours and time may prove you 100% right and me wrong. But based on my experience with the law and the claims C/P has raised to date, I just can’t personally get behind the theory that C/P is going to do anything that would put much - if any - of the donor’s money back in their hands. Donors need to be realistic about this and start looking into their own rights to get that money back.
M
Since I can't edit my message above - recall also that a plaintiff must choose between "profits and actual damages" and "statutory damages" - C/P can't get both. So even if we assume Axanar's profits are "whatever was donated that hasn't been spent yet", C/P can't get both those profits and whatever statutory damages might be available.
M
M
Good points. There's no connection whatsoever between CBS/Paramount and the donors, and no reason for them to get involved in that.
Sometimes I wish I worked for some big, powerful corporation, so I could do something like this. It would be glorious.
Kor
Sometimes I wish I worked for some big, powerful corporation, so I could do something like this. It would be glorious.
Kor
So I could pre-sell 10,000 'commemorative' DVDs for $50 each, significantly infringing on someone's IP, use that money to buy myself a permanent DVD manufacturing and content production facility for delivering the pre-sell and repeating the process, and I could deduct all that, even including paying myself, as 'cost of making the DVDs' from the recoverable infringement award 'profit'? Something about this seems amiss. I would be selling someone else's work and simply keeping all the revenues instead of licensing it and building my facility out of the 25% or whatever I would otherwise be allowed to keep.
Surely the deduction would only pertain if I used resources of my own to pay for the deductible costs?
Surely the deduction would only pertain if I used resources of my own to pay for the deductible costs?
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Hey mkstewartesq, good post. We all appreciate your legal expertise. Don't worry you have protection against any of the bullies in the playground. 
Well, not sure if I am correctly reading your hypothetical on "presell, then buy facilities". In your hypothetical, did you ever actually make the DVDs you presold?
If "yes" - then you could probably deduct "buying yourself a permanent DVD manufacturing and content production facility for delivering the pre-sell". These are all expenses of creating the infringing work - you just made people prepay you before you incurred the expense. But that doesn't change the amount or nature of the expense you put into ultimately creating/delivering the infringing item.
If "no" (you "presold", bought the facilities but never made the product) - different ballgame entirely because you never actually created an infringing work, so we're not even in an infringement case. Which is one of the lines Winston and Strawn is trying to pursue - "we haven't even infringed yet.") Instead, it smells to me more like a fraud or theft case with respect to the funds you took for goods you never delivered.
(And let me take this opportunity to again fix a typo above in the absence of my editing function (my 14 day probation ends on the 15th) - above I said "The Copyright Act measure of damages is “plaintiff’s profits attributable to the infringement plus...." That should read "The Copyright Act measure of damages is “defendant’s profits attributable to the infringement plus ..." In the words of Willy Wonka, "Strike that. Reverse it.")
M
Thanks! Both cases are interesting. It is disturbing to me to imagine that anyone could
a) go on Kickstarter and say, hey I want to write produce and distribute to you a new Harry Potter book with significant infringements,
b) please donate for my writing and publishing costs, and by the way
c) i am going to buy a printing press and set up offices too all off your desire for another Harry Potter book
d) I sink all the cash into the infrastructure and operating costs and printing/publishing costs, having no money left after all the activity, and then
e) the owner of Harry Potter copyrights has no recourse to recover the cash value of the assets I acquired off their property value (or perhaps that's what the Statutory damages are for?).
Well, that's certainly part of the reason the law allows the plaintiff to choose between "profits" and "statutory damages" right up to the moment judgment is entered. Otherwise, it would suck hard for someone to rip you off completely, you sue them and then only find out at the very end that, because they were shitty at business, they never turned a profit so you get zero and are left thinking "I need to find a better class of defendant."
M
because they were shitty at business, they never turned a profit so you get zero and are left thinking "I need to find a better class of defendant."
M
the thing I think lots of people may be wondering is whether a net-zero-profit business that acquires a million dollars of new physical plant and similar noncash assets from an IP ripoff, gets to keep those assets.
Hey, @muCephi - I'm glad you posted this because I was about to write you/the group on this very topic when I got back to my computer.
I may not always give the best answer - but I do try to at least give answers that are not confusing, incomplete or miss an important point. And while I was out running some errands, I thought about your original post and realized that I had missed a point you raised, and it was a good point and applicable to the Axanar case.
When the Copyright Act talks about "profits attributable to the infringement", I believe it is really talking conceptually about "the benefit the defendant received from infringing, after you deduct what it cost him to infringe and get that benefit." And there's certainly nothing in the law that says profit only means "money" or "cash in hand". Otherwise, I could avoid all "profits" if I infringed and took payment in the form of, say, an exchange of property that was worth more than what it cost me to infringe.
So, in your hypo, if I took money (say I presold DVDs at $50 a pop) and just outright bought the facilities for production, yes, I would argue that I get to deduct all the costs of the equipment from my revenue to reduce my profits. But you posed an additional element I gave short shrift to - what about the fact that I can then leverage those facilities into other profit-making ventures?
I'll fully admit I haven't thought this all the way through - but, yes, I would think a plaintiff should be able to recover some of the cost/value of that equipment- either by (i) claiming the equipment is a benefit that should be included in my profits, or (ii) claiming that, since the equipment can be re-used for other activities, I shouldn't be allowed to deduct the whole value from my revenue to reduce profits, but only some pro-rata amount. This is actually consistent with the scheme in the statute - just as plaintiff only gets those profits that are attributable to the infringement, defendant can likewise only deduct those expenses that are attributable to the infringement. So plaintiff would argue something like the following:
1. You raised $1.5 million solely by infringing my IP.
2.
I read the previous post - this was my reaction
Godammit I hit send accidentally.
Continuing my earlier message:
So plaintiff would argue something like the following:
1. You raised $1.5 million solely by infringing my IP.
2. You spent $1.5 million on a studio to create the infringing work.
3. But wait - you still have the studio and are going to use it to create other works.
4. So the value of the studio wasn't exhausted by the one infringing act.
5. So we should only attribute part of the price of the studio as an "expense attributable to the infringement". The rest is profit to you.
I'm stopping there before I screw up again. But sorry I missed your original point.
M
Continuing my earlier message:
So plaintiff would argue something like the following:
1. You raised $1.5 million solely by infringing my IP.
2. You spent $1.5 million on a studio to create the infringing work.
3. But wait - you still have the studio and are going to use it to create other works.
4. So the value of the studio wasn't exhausted by the one infringing act.
5. So we should only attribute part of the price of the studio as an "expense attributable to the infringement". The rest is profit to you.
I'm stopping there before I screw up again. But sorry I missed your original point.
M
Thanks for the additional explanation. I think that while you're legally correct that CBS/Paramount isn't trying to make this case about how Axanar treated its donors, if it does successfully recover damages, it presents CBS/P with an opportunity to make a grand gesture to counter Axanar's "this suit is an attack on fandom" narrative. Dedicating any recovered damages as partial reimbursements to those who sank their money into Axanar would go far. Certainly, CBS/P have made no indication to that effect, but it does offer an opportunity to address Peters' spin.
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