Reviewing a spectrum of copyright-related issues following the conclusion of a jury trial, the U.S. Court of the Appeals for the Eleventh Circuit affirmed the district court, concluding that  willful copyright infringement under 17 U.S.C. § 504(c)(2) encompasses reckless disregard of the possibility that one’s actions are infringing a copyright and that the independent economic value test should be used to distinguish between individual photos and compilations for purposes of counting “works” subject to statutory damages. Yellow Pages Photos, Inc. v. Ziplocal, LP, Case Nos. 14-13355; -13401 (11th Cir., July 30, 2015) (Coogler, D.J., sitting by designation).

Plaintiff Yellow Pages Photos (YPP) and its principal Trent Moore sued former business partner Ziplocal for breach of contract and copyright infringement. YPP also sued Ziplocal’s subcontractor, Yellow Pages Group (YPG) for copyright infringement. YPP was the owner of an expansive library of stock photographs that were grouped into “collections” or “headings” such as “Plumbers, “Roofers,” “Attorneys, or “Landscape.” The photograph collections were marketed and sold to publishers of Yellow Page phonebook products because the collections were organized along the same headings as the Yellow Pages. This organization allowed YPP’s customers to efficiently select between many different photos for a given category.

YPP sold the photographs to Ziplocal pursuant to two agreements finalized in March 2004: a Site License Purchase Agreement (SLPA) and an End User License Agreement (EULA). In relevant part, the EULA prohibited transfer of the images sold to Ziplocal without YPP’s consent. In 2010, however, Ziplocal outsourced the assembly and pagination of its phonebook products to YPG. As part of the subcontracting arrangement, Ziplocal sent YPG the YPP photos without consent from YPP. YPG, although not a party to the earlier agreements between YPP and Ziplocal, promised in its outsourcing agreement not to infringe any third-party intellectual property rights.

Against Ziplocal, the jury awarded one dollar in actual damages and zero dollars in statutory damages. Against YPG, the jury awarded zero dollars in actual damages and $123,000 in statutory damages. Because the jury found that Ziplocal contributed to YPG’s infringement, it awarded YPP $100,000 against Ziplocal for contributory infringement. YPG appealed, challenging an array of legal and evidentiary rulings. YPP cross-appealed and sought a new trial on damages.

The 11th Circuit carefully analyzed YPG’s arguments that it was entitled to judgment as a matter of law (JMOL) that it was permitted to use YPP’s photo collections under the SLPA. However, because the panel agreed that there was sufficient evidence for the jury to conclude that the SLPA and the EULA should be understood together, YPG’s arguments were rejected. Properly construed, the EULA did not permit distribution of the images from Ziplocal to YPG without authorization of the copyright owner.

Having established liability, the 11th Circuit then considered whether the infringement was willful under § 504, thereby entitling YPP to enhanced statutory damages. The 11th Circuit characterized willful copyright infringement as a defendant as proceeding to infringe having knowledge that its actions constituted an infringement. Yet, based on the facts of this case, including the absence of any due diligence to determine who owned the photos, the 11th Circuit expanded the meaning of willfulness to include a defendant who “recklessly disregarded the possibility that it was infringing a copyright.” In so holding, the 11th Circuit’s position on reckless disregard of the copyright holder’s rights (rather than actual knowledge of infringement) now aligns with the Second, Fifth, Seventh and Eighth Circuits.

The 11th Circuit also considered whether the 178 collections of photos organized by heading name were—for purposes of calculating statutory damages—10,411 individual photo “works” or 178 compilation “works.” Finding the issue to be a mixed question of law and fact, the review proceeded de novo. The court concluded that § 101 of the Copyright Act (defining “compilation”), coupled with the factual record, warranted the conclusion that the infringement pertained to 178 compilations rather than 10,000+ individual photos. Not only did Mr. Moore (YPP’s principal) create, market and distribute his photos as collections organized by subject matter heading, but he also registered his photos with the Copyright Office as collections rather than individual photos. The court further considered YPP’s competing arguments under the independent economic value test and, in particular, whether individual photos had real-world value outside of the collection. Notwithstanding YPP’s contentions, the court determined that precedent compelled the conclusion that the district court was correct to treat each collection of photos as a compilation subject to only one award of statutory damages.

Practice Note: The 11th Circuit recognized that the jury’s award of zero dollars for statutory damages against Ziplocal was inconsistent with the monetary range proscribed in the Copyright Act. However, although it was legally erroneous for the jury to award zero dollars for statutory damages after finding infringement, the award was not disturbed on appeal because counsel agreed during trial—in response to a question submitted by the jury during deliberations—that the jury could award zero dollars in statutory damages to one defendant. By so endorsing that path, YPP had invited the legal error and thereby waived the opportunity to challenge the result on appeal.