On an issue of first impression in a copyright infringement dispute out of the Southern District of Texas, the US Court of Appeals for the Fifth Circuit confirmed that failure to mitigate is not a complete defense to copyright or Digital Millennium Copyright Act (DMCA) claims for statutory damages. Energy Intelligence Grp., Inc. et. al., v. Kayne Anderson Capital Advisors, LP, et. al., Case No. 18-20350 (5^th Cir., January 15, 2020) (Higginson, J.).

In 2014, energy industry publisher Energy Intelligence Group, Inc. and its affiliated entity in the United Kingdom (together, EIG) filed suit against energy securities investment firm Kayne Anderson Capital Advisers (KA), alleging copyright infringement and abuses of the DMCA based on a KA partner’s violation of US copyright law and violation of his subscription agreement for EIG’s Oil Daily newsletter, which provides news and analysis about the North America petroleum industry. The jury in the district court proceeding found that EIG could have reasonably avoided almost all of the alleged copyright and DMCA violations through real-time investigations and enforcement efforts, and thus awarded EIG just over $500,000 in statutory damages for the infringement of 39 works of authorship. The district court, however, still applied the Copyright Act’s fee shifting provisions and awarded EIG over $2.6 million in attorney’s fees and costs. The parties’ consolidated appeals to the Fifth Circuit thus presented an issue of first impression: namely, whether the failure to mitigate copyright infringement is a complete defense to liability for statutory damages under the Copyright Act and the DMCA.

The case record demonstrated that KA paid for anywhere from one to five subscriptions for EIG’s Oil Daily newsletter between the years of 2004–2014. But, by 2014, more than 20 KA employees were accessing the Oil Daily publication, while KA was undertaking efforts to obfuscate the fact that it was sharing the publication with non-subscriber inside KA and with outside third parties. The record also suggested that between the years of 2007–2014, EIG had varying degrees of knowledge regarding KA’s Oil Daily-sharing activities that exceeded the scope of its purchased licenses. In this regard, while conceding certain aspects of copyright infringement, KA argued that EIG had a “wait, don’t warn” business model and that EIG regularly employed a litigious business strategy of waiting for infringements to pile up in order to seek large statutory damages, rather than pursuing real-time, mitigating enforcement efforts.

Citing the US Supreme Court’s decision in Petrella v. MGM and the “separate accrual” rule, which holds that every act of copyright infringement is an independently actionable legal wrong, the Fifth Circuit explained that statutory damages under the Copyright Act are distinct from the type of post-injury consequential damages that are typically calculated according to the rules of mitigation. The Court also confirmed that the duty to mitigate arises “after an injury occurs, not before.” Nevertheless, the Court concluded that the district court properly instructed the jury to consider EIG’s mitigation efforts (or lack thereof) in determining the amount of statutory damages that were appropriate.

Therefore, while the court determined that mitigation efforts might affect “properly awardable” statutory damages, it also held that mitigation does not provide an absolute defense to copyright infringement. Moreover, the court determined that the district court incorrectly instructed the jury that EIG could not recover for any item of damage that they could have avoided through reasonable effort.

Thus, the Fifth Circuit held that failure to mitigate is not a complete defense to copyright or DMCA claims for statutory damages, and remanded to the district court to determine copyright damages, because it was not clear whether the jury’s initial findings were intended to award $15,000 for each of the 39 infringed works to EIG.