Where The Rubber Hits The Road: Damages For Canadian E-Commerce Copyright Infringement

• Published date: 02 September 2020
• Subject Matter: Intellectual Property, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Copyright
• Law Firm: Norton Rose Fulbright Canada LLP
• Author: Mr Mark Davis and Colin Hyslop

In Rallysport Direct LLC v 2424508 Ontario Ltd, 2020 FC 794, the Canadian Federal Court awarded $357,500 in statutory damages and $50,000 in punitive damages for infringement of copyright in 1,430 photographs.

Background

Rallysport Direct LLC (RSD) is a wholesaler and direct-to-consumer supplier of aftermarket automotive components and accessories. It sells its products on its website using photographs of RSD's products created by its employees under its direction.

The defendants also carried on business as an aftermarket automotive components and accessories supplier. In 2016, one of the individual defendants directed third party contractors to copy RSD's photographs for the defendants' website, which was owned by the first corporate defendant, 2424508 Ontario Ltd (242 Ontario Ltd.).

When RSD became aware of the infringement, it sent 242 Ontario Ltd. a cease and desist letter and brought this action for copyright infringement against 242 Ontario Ltd. in early 2017. Several months later, the individual defendants incorporated 2590579 Ontario Ltd. (NewCo), transferred ownership of the defendants' website from 242 Ontario Ltd. to NewCo, and commenced bankruptcy proceedings for 242 Ontario Ltd.

When RSD became aware of NewCo and 242 Ontario Ltd.'s impending bankruptcy, it successfully brought a motion to amend its pleadings to add claims against NewCo and the individual defendants. The defendants then brought a motion for summary judgement, alleging that copyright did not protect RSD's photographs. The defendants were unsuccessful, and the Court awarded summary judgement in favour of RSD (Rallysport Direct LLC v 2424508 Ontario Ltd, 2019 FC 1524).

Statutory Damages

RSD elected to pursue statutory damages for infringement for commercial purposes at a rate of $500 per infringement under paragraph 38.1(1)(a) of the Copyright Act. Statutory damages recognize that actual damages for copyright infringement are often difficult to prove. They are supposed to incentivize copyright owners to invest in and enforce copyright, while deterring would-be infringers. Statutory damages for infringement for commercial purposes range from $500 to $20,000 per infringement.

Subsection 38.1(3) gives the Court the discretion to award statutory damages of less than $500 per commercial infringement if either there is more than one work in a single medium or the infringement is done by way of the Internet, and awarding the minimum amount would be grossly out of proportion to the...