McGraw-Hill Global Education Holdings, LLC v. Khan

Background

Five higher-education publishing companies sued the defendants for copyright infringement involving educational materials, including college textbooks, instructor solutions manuals, and test banks. The plaintiffs alleged that the defendants owned, controlled, and operated websites that created, stored, and sold unauthorized digital copies of the plaintiffs’ works. The plaintiffs also alleged that the defendants used multiple names, email addresses, payment accounts, and domain names to avoid interruption of their operations.

The plaintiffs conducted test purchases and downloaded samples from the defendants’ websites. They alleged that the websites sold complete digital copies of the plaintiffs’ works without compensating the plaintiffs. The complaint identified 61 works at issue.

Prior Proceedings

The court issued a temporary restraining order on the day the complaint was filed and later entered a preliminary injunction after the defendants failed to respond or appear. In June 2018, the court entered an Order of Default and Permanent Injunction, finding each defendant liable for willful copyright infringement under federal law. An amended order issued in July 2018 confirmed that liability and made the defendants jointly and severally liable. The court referred the case to Magistrate Judge Debra C. Freeman for an inquest into damages.

Judge Freeman recommended statutory damages of $100,000 for each of the 61 works, totaling $6.1 million. The plaintiffs had requested $150,000 for each work, or $9.15 million. No party objected to the recommendation.

Court’s Review

When reviewing a magistrate judge’s report and recommendation, a district court may accept, reject, or modify the recommendation. Because no party filed an objection after receiving notice of the 14-day objection period, the parties waived further judicial review. Even so, the court reviewed the recommendation for clear error and found none.

Because the defendants defaulted, the well-pleaded factual allegations establishing liability were treated as admitted. The court explained that default established liability but did not establish the amount of damages; the plaintiffs still had to support their damages request with evidence. The court found that the plaintiffs’ declarations and test purchases established infringement of each of the 61 works.

Statutory Damages

The Copyright Act permits a copyright owner to elect statutory damages instead of proving actual damages. For willful infringement, statutory damages may reach $150,000 per work. The court stated that a defaulting defendant is treated as a willful infringer for this purpose. In setting the amount, courts may consider the infringer’s state of mind, saved expenses and profits, the copyright holder’s lost revenue, deterrence, the infringer’s cooperation, and the parties’ conduct and attitude.

The court agreed that the defendants’ conduct warranted a high award. The defendants’ use of aliases, multiple email addresses, domain names, and payment accounts supported a finding that the infringement was knowing and intentional. The court also considered the need to deter the defendants and third parties.

The court nevertheless found insufficient evidence to justify the maximum award. Although the plaintiffs alleged that $2.2 million had passed through payment accounts associated with the websites, that amount was not shown to represent revenue from the plaintiffs’ works specifically. The plaintiffs also did not provide evidence of their lost revenue or the defendants’ savings from using the plaintiffs’ content. Finally, the plaintiffs did not demonstrate that the defendants continued infringing after the lawsuit began or in violation of a court order. The court therefore approved $100,000 per work rather than $150,000.

Disposition

Judge Gardephe adopted Judge Freeman’s report and recommendation in its entirety. The plaintiffs were awarded total statutory damages of $6.1 million, calculated at $100,000 for each of the 61 infringed works. The defendants were held jointly and severally liable. The court stated that post-judgment interest is governed by statute and need not be included in the judgment itself. The Clerk of Court was directed to enter judgment and close the case.