Venegas-Hernandez v. Sonolux Records

United States Court of Appeals
For the First Circuit

Nos. 03-2014, 03-2015

MARIA VENEGAS-HERNANDEZ; GUILLERMO VENEGAS-HERNANDEZ;
RAFAEL VENEGAS-HERNANDEZ; YERAMAR VENEGAS-VELAZQUES;
GUILLERMO VENEGAS-LLOVERAS, INC.,

Plaintiffs, Appellants/Cross-Appellees,

v.

SONOLUX RECORDS,

Defendant, Appellee/Cross-Appellant,

SONY; SONY DISCOS, INC.,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Juan M. Pérez-Giménez, U.S. District Judge]

Before

Torruella, Circuit Judge,
John R. Gibson, Senior Circuit Judge,*
and Lynch, Circuit Judge.

Heath W. Hoglund for appellants/cross-appellees.

David M. Rogero on brief for appellee/cross-appellant.

June 7, 2004

*
Of the United States Court of Appeals for the Eighth Circuit,
sitting by designation.
 LYNCH, Circuit Judge. This case raises several novel

issues, including an important question of the meaning of the

statutory damages provision of the Copyright Act, 17 U.S.C. §

504(c), and the question of whether Fed. R. Civ. P. 59(e) is ever

available to alter or amend a default judgment entered under Fed.

R. Civ. P. 55(b).

The heirs of a Puerto Rican popular songwriter sued two

recording companies for copyright infringement of some of the

songwriter's best-selling songs. One of those companies defaulted

and ended up with a $1.6 million judgment against it. The judgment

was based on statutory damages for sixteen albums that each

included at least one of two infringed songs. Plaintiffs also

sought actual damages and defendant's profits for a seventeenth

album, but the court at the default judgment hearing found that

such damages and profits were not proven. The defaulting

defendant, Sonolux Records ("Sonolux"), a U.S. company, then moved

promptly under Rule 55(c) to set aside the entry of default and the

default judgment. Sonolux also moved under Rule 59(e), in the

alternative, to amend the judgment to reduce the damages award.

Sonolux's attempt to remove the default and the entry at

all of a default judgment was heard and rejected by a second judge.

However, that judge granted Sonolux's Rule 59(e) motion to amend

the amount of the judgment, and the statutory damages award for the

copyright infringement was reduced from $1,600,000 to $200,000 on

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the ground that the larger amount was based on an incorrect reading

of the statutory damages provision of the Copyright Act, 17 U.S.C.

§ 504(c).

After careful review, we affirm the denial of defendant's

motion to set aside the entry of default and the default judgment

and affirm the grant of defendant's Rule 59(e) motion. The entry

of a default judgment stands, but we vacate the amount of that

judgment and remand the amount determination to the district court

for further proceedings consistent with this opinion.

I.

Plaintiffs are the children of Guillermo Venegas-

Lloveras, a noted composer, who inherited the copyright in 197 of

his songs. They filed a copyright infringement suit against

Sonolux in U.S. district court in September 2001. Sonolux had

published recordings of two of the copyrighted songs, "Desde Que Te

Marchaste" and "No Me Digan Cobarde,"1 on sixteen different albums

by different artists. Sonolux had also used portions of "Desde Que

Te Marchaste" in a seventeenth album called "Sentimientos."

Plaintiffs had duly registered their copyright claims to both

songs.

Sonolux failed to answer the complaint and a default was

entered against it on January 24, 2002, under Fed. R. Civ. P.

1
These titles translate to "Since You Went Away" and
"Don't Call Me a Coward."

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55(a). Plaintiffs applied to the court for entry of a default

judgment under Fed. R. Civ. P. 55(b)(2) and sent Sonolux notice of

the damages hearing. Sonolux still did not appear to defend.

Plaintiffs elected to seek statutory damages, rather than to try to

prove actual damages and defendant's profits, for sixteen albums.

They also sought actual damages for another album called

"Sentimientos." Because Sonolux had not appeared, plaintiffs had

no opportunity to obtain discovery and thus were disadvantaged in

proving actual damages and defendant's profits as to each of the

songs.

Plaintiffs represented to the district court that they

were entitled to the measure of statutory damages multiplied by the

number of albums containing the infringed songs. They did not

provide citations, nor did they alert the judge that the statute

had been interpreted differently by courts.

On February 3, 2003, the court found that plaintiffs had

failed to prove actual damages or profits as to the album

"Sentimientos," but, simply accepting plaintiffs' statement of the

correct measure of damages, awarded plaintiffs $1.6 million in

statutory damages for the infringement of the two songs on the

other albums. The court concluded that "an award of $100,000 for

each of 16 works, or a total of $1,600,000 represents a fair

measure of damages in this case." This was based on "the willful

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nature of Defendant's conduct as well as the potential to

discourage future infringement."2

After the default judgment issued on February 19, 2003,

Sonolux appeared for the first time on March 6, 2003 and filed a

motion under Rule 55(c) to set aside the default entry and default

judgment, or, in the alternative, to amend the default judgment

under Rule 59(e). In the Rule 59(e) motion, Sonolux argued, inter

alia, that the district court had erred in its damages calculation

by applying the statutory damages rate to the number of infringing

albums (sixteen) rather than to the number of infringed songs

(two). The district court, now a different judge, who was the

first to address the question of the correct measure of damages,

denied Sonolux's motion to set aside the default and default

judgment but found the damages calculation to be a "manifest error

of law" and granted the Rule 59(e) motion. The court reduced the

damages award to $200,000 using the method of statutory damages

calculation advanced by Sonolux. This appeal and cross-appeal

ensued. Plaintiffs appeal the grant of Sonolux's Rule 59(e) motion

to amend the default judgment and the finding that they did not

prove defendant's profits on the album "Sentimientos." Sonolux

2
A court may award statutory damages for each work "in a
sum of not less than $750 or more than $30,000 as the court
considers just," and where the infringement was committed
willfully, "the court in its discretion may increase the award of
statutory damages to a sum of not more than $150,000." 17 U.S.C.
§ 504(c).

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cross-appeals the denial of its motion to set aside the default and

default judgment.

II.

Sonolux challenges the denial of its motion to set aside

both the entry of default and the entry of a default judgment.

Rule 55(c) sets up different standards for setting aside an entry

of default under Rule 55(a) and setting aside a default judgment

under Rule 55(b). We take up each in turn.

A. The Entry of Default

An entry of the default itself may be set aside "[f]or

good cause," Fed. R. Civ. P. 55(c), a term that is liberally

construed. United States v. $23,000 in United States Currency, 356

F.3d 157, 164 (1st Cir. 2004). Among the factors that a court may

consider are whether the default was willful and whether removal of

the default would prejudice the plaintiff. Id. There is no

precise formula for the "good cause" analysis. KPS & Assoc., Inc.

v. Designs by FMC, Inc., 318 F.3d 1, 12 (1st Cir. 2003). Our

review of the denial of the motion to set aside the entry of

default is for abuse of discretion; we review any factual findings

underlying the denial for clear error. Id.

There was no abuse of discretion here. Having been

properly served with a summons and a complaint, and later given

notice of the damages hearing, defendant intentionally did not

appear in the case until more than a year after the filing of the

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complaint and ten days after the default judgment was entered.

Defendant was well aware of the ongoing litigation, and the

district court was justified in discounting defendant's excuse.

Sonolux claimed that it "never intended to default, reasonably

understood that the claims of the Plaintiffs were being properly

dealt with, and [was] mistaken in apparently failing to note the

significance of the Plaintiffs' filing of a duplicative lawsuit."

The court rejected those claims, noting that plaintiffs' suit was

a major multi-million dollar copyright infringement action that

could not have been easily ignored, that defendant was given proper

notice of the suit, and that it was defendant's obligation to learn

the specifics of the suit and keep informed of its progress. We

believe that the district court did not abuse its discretion in

reaching these conclusions. Defendant's decision not to appear

also may have prejudiced plaintiffs' case by preventing them from

obtaining sufficient evidence on which to prove actual damages and

defendant's profits.

B. The Default Judgment

A default judgment may be set aside "in accordance with

Rule 60(b)." Fed. R. Civ. P. 55(c). Although Sonolux's motion did

not reference Rule 60(b), we understand its argument that the

default judgment should be vacated entirely to rely essentially on

the theory that its actions in failing to appear constituted

"excusable neglect." That argument fits within the requirements of

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Rule 60(b)(1), which allows a court to relieve a party from a

judgment on account of "mistake, inadvertence, surprise, or

excusable neglect." The reason for a defendant's delay is a

critical factor in the excusable neglect inquiry. See $23,000, 356

F.3d at 164.

Our review of the district court's denial of defendant's

Rule 60(b) motion is also for abuse of discretion, id. at 165, and

we find none here. For the same reasons that defendant cannot

satisfy the more liberal "good cause" standard for setting aside

the entry of default, defendant cannot show that its actions

constituted "excusable neglect." Defendant has offered no adequate

justification for its failure to respond in this case; its decision

not to respond appears to have been willful. As a result, the

decision that defendant does not deserve a new opportunity to

litigate the entry of a default judgment is sound.

III.

Plaintiffs challenge the grant of defendant's Rule 59(e)

motion to amend a default judgment by reducing the damages amount.

That challenge raises an issue that has not been addressed by

either party or previously by this court.

A. Availability of Rule 59(e)

It is by no means clear that a Rule 59(e) motion is even

a valid mechanism for altering or amending a default judgment. It

is arguable that Rule 55(c) provides the exclusive means for

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challenging a default judgment through Rule 60(b), which allows

relief from a judgment or order. Rule 55(c) states: "For good

cause shown the court may set aside an entry of default and, if a

judgment by default has been entered, may likewise set it aside in

accordance with Rule 60(b)." Rule 60(b), in turn, specifies six

grounds for relief. Rule 59(e) provides that "[a]ny motion to

amend a judgment shall be filed no later than 10 days after entry

of the judgment." Rule 59(e) does not specifically mention default

judgments.

In a different context, that of whether a defaulted party

had filed a timely notice of appeal,3 one court of appeals has held

that Rule 55(c) (and, by reference, Rule 60(b)) provides the

exclusive method for attacking a default judgment. Gulf Coast

Fans, Inc. v. Midwest Elec. Imps., Inc., 740 F.2d 1499, 1507 (11th

Cir. 1984). In that same context, two other courts of appeals have

held that a Rule 59(e) motion is indeed a valid mechanism for

attacking a default judgment, in addition to the mechanism of Rule

60(b). United States v. One 1988 Dodge Pickup, 959 F.2d 37, 40

3
The issue of whether the defaulted party had filed a
timely notice of appeal turned on whether the party's post-judgment
motion was deemed a Rule 59(e) motion or a Rule 60(b) motion,
because prior to the 1993 amendments to Fed. R. App. P. 4(a)(4), a
Rule 59(e) motion tolled the running of time for filing a notice of
appeal but a Rule 60(b) motion did not. Fed. R. App. P. 4 advisory
committee's notes. Pursuant to the 1993 amendments to Fed. R. App.
P. 4, the time for filing a notice of appeal is tolled by, among
other motions, motions under Rule 60(b) that are filed no later
than ten days after judgment is entered and motions under Rule
59(e). Fed. R. App. P. 4(a)(4)(A).

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(5th Cir. 1992); Anilina Fabrique de Colorants v. Aakash Chems. &

Dyestuffs, Inc., 856 F.2d 873, 876 (7th Cir. 1988). This court has

noted the issue, but declined to decide it, in a case where the

defaulted party's post-judgment motion specifically invoked Rule

55(c) and did not invoke Rule 59(e). Echevarria-Gonzalez v.

Gonzalez-Chapel, 849 F.2d 24, 27 (1st Cir. 1988).

Our case presents this issue in a different context. We

again decline to resolve it. Plaintiffs have not argued to either

this court or the district court that Sonolux could not have used

a Rule 59(e) motion at all, and neither party has briefed the

issue. As a result, we treat any argument that a Rule 59(e) motion

is not a valid mechanism for amending a default judgment as waived.

One might ask why, if there is doubt about the

availability of Rule 59(e) to amend a default judgment, we do not

just treat the motion to alter the judgment as a Rule 60(b) motion

and review it as such. After all, Rule 55, which deals with

default judgments, expressly says that such judgments are subject

to Rule 60(b) motions.

The answer is that such a solution is foreclosed by

circuit precedent in these circumstances. Sonolux's motion to

alter the amount of the damages was premised on the argument that

a legal error was made as to the statutory measure of damages.

Rule 59(e) permits an attack on a judgment on the ground that the

judgment is based on a manifest error of law. Bogosian v.

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Woloohojian Realty Corp., 323 F.3d 55, 72 (1st Cir. 2003); 11

Wright, Miller & Kane, Federal Practice and Procedure, § 2810.1

(West 1995). One might, and some courts do, think that Rule

60(b)(1)'s reference to "mistake" as a grounds for relief from

judgment includes this type of error of law. But this circuit

decided that question the other way in 1971. Silk v. Sandoval, 435

F.2d 1266, 1267-68 (1st Cir. 1971) (Aldrich, C.J.) (a construction

of "mistake" under Rule 60(b) that is as extensive as that

available under Rule 59(e) undermines the interest in speedy

disposition and finality that Rule 59(e) reflects).4 That may be

why Sonolux framed its motion for relief based on error of law as

a Rule 59(e) motion.

We have cited Silk favorably since 1971, Ahmed v.

Rosenblatt, 118 F.3d 886, 891 (1st Cir. 1997), and it has never

been overruled. As one commentator has noted, this circuit's

interpretation "seems to fit better the structure of the rules" and

"makes more sense of the relation between Rule 59(e) and Rule

60(b)(1)." 11 Federal Practice & Procedure, § 2858. However, Silk

did not account for the special problem of default judgments.

4
Presumably, Silk's reasoning would, for the same reasons,
lead to the rejection of an argument that this type of error of law
would be a valid ground for relief under Rule 60(b)(6), which
allows relief for "any other reason justifying relief from the
operation of the judgment."

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 If Silk is correct about the limited scope of Rule 60(b)

and so are the courts that say that Rule 59(e) may not be used to

challenge a default judgment, then a party in default would never

be able, by motion in the district court, to bring to that court's

attention an error of law in the default judgment. Of course, the

party could appeal the judgment to the court of appeals, but it

would be odd and inefficient to preclude the party in default from

first seeking relief based on error of law from the district court.

Judge Friendly, taking a different view from Judge Aldrich, made

that point in Schildhaus v. Moe, 335 F.2d 529, 531 (2d Cir. 1964)

("[T]here is indeed good sense in permitting the trial court to

correct its own error and, if it refuses, in allowing a timely

appeal from the refusal; no good purpose is served by requiring the

parties to appeal to a higher court, often requiring remand for

further trial proceedings, when the trial court is equally able to

correct its decision in the light of new authority on application

made within the time permitted for appeal . . ."). That particular

problem would be exacerbated if, as happened here, the defaulted

party also failed to appear at the hearing on the amount of the

default judgment. In such circumstances, the defaulting party

could never get a hearing before the district court on its argument

that the amount embodied in the default judgment is based on an

error of law. That might make sense as a strong medicine to

encourage parties not to default, but it also could lead to

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uncorrected basic legal errors. Given this problem, and given that

plaintiffs have waived the issue of the availability of the Rule

59(e) motion to defendant in these circumstances, we proceed to

plaintiffs' argument that the motion was granted in error.

Plaintiffs do argue that Sonolux should not have been

allowed to use the rule to make its particular argument about the

meaning of "work" in 17 U.S.C. § 504. They point us to the usual

rule that parties cannot use Rule 59(e) motions to raise new

arguments that could have been made before judgment issued or to

undo their own procedural failures. Bogosian, 323 F.3d at 72;

Aybar v. Crispin-Reyes, 118 F.3d 10, 16 (1st Cir. 1997). Rule

59(e) motions are "aimed at reconsideration, not initial

consideration." F.D.I.C., 978 F.2d at 16 (internal quotation marks

omitted and emphasis added); Jorge Rivera Surillo & Co., Inc. v.

Falconer Glass Indus., Inc., 37 F.3d 25, 29 (1st Cir. 1994). In

this way, Rule 59(e) motions allow a court to correct its own

errors and avoid unnecessary appellate procedures.

But, assuming arguendo Rule 59(e) can be used for

amendment of default judgments, it is an open question whether the

usual rule for Rule 59(e) motions -- that they cannot be used to

raise new arguments -- applies where one party is challenging a

default judgment and it has not previously appeared.5 The topic is

5
Subsection (b)(2) of Rule 55 gives rise to the following
four scenarios in which the question of "waiver" could arise in
connection with a Rule 59(e) motion to amend a default judgment.

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unaddressed in the case law. The "raise-it-or-waive-it" rule may

not always make sense when applied to a default judgment, and does

not make sense here, once Rule 59(e) is deemed to apply due to

plaintiffs' waiver.

B. Standards of Review

We review for abuse of discretion the district court's

decision to grant the Rule 59(e) motion. Williams v. Poulos, 11

F.3d 271, 289 (1st Cir. 1993); DeSenne v. Jamestown Boat Yard,

Inc., 968 F.2d 1388, 1392 (1st Cir. 1992). Our abuse of discretion

review is superimposed on the standard of review the Rule 59(e)

judge exercises over the original judgment. That question is

complicated here by the fact that the underlying judgment was a

default judgment, not the normal stuff of Rule 59(e) review.

Rule 59(e) itself does not state the grounds on which

relief under the rule may be granted, and the district courts have

First, a party who has appeared, but has defaulted for
another reason, could appear to defend against the default judgment
and, after the judgment has issued, file a Rule 59(e) motion. If
that motion were to raise a new argument, the argument would
clearly be improper under this circuit's precedent because there
could be no question that the defendant had the opportunity to
raise the argument before default judgment issued. Second, a party
who has defaulted by not appearing could appear to defend against
the judgment and then file a Rule 59(e) motion after judgment. As
in the first scenario, a new argument raised in that motion would
be improper for the stated reasons.
Third, the 59(e) motion could be filed by a party who has
appeared, defaulted, and failed to appear to defend against the
judgment. And fourth, the 59(e) motion could be filed by a party
who has not appeared at all. This last situation is the one
presented in this appeal; the third situation presents similar
issues.

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considerable discretion in deciding whether to grant or deny a

motion to alter or amend under Rule 59(e). Edward H. Bohlin Co. v.

Banning Co., 6 F.3d 350, 355 (5th Cir. 1993); Robinson v. Watts

Detective Agency, 685 F.2d 729, 743 (1st Cir. 1982); 11 Wright,

Miller & Kane, Federal Practice and Procedure, § 2810.1 (West

1995). That discretion requires a balancing of the need for

finality of judgments with the need to render a just decision.

Edward H. Bohlin Co., 6 F.3d at 355. Under the broad umbrella of

the district court's discretionary power, the case law has

developed a non-exhaustive list of circumstances in which relief is

available under Rule 59(e) that attempts to balance the need for

finality with the need for justice. One of those circumstances,

articulated in cases where the underlying judgment is not a default

judgment, is where the moving party clearly establishes a manifest

error of law. F.D.I.C. v. World Univ., Inc., 978 F.2d 10, 16 (1st

Cir. 1992). In granting Sonolux's Rule 59(e) motion, the second

district judge determined that there was a manifest error of law in

the first judge's interpretation of 17 U.S.C. § 504(c). It would

be a closer question here if the judgment had entered not by

default, but after the parties joined on the issue, whether the

error was, indeed "manifest."

In the common case, the judgment being reviewed by the

Rule 59(e) judge has been entered after both parties have argued

the points at issue. Here, by contrast, the judgment being

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reviewed was a default judgment and the Rule 59(e) judge was the

first to address the legal issues around the question of the

statutory measure of damages. Sonolux had never appeared in the

case. Finality plays a slightly different role in the default

context. This is reflected by the lenient standard for removing

entries of default and the only slightly more restrictive standard

for setting aside default judgments. We have found no cases

discussing the application of the Rule 59(e) standard to a default

judgment. Assuming Rule 59(e) is available at all, we think it is

clear that the default context is something that a district court

can consider in exercising its discretion in order to strike the

appropriate balance between finality and justice.

C. Interpretation of 17 U.S.C. § 504(c)

Section 504(c) states that a copyright owner can elect to

recover statutory damages "for all infringements involved in the

action, with respect to any one work, for which any one infringer

is liable individually." The second district judge read that

language as meaning "that an infringer's statutory damages

liability is based on the number of infringed works" rather than on

the number of infringing works.

In support of that interpretation, the district judge

pointed to the applicable Report of the Committee on the Judiciary,

H.R. Rep. No. 94-1476, at 162 (1976) reprinted in 1976 U.S.C.C.A.N.

5659, 5778, which states: "A single infringer of a single work is

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liable for a single amount . . . no matter how many acts of

infringement are involved in the action and regardless of whether

the acts were separate, isolated, or occurred in a related series."

The court also found support for its interpretation in

the case law, citing to Walt Disney Co. v. Powell, 897 F.2d 565,

569 (D.C. Cir. 1990) ("Both the text of the Copyright Act and its

legislative history make clear that statutory damages are to be

calculated according to the number of works infringed, not the

number of infringements."), and to a case from this circuit, Gamma

Audio & Video, Inc. v. Ean-Chea, 11 F.3d 1106, 1116 (1st Cir.

1993). Noting that there were only two infringed works, "Desde Que

Te Marchaste" and "No Me Digan Cobarde," the second district judge

applied the statutory damages rate set by the first district judge

($100,000 per work) to those two works, resulting in a reduction in

the damages award from $1,600,000 to $200,000.

The legal issue of whether under § 504(c) statutory

damages are to be applied to each infringed work or to each

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infringement on a given work is reviewed de novo.6 A leading

commentator, Nimmer, sets up the question as follows:

If in a single action, the same copyrighted work is held
to have been infringed by several different infringing
acts all committed by the same infringer, does this give
rise to only one set of statutory damages, with a
statutory minimum of $250 (currently raised to $750) for
all such infringing acts, or is the plaintiff entitled to
recover at least a minimum of $250, and a separate set of
statutory damages, for each such infringing act? The
current Act states that only a single minimum, and a
single set of statutory damages, will be applicable "for
all infringements involved in the action, with respect to
any one work, for which any one infringer is liable
individually. . . ."

4 M. Nimmer & D. Nimmer, Nimmer on Copyright § 14.04[E][2][a]

(2001).

Section 504(c) states that a copyright owner may elect

"an award of statutory damages for all infringements involved in

the action, with respect to any one work, for which any one

infringer is liable individually . . . ." Another leading treatise

in the field, Goldstein, states without reservation that under §

504(c) statutory damages are available for each infringed work

6
Sonolux urges that even if we determine that there is a
substantial legal dispute over the meaning of the term "work" in §
504(c), there could not be an abuse of discretion in the reduction
of the award because the second district judge's interpretation
could not be a "manifest error." The superficial attraction of
that argument does not last for several reasons. Most importantly,
the proper interpretation of the term "work" in § 504(c) is a pure
issue of law that we normally review de novo, even under the abuse
of discretion standard. Further, we see no reason why plaintiffs
here should be disadvantaged by being subjected to a less favorable
standard of review on a statutory question than they would have had
on direct appeal.

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(song), not each act of infringement (album). 2 P. Goldstein,

Copyright, § 12.2.2.2(a) (2d ed. 2003 Supp.) ("[A]n infringer will

be liable for a single statutory award whether it makes one copy of

a copyrighted [work] or one thousand . . . ."). Nimmer comes to a

"tentative conclusion" that this reading of the statute, propounded

by Goldstein, is correct. 4 Nimmer on Copyright, § 14.04[E][2][c].

The most natural reading of the plain language of the

statute is that the song is the "work." There is, though, arguably

some ambiguity. The legislative history dissolves any argument of

ambiguity:

Although . . . an award of minimum statutory damages may
be multiplied if separate works and separately liable
infringers are involved in the suit, a single award . .
. is to be made "for all infringements involved in the
action." A single infringer of a single work is liable
for a single amount between $[7]50 and $[3]0,000, no
matter how many acts of infringement are involved in the
action and regardless of whether the acts were separate,
isolated, or occurred in a related series. . . .
. . . . Where the infringements of one work were
committed by a single infringer acting individually, a
single award of statutory damages would be made.

H.R. Rep. No. 94-1476, at 162, reprinted in 1976 U.S.C.C.A.N. 5659,

5778 (emphasis added).

The one circuit court to have addressed the issue

squarely, the D.C. Circuit, has adopted the reading advanced by the

second district judge. Walt Disney Co., 897 F.2d at 569 (vacating

a damages award that "mistakenly focus[ed] on the number of

infringements rather than on the number of works infringed").

Although the precise issue was not presented to the Fifth Circuit,

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that court addressed it at length in Mason v. Montgomery Data,

Inc., 967 F.2d 135 (5th Cir. 1992), as part of its interpretation

of 17 U.S.C. § 412, which references § 504. The Fifth Circuit

explained:

Under [§ 504(c)(1)], the total number of "awards" of
statutory damages . . . that a plaintiff may recover in
any given action depends on the number of works that are
infringed and the number of individually liable
infringers, regardless of the number of infringements of
those works. So if a plaintiff proves that one defendant
committed five separate infringements of one copyrighted
work, that plaintiff is entitled to only one award of
statutory damages . . . . And if a plaintiff proves that
two different defendants each committed five separate
infringements of five different works, the plaintiff is
entitled to ten awards, not fifty.

Id. at 143-44 (emphasis in original). The Eleventh Circuit

declined to reach the issue in MCA Television Ltd. v. Feltner, 89

F.3d 766 (11th Cir. 1996), because it was not raised before the

district court, but the court went on to quote at length from the

above section of Mason and also cited Walt Disney.7 Id. at 770.

In Columbia Pictures Television v. Krypton Broadcasting, 106 F.3d

284 (9th Cir. 1997), rev'd on other grounds, Feltner v. Columbia

Pictures TV, 523 U.S. 340 (1998), the Ninth Circuit, citing Mason,

stated that “when statutory damages are assessed against one

7
In an opinion dissenting on another point, Judge Bright
indicated that he would have reached the damages issue and stated
that "the text of section 504(c)(1) of the Copyright Act and the
case law interpreting that Act make clear that the statute allows
only one award of statutory damages for each work infringed." MCA
Television, 89 F.3d at 771 (Bright, J., dissenting) (emphasis in
original).

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defendant . . . each work infringed may form the basis of only one

award, regardless of the number of separate infringements of that

work.” Id. at 294 (affirming a statutory damages award based on

works infringed, where neither party challenged this interpretation

of § 504(c)(1). Language from the Second Circuit's opinion in Twin

Peaks Prods., Inc. v. Publ'ns Inter'l, Ltd., 996 F.2d 1366 (2d Cir.

1993), is also consistent with the Walt Disney and Mason

interpretations, id. at 1381 ("The current statute shifts the unit

of damages inquiry from number of infringements to number of works

[infringed]."), but in Twin Peaks there was only one infringing

work so the issue was not directly presented.

Our own opinion in Gamma Audio, while not directly on

point, implicitly adopts the reading adopted or cited approvingly

by those other circuits. In Gamma Audio, we held that the

plaintiff was entitled to four awards of statutory damages because

the defendant had infringed four separate "works."8 11 F.3d at

1118. We observed that the present Copyright Act marked a change

in the scheme for awarding statutory damages from the Copyright Act

of 1909, and we cited Twin Peaks for the proposition that the

current act "shifts the unit of damages inquiry from number of

infringements to number of works." Id. at 1116 (quoting Twin

8
There is no dispute in this case that each infringed song
is a separate "work" for purposes of the Act.

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Peaks, 996 F.2d at 1381). We also quoted the House Report

concerning § 504(c) and cited Walt Disney.

Nimmer cautions that the prevailing reading may lead to

adverse results -- specifically, game-playing by plaintiffs to

separate their various claims of infringements as to any one work

into separate lawsuits so as to obtain more than one statutory

damages award for each infringed work. Nimmer on Copyright, §

14.04[E][2]. Nimmer does acknowledge that the doctrine of res

judicata may act as a curb on this problem, id. at §

14.04[E][2][b]-[c], but he suggests that the law of res judicata

might not bar separate suits based on different infringing

transactions and that the risk of such game-playing warrants

reconsideration of the widely accepted reading of the section, id.

at § 14.04[E][2][c].

There are a number of ways in which the problem of game-

playing could occur under the prevailing reading and a number of

possible solutions to that problem, the discussions of which are

beyond the scope of this opinion.9 And both interpretations of the

9
Goldstein suggests that the strategy of filing successive
actions to obtain multiple awards for continuing infringements
would be "both procedurally and practically implausible." 2
Goldstein, Copyright, § 12.2.2.2(a). He explains:
In the ordinary case involving a continuing infringement,
the copyright owner will want to seek temporary and final
injunctive relief; if the copyright owner prevails, this
will forestall any future infringements and will
circumscribe the copyright owner's statutory damage award
by all infringements occurring before the injunction
entered. In any event, the rare copyright owner who

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statute have an accompanying set of potential problems. The

current statute represents a departure from the case law

interpreting the statute under the earlier Act of 1909.10 4 Nimmer

on Copyright, § 14.04[E][2][a]; see L.A. Westerman Co. v. Dispatch

Printing Co., 249 U.S. 100 (1919) (two separate infringements of

the same copyrighted work gave rise to two separate claims for

minimum damages). Indeed, problems with the old statute no doubt

led to the revision.11

The prevailing reading in the circuits is the one that we

join: under § 504(c) the total number of "awards" of statutory

damages that a plaintiff may recover in any given action against a

single defendant depends on the number of works that are infringed

pursues this route should expect to receive a smaller
statutory award in its successive actions than if it
sought to recover for these infringements in a single
action.
Id.
10
The problematic issue under the 1909 Act seems to have
been determining what constituted a single "infringement" and what
constituted multiple "infringements." See 4 M. Nimmer and D.
Nimmer, Nimmer on Copyright § 14.04[E][2][a]; Robert Stigwood
Group, Ltd. v. O'Reilly, 530 F.2d 1096 (2d Cir. 1976).
11
If the focus were on the number of infringements of a
work by a single defendant rather than on the number of works,
questions would arise as to whether a series of events were
separate or the same infringement. Would it depend on how close in
time the events were? Or on whether there was a common third-party
publisher? Or whether the infringing activities were alike?
Indeed, a problematic issue under the previous Copyright Act was
determining what constituted a single "infringement." See 4 Nimmer
on Copyright, § 14.04[E][2][a]; Robert Stigwood Group, Ltd. v.
O'Reilly, 530 F.2d 1096, 1102-03 (2d Cir. 1976).

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and the number of individually liable infringers and is unaffected

by the number of infringements of those works. That reading works

in the overall context of the statute, flows naturally from the

statutory language, and is supported by the legislative history.

In re Bankvest Capital Corp., 360 F.3d 291, 299 (1st Cir. 2004).

We thus agree with the second district judge that “works” in §

504(c)(1) means “songs” in the context of this case.

D. Application of Abuse of Discretion Standard

That conclusion only brings us back to the initial

question of whether the second district judge abused his discretion

in granting the Rule 59(e) motion. As already noted, the

touchstone of Rule 59(e) relief is limited discretion that honors

both the need for finality and the need for justice.

Here, the record provides no reason to think that the

first district judge was even aware that there was an issue as to

the interpretation of "work" in § 504(c). Had he been aware, we

doubt he would have calculated damages as he did. Indeed, no

circuit court had ever upheld that method of calculation, and the

plain language of the statute reads otherwise. At most, one

treatise had suggested, for policy-based reasons, that the statute

could be read differently (while another treatise had rejected the

suggestion). Given that the issue was never fairly presented to

the first district judge, and given the default context in which

the original damages award was calculated, the second district

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judge's decision to grant the Rule 59(e) motion was within the

allowable scope of his discretion under the rule. The second

judge's determination that Congress's policy choice, reflected in

the plain language of § 504(c), should be honored even in the

default context of this case seems to us to strike the proper

balance between the need for finality of judgments and the need for

justice. It was within the district court's province to conclude

that amendment of the amount of the damages award was warranted in

order to reach a just judgment in accord with congressional intent.

It may seem odd that we would uphold the second judge's

determination that the original damages award was in violation of

the statute when this Court had never before ruled on the issue.

The second district judge, after all, characterized the original

damages award as a "manifest error of law." See Black's Law

Dictionary 563 (7th ed. 1999) (a manifest error is "[a]n error that

is plain and indisputable, and that amounts to a complete disregard

of the controlling law."). But for the reasons stated earlier, in

the peculiar context of this case, we do not find an abuse of

discretion. After all, the situation developed not only because

Sonolux defaulted, but also because plaintiffs utterly failed in

their obligation to inform the first judge of contrary authority,

and should not be rewarded for that lapse.

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E. Remedy

Still, we do not simply affirm an award of $200,000 and

remand with instructions to enter that judgment. It is quite

possible that applying the correct rules, the award should be

higher. At the $100,000 per “work” rate set by the original judge,

the corrected calculation would automatically produce a reduction

in the judgment to $200,000. However, it may be that the first

judge would have increased the amount of damages per work, given

the number of infringements and given his finding of willfulness,

if he had understood that “works” referred to the infringed songs

rather than the infringing albums.

The sliding scale for statutory damages is designed in

part to allow courts "to increase the amount of the award in

proportion to the number of individual infringements." 2

Goldstein, Copyright § 12.2.2.2(a). The sliding scale is also

designed to deter willful infringements, and the award can go up to

$150,000 per work where willfulness has been found. 17 U.S.C. §

504(c)(2); see H.R. Rep. No. 94-1476, at 162, reprinted in 1976

U.S.C.C.A.N. 5659, 5778 ("The basic principle underlying [§

504(c)(2)] is that the courts should be given discretion to

increase statutory damages in cases of willful infringement and to

lower the minimum where the infringer is innocent."); Yurman

Design, Inc. v. PAJ, Inc., 262 F.3d 101, 113-14 (2d Cir. 2001)

("[S]tatutory damages are not meant to be merely compensatory or

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restitutionary. The statutory award is also meant to discourage

wrongful conduct. That is why the statute permits consideration of

. . . additional damages where an infringement is willful.")

(internal citations and quotation marks omitted). Both district

judges concluded that the infringements were willful. Indeed, it

would be easy to view Sonolux's conduct in this case as

demonstrating a continuing disregard for the law. Cf. Morley Music

Co. v. Dick Stacey's Plaza Motel, Inc., 725 F.2d 1, 3 (1st Cir.

1983) ("Not only was it a permissible inference that plaintiffs'

copyrights were infringed in four prior years but, even if it were

not, the other evidence of size of defendants' operation,

resistance to production of documents, intent, dissimulation, or at

least diffident efforts to exact respect for others' copyrights

justified the court's award.").

The first district judge stated that “an award of

$100,000 for each of the 16 works, or a total of $1,600,000,

represents a fair measure of damages in this case.” That language

may well mean that the first judge was primarily concerned with the

total damages, the $1,600,000, as the sum that would reflect a just

award in light of defendant’s willfulness and would discourage

future infringement. Because the intent of the original order is

not clear, we think on remand plaintiffs should be free to argue to

the district court that the statutory damages rate should be

increased, subject to the statutory cap of $150,000 per song, in

-27-
light of seventeen infringing works (including the album

"Sentimientos") and the willful conduct. The $200,000 award will

serve as a damages floor on remand.

Our decision to open this issue on remand is by analogy

to criminal law. A decision in an infringement suit to increase

the statutory rate based on a finding of willfulness, like an

upward departure from a sentencing guideline's range, is a punitive

measure meant to deter. Williams v. United States, 503 U.S. 193

(1992), held that a remand is necessary when a district court has

used improper factors to justify a sentencing guidelines departure

and the appellate court cannot ascertain whether the district court

would have imposed the same sentence even if it had not used the

improper factors. Id. at 203-204. That is so because the district

court, if apprised of the errors in its interpretation of the

Guidelines, may have chosen a different sentence. Id. at 204-05.

Further, we note that in Walt Disney the court of appeals did not

itself determine damages, but remanded to the district court

without restriction to award appropriate damages. 897 F.2d at 570.

Plaintiffs have not requested the opportunity to have the

option of proving actual damages and defendant's profits on remand.

As a result, any issue about that option is waived.12

12
Even were it not waived, it is not clear whether the
option of seeking actual damages and defendant's profits would be
available on remand, given plaintiffs' earlier election. Cf. Twin
Peaks, 996 F.2d at 1380 ("Once a plaintiff has elected statutory
damages, it has given up the right to seek actual damages . . .

-28-
 This leaves only the plaintiffs’ appeal from the

conclusion that they did not prove actual damages and defendant's

profits on the album “Sentimientos.” This aspect of the appeal is

largely mooted by our reading of "work" in § 504(c). Under our

reading of § 504(c), it is the song, "Desde Que Te Marchaste," to

which statutory damages apply and plaintiffs may not seek actual

damages for yet another infringing album. The number of

infringements is a relevant factor in setting the statutory damages

rate, 2 Goldstein, § 12.2.2.2(a), and plaintiffs may argue on

remand that the amount of statutory damages should be increased to

reflect this seventeenth infringement in the album "Sentimientos."

Of course, the parties are encouraged to attempt to

resolve this case on remand by agreement.

IV.

The denial of defendant's motion to set aside the entry

of default and the default judgment is affirmed. The grant of

defendant's Rule 59(e) motion to amend the default judgment is

affirmed insofar as we hold that the original damages calculation

."); Jordan v. Time, Inc., 111 F.3d 102, 103 (11th Cir. 1997)
("Having timely elected to receive statutory damages . . .
[plaintiff] is precluded from appealing any question related to
actual damages."). Whether the fact that defendant's default
prevented plaintiffs from obtaining the necessary discovery to
prove actual damages and defendant's profits (and thus left them
without a real choice) would affect the availability of the option
to un-elect statutory damages on remand is also not clear. In any
event, we need not reach these issues because plaintiffs have not
asked us to do so.

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was based on a manifest error of law. The amount of the judgment

only, and not the entry of the judgment, is vacated, and the case

is remanded to the district court for further proceedings

consistent with this opinion.

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