Southern Credentialing Support v. Hammond Surgical Hospital LLC

On cross-appeals from district court award granting plaintiff summary judgment and statutory damages on copyright infringement claim, Fifth Circuit affirms permanent injunction enjoining future infringements but reverses on statutory damages, holding that damages are not automatic if work is unregistered when infringement begins.

Plaintiff, Southern Credentialing Support Services LLC, is in the business of providing healthcare credentialing services. Doctors who wish to practice at hospitals must go through a credentialing process involving the submission of a number of forms, which are verified by service providers such as Southern Credentialing. From 2010 to 2013, Southern Credentialing created custom forms for its client, defendant Hammond Surgical Hospital LLC, including an original credentialing packet and a re-credentialing packet, both of which were designed to increase the efficiency of the client’s process. In 2013, Southern Credentialing stopped providing services to Hammond, but Hammond continued using at least 50 pages of Southern Credentialing’s forms packet. By 2017, these forms could be accessed on the website of Hammond’s new service provider without the necessity of a password.  

Upon learning of Hammond’s reproduction, Southern Credentialing registered copyrights for its original packet and re-credentialing packet in February 2014 and July 2014, respectively. Soon after, when negotiations did not resolve the parties’ dispute, Southern Credentialing filed suit, alleging that Hammond infringed its copyrights.

In the district court, Southern Credentialing obtained summary judgment on its copyright infringement claim and secured statutory damages under Section 504 of the U.S. Copyright Act of $5,000 for both of the copyrighted packets. While acknowledging that Section 412 of the Copyright Act bars an award of statutory damages for infringement occurring prior to the date on which a work is registered, the court nonetheless determined that Hammond’s post-registration infringement (distribution) was “different in kind” from its pre-registration infringement (reproduction). Therefore, statutory damages were available. The district court did not find that Hammond’s infringement was “willful” but awarded Southern Credentialing attorneys’ fees and costs, and issued a permanent injunction against Hammond from any further infringement. Both parties appealed. While Southern Credentialing argued that Hammond’s infringement was willful, Hammond sought review of the summary judgment ruling and principally argued that Section 412 of the Copyright Act precluded Southern Credentialing’s statutory damages award because Hammond’s infringement began before the packets were copyrighted.   

Addressing each issue in turn, the appellate court first concluded that Southern Credentialing’s forms packets met the low bar for originality. Despite recognizing that state and federal law as well as hospital-specific policies generally dictated the contents of the forms, the court acknowledged that Southern Credentialing’s “unique selection and arrangement of information” in its forms exhibited creative expression—Hammond even admitted that Southern Credentialing’s packets provided for a much faster credentialing process. Next, the court affirmed the permanent injunction on the grounds that Hammond infringed the copyrighted packets by duplicating approximately 50% of Southern Credentialing’s materials, including copying them verbatim. 

Finally, the court considered the novel issue of whether Section 412 barred Southern Credentialing’s statutory damages award despite the purported distinction in Hammond’s pre-registration and post-registration infringement, and found that it did. In reaching this conclusion, the court explained the rule set forth in the Fifth Circuit’s 1992 decision in Mason v. Montgomery Data, Inc., which dealt with the applicability of Section 412 to multiple infringements to the same work before and after registration. In Mason, the court held that the defendant’s infringement of a copyright in the same manner, i.e., reproduction, both prior and subsequent to registration of the copyright, precluded an award of statutory damages. This, the court reasoned, was consistent with the statutory language in Section 504, which provides a single award (“an award”) per an infringed work (“for all infringements”).  

Applying Mason, the Fifth Circuit held that the outcome should be no different regardless of the type of infringement that occurred pre- or post-registration. Accordingly, the court rejected the district court’s reasoning that statutory damages were available to Southern Credentialing on the grounds that Hammond’s post-registration infringement, i.e., distribution, was “different in kind” from its pre-registration infringement, i.e., reproduction. To conclude otherwise, the court explained, would contravene the basic principle that each violation of an exclusive right under Section 106 is “a coequal infringement.” In so holding, the court noted that it expressed no opinion on whether Section 412 would bar statutory damages and attorneys’ fees if a defendant’s pre-registration and post-registration infringement experienced a “a substantial gap” because Hammond’s infringement was ongoing and “continued without interruption.”

Summary prepared by Melanie Howard and Mary Jean Kim.