Appeals Court Affirms U.S. Navy Should Pay $154k in Piracy Damages, not $155m

Software company Bitmanagement has been dealt another blow in its piracy battle against the U.S. Navy. Instead of winning over $155 million in damages, the U.S. Court of Appeals for the Federal Circuit upheld a lower court's ruling, awarding a mere $154,400 for the Navy's unauthorized installations of the German company's software.

Nearly a decade ago, the US Navy was sued for mass copyright infringement and accused of causing hundreds of millions of dollars in damages.

The lawsuit was filed by the German company Bitmanagement. It’s not a typical piracy case in the sense that software was downloaded from shady sources. Instead, it deals with unauthorized installations.

It all started in 2008 when the US Navy began testing Bitmanagement’s 3D virtual reality application ‘BS Contact Geo’. After some testing, the Navy installed the software across its network, assuming that it had permission to do so.

This turned out to be a crucial misunderstanding. Bitmanagement said it never authorized this type of use and when it heard that the Navy had installed the software on 558,466 computers, the company took legal action.

Bitmanagement Wins Appeal

In a complaint filed at the U.S. Court of Federal Claims in 2016, the German company accused the US Navy of mass copyright infringement and demanded damages for the alleged unauthorized use.

The Court initially ruled in favor of the government, but Bitmanagement appealed. In 2021, the Court of Appeals for the Federal Circuit sided with the software company, concluding that the US Government is indeed liable.

This meant that the matter was reverted to the Federal Claims court, to determine an appropriate damages amount. This part of the legal battle was just as crucial, as potential damages ranged from tens of thousands of dollars to more than $100 million.

$155,400,000 in Piracy Damages?

Bitmanagement told the court that it is entitled to $155,400,000 in copyright infringement damages. The figure was based on more than 600,000 copies of the software allegedly installed by the Navy, multiplied by the negotiated $370 license per install, minus a 30% discount.

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The U.S. Government disagreed. To counter the software company, it brought forward expert witness David Kennedy. After reviewing various log files, Mr. Kennedy concluded that the software was used by a few hundred unique users at most.

The witness further argued that a price of up to $200 per license would likely have been reasonable. The amount was lower than the $370 per install previously quoted, but warranted due to the large number of licenses involved.

Court Awards $154,400, Bitmanagement Appeals

The Federal Claims Court ultimately went along with the Government’s position, awarding $154,400 in damages.

The damages figure is based on 635 unique users and a license fee of $200. The court also awarded an additional $350 for each of the 100 simultaneous-use licenses the Navy would have agreed to.

The court stressed that its damages calculation was based on objective considerations, characterizing it as “fair and reasonable”. Bitmanagement had a different take and requested a higher damages award at the Court of Appeals.

Appeals Court Affirms $154,400 Damages Award

Earlier this month, the Court of Appeals for the Federal Circuit reached its decision. After hearing both sides, it concluded that the $154,400 award was correct.

The Federal Circuit affirmed the damages figure, noting that the law does not require every award of copyright damages to be on a per-copy basis.

“No case that we or the parties have identified, in this or any other circuit, requires that an award of copyright damages invariably be on a per-copy basis,” the decision notes.

The court also held that the Court of Federal Claims did not err when it required Bitmanagement, rather than the Navy, to prove how much the U.S. Navy used the software. Finally, the court was within its right to admit the testimony of the government’s expert witness.

“We have considered Bitmanagement’s remaining arguments and find them unpersuasive. Because the Court of Federal Claims’ damages award was not an abuse of discretion, we affirm,” the court concludes.

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While this is certainly a unique case, it’s not the first time the U.S. military has been “caught” pirating software. The Government was previously accused of operating unlicensed logistics software, a case the Obama administration eventually settled for $50 million.