Intellectual Property Attorney

“Bad Boy of Pharma” Martin Shkreli Faces Copyright Lawsuit over Wu-Tang Clan Album

Pejoratively called the “Bad Boy of Pharma” after his company raised the price of Daraprim, a drug often used by AIDS patients, by more than 5000% overnight, Martin Shkreli has attracted a great deal of bad publicity. The
BBC opined that he “may be the most hated man in America”.
Hillary Clinton accused him of “[p]rice gouging”, while
Donald Trump said “[t]hat guy is nothing. He’s zero. He’s nothing. He ought to be ashamed of himself”. Whatever the media has decided to call him, one man has levied a new accusation: copyright infringer.

In 2015, iconic hip hop group the Wu-Tang Clan auctioned off a one-of-a-kind album entitled Once Upon a Time in Shaolin. Created as a reaction against changing cultural attitudes towards the mass availability and replicability of music, the
Wu-Tang Clan recorded the album in secret over six years, destroyed all master and backup copies, and auctioned off the sole remaining CD for a
reported $2 Million last October. As part of the deal, the Wu-Tang Clan reportedly contracted with the buyer to prevent the commercial release of the album for the next 88 years.

As part of the “package”, the sole copy of Once Upon a Time in Shaolin was sold in a custom, hand carved nickel and silver casted box alongside a 174 page, leather bound, gold-leafed book featuring “lyrics, credits and anecdotes on the production and recordings of each song.” This 174 page book is now the center of a lawsuit connecting the most unlikely bedfellows: Martin Shkreli, the Wu-Tang Clan and an amateur New York artist named Jason Koza.

According to a complaint filed in the Southern District of New York earlier this month, Koza, a self-proclaimed “devoted fan” of the Wu Tang Clan, created illustrations of the various founding members of the Wu-Tang Clan and posted digital images of his illustrations to the fan-website According to the complaint, these illustrations were included as part of the commemorative leather bound book accompanying the album sale without Koza’s permission.

Surprisingly, it appears that Martin “Bad Boy of Pharma” Shkreli was the anonymous bidder who purchased the sole copy of
Once Upon a Time in Shaolin for several million dollars. In January of this year,
Vice ran an interview with Shkreli which included several photographs of the mysterious
Once Upon a Time in Shaolin album taken by the reporter on his smartphone. Among these photographs were several images of the 174 page leather bound book—photographs which Koza claims conclusively prove that the Wu-Tang Clan copied his fan art illustrations.

According to Koza, the WuDisciples website did not contain any language or disclaimer granting a license to use his works. As such, Koza alleges that the only permission given was an “implied license” to display the illustrations on the WuDisciples website—and that the Wu-Tang Clan never had permission to use them in the Shaolin companion book. Significantly, attached to Koza’s complaint are several exhibits purportedly showing an exchange between Koza and Tarik Azzougarh (a.k.a. Cilvaringz) from the Wu-Tang Clan regarding “the use of your [Koza’s] drawings”.

Koza’s lawsuit is directed against the Wu-Tang Clan Members Robert Diggs (a.k.a. RZA) and Tarik Azzougarh, Paddle8 (the auction house which sold the sole copy of Once Upon a Time in Shaolin) and Martin Shkreli. The Complaint alleges that Diggs and Azzougarh violated Koza’s rights of “reproduction, adaptation, and distribution” by including his illustrations in the
Shaolin companion book, that Paddle8 infringed the right of distribution in auctioning off the book, and that Shkreli violated the right of public display by “permitting at least three of the nine Wu-Tang Clan Portraits to be displayed to the public in a news article without Mr. Koza’s permission or license”.

Whether Koza granted a license or assignment to the WuDisciples website, and whether any such license or assignment allowed the WuDisciples website to sublicense or further assign Koza’s images to the Wu-Tang Clan is a fact-specific inquiry which the parties will undoubtedly explore further.

Given the commercial nature of Once Upon a Time in Shaolin (and, hence, the unlikelihood of any fair use defense), if Koza is able to prove that the
Shaolin companion book contains unlicensed copies of his illustrations, Wu-Tang, Paddle8 and Shkreli will likely have to pay damages. Unfortunately for Shkreli, there is no equivalent to a “good faith purchaser for value” in copyright law, i.e., purchasing an article containing infringing material—even without notice—does not immunize someone from the copyright laws. In other words, the real question between the parties is reminiscent of the central hook from Wu-Tang’s classic hit C.R.E.A.M.: Cash Rules Everything Around Me.

Under 17 U.S.C. § 504, copyright infringers are liable for either: (i) actual damages and any additional profits from an infringer; or (ii) statutory damages.

In cases such as this, actual damages would likely be difficult, if not impossible, to prove. Arguably, the value of the $2 Million album came from the music itself, rather than the companion book containing the allegedly copied drawings. In fact, given the heavy secrecy surrounding the album’s release, it seems probable that prospective buyers (including Shkreli) were not given the opportunity to look through the companion book prior to purchase—much less look at the allegedly infringing images prior to the purchase. This fact weights against an actual damages calculation, i.e., what “value” did unviewed images in a companion book contribute to the amount paid for the album? It is unsurprising, then, that Koza’s complaint seeks statutory damages—with economic damages only requested as a “backup”.

In recognition of the difficulties in calculating actual damages (especially when trying to estimate the number and value of “black market” sales) 17 U.S.C. § 504 allows parties to recover what are known as “statutory damages”. In ordinary cases, courts have wide latitude to determine the amount of statutory damages within a broad range stretching from $750.00 to $30,000.00. Where a plaintiff can show that there was willful infringement, the upper bounds of statutory damages jumps to $150,000.00. Conversely, the lower bounds drops to $200.00 when the court finds that an infringer “was not aware and had no reason to believe that his or her acts constituted an infringement of copyright”.

In the case of Paddle8 and Shkreli, there does not seem to be any evidence showing that either party had reason to believe that there was any infringement. This means that any award of statutory damages could well be limited to near the $200.00 range. For the Wu-Tang Clan, however, the situation could become considerably more expensive. Given the alleged copying and the alleged subsequent back and forth communications with Koza, a court could find that the Wu-Tang Clan acted in “willful infringement”, i.e., that statutory damages could be upwards of $150,000.00.

One critical point (conveniently omitted from Koza’s complaint) is that, under 17 U.S.C. § 412, statutory damages are only allowed if infringement took place
after the effective date of a Federal copyright registration (unless the work is registered within three months of its first publication, and the infringement takes place within that three month period). According to Koza’s complaint, the works were published on the WuDisciples website “in or around late 2013 or early 2014” but were not Federally registered until February 1, 2016, i.e., long after not only first publication but also the alleged infringing acts by the Wu-Tang Clan, Paddle8 and Shkreli.

Assuming this case does not settle a court would need to decide whether the act of submitting his illustrations to the WuDisciples blog was a “publication”. Further assuming that it was a publication, Koza’s failure to timely register his copyrights prior to (or within 3 months of) first publication may have cost him tens, if not hundreds, of thousands of dollars in statutory damages.

One final point worth considering are the equitable remedies Koza may have. Surprisingly,

Koza’s complaint makes no mention of 17 U.S.C. § 503 under which a victim of copyright infringement may ask the court to order the impounding of “all copies…claimed to have been made or used in violation of the exclusive right of the copyright owner”. In other words, if Koza’s illustrations were infringed, Koza could ask the court to impound or even to destroy the companion book to
Once Upon a Time in Shaolin.

One could well imagine that the parties would want to reach an amicable settlement before the sole copy of what may be the Wu-Tang Clan’s last collaboration is jeopardized. The specter of possible impoundment and even destruction of the companion book could well be the most significant issue in the entire dispute

Koza’s regrettable position demonstrates the essential importance of proactively securing copyright protection. Had Koza swiftly registered his work, he would be in a much stronger position. Unfortunately it appears that Koza, like many artists, writers and musicians, failed to see the potential value in his work before others did. The old adage about buying insurance holds true for copyrights and other intellectual property, i.e., buy the right protection before you need it, because after you need it, you can no longer afford it. Hopefully for Koza his timing will not be fatal, and potential equitable remedies will give him the leverage he needs to fairly resolve his dispute.

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