## Facts

- Cream Records, Inc. owned the copyright in the musical composition “Theme from Shaft.”
- Jos. Schlitz Brewing Company, using its advertising agency Benton & Bowles, Inc., produced and aired a television commercial containing music found by a jury to infringe Cream’s copyrighted work.
- Before airing the commercial, Schlitz sought a one-year license to use the theme; Cream quoted $100,000 and later conceded the market value of such a license was $80,000.
- After the commercial aired, another potential licensee withdrew interest in licensing the work for advertising.
- Evidence indicated that once a popular song is used in a television advertisement, its value to other advertisers for similar use is materially impaired or eliminated.
- The parties tried damages to the court; the district court awarded $12,000 in actual damages (15% of $80,000 based on partial use) and $5,000 in profits attributable to the infringement under 17 U.S.C. § 504(b).

## Issues

1. Whether actual damages for the infringing commercial should be limited to a fraction of the market value of a full-song advertising license based on the portion used, when the infringement eliminated the work’s advertising-license value.
2. Whether the district court properly applied 17 U.S.C. § 504(b) in apportioning only a small portion of Schlitz’s profits to the infringement, including the statute’s burden-shifting for apportionment.

## Decision

- The Ninth Circuit held the district court erred by reducing actual damages to 15% of the market value of a one-year advertising license.
- The court ruled Cream was entitled to recover the full market value of the lost one-year license because the unauthorized use destroyed that licensing opportunity.
- The court held the district court’s profit apportionment under § 504(b) was clearly erroneous in part and required reconsideration.
- The damages award was vacated in relevant part and remanded for recalculation consistent with the proper measures of actual damages and profits.

## Legal Principles

- Actual damages under copyright law may be measured by the market value of the license fee the infringer should have paid for the use made.
- When an infringing use precludes or destroys a specific licensing market (such as advertising use), the copyright owner may recover the full market value of that lost license absent evidence that a partial-use license would have been valued differently.
- Under 17 U.S.C. § 504(b), the copyright owner must show gross revenue reasonably related to the infringement; the infringer bears the burden to prove deductible expenses and the portion of profits attributable to non-infringing factors.
- Uncertainty in apportioning profits between infringing and non-infringing elements is generally resolved against the infringer, consistent with the statutory allocation of proof.
- Section 504(b) bars double recovery: profits already accounted for in computing actual damages may not be recovered again as infringer’s profits.

## Conclusion

The court required awarding the full market value of the lost advertising license as actual damages because the infringing commercial eliminated that market, and it remanded for a renewed § 504(b) profits analysis applying the statutory burden-shifting and avoiding double counting.


Cream Records, Inc. v. Jos. Schlitz Brewing Co., 754 F.2d 826 (9th Cir. 1985)