Bitmanagement Software GmbH v. United States
Authored by: Jeremy J. Gustrowsky
In a recent decision, the Federal Circuit affirmed a much smaller damages award for Bitmanagement Software GmbH after the U.S. Navy was found to have infringed its copyright on 3D graphics software. Bitmanagement had argued it was entitled to nearly $86 million—calculated at $200 for each of the 429,567 copies the Navy installed of its BS Contact Geo software. However, the court rejected this per-copy approach, siding instead with a damages calculation based on actual usage, resulting in an award of just $154,400.
The dispute centered on how to value the Navy’s unauthorized installations. Originally, Bitmanagement licensed its software to the Navy using “seat licenses” (one computer per license), but later switched to a “floating license” model, which allowed installations on many computers but limited the number of simultaneous users. The Navy failed to enforce this user cap, leading to the copyright infringement claim. The court found that, based on the parties’ licensing history and a hypothetical negotiation, the most reasonable measure of damages was not the number of copies made, but the number of users and the extent of actual use.
Importantly, the court clarified that copyright law does not require damages to be awarded on a per-copy basis in every case. Instead, damages should reflect the copyright owner’s actual loss, often determined by what the parties would have agreed to in a fair, arms-length negotiation. Here, the evidence showed that both parties had previously negotiated licenses based on usage, not installations, and Bitmanagement failed to provide evidence supporting a higher damages theory.
This case serves as a reminder that in copyright disputes—especially those involving software and government use—damages are not automatically calculated by multiplying the number of unauthorized copies by a standard license fee. Courts will look closely at the real-world value of the infringement and the likely terms of a negotiated license, emphasizing fairness and actual loss over punitive or windfall awards.