Copyright Infringement of English Language Exams and Compensation

The Educational Testing Service (ETS), a New Jersey-based non-profit organization developing and administering English Language tests such as the Test of English for International Communication (TOEIC) and the Test of English as a Foreign Language (TOEFL), sued a leaker for leaking TOEIC exam questions in 2017. In a recent decision, the IP Court of Taiwan ruled in favor of ETS and ordered the leaker to pay damages at NTD 4 million by adopting a novel approach to calculate the damages, based primarily on ETS’ restoration cost to rearrange the following tests and repair damaged credibility. ETS v. Wei, 109 Min Zhu Shang 19, Taiwan's IP Court (March 2021) (second instance decision). The decision showcases the Court’s flexibility and acceptance of new ways in formulating compensation in unconventional cases when being asked to exercise discretion with statutory damages.

Prior to the TOEIC exam in July, 2017, one test-taker was approached by a leaker who claimed to hold the questions and answers of the upcoming exams. To establish his credibility, the leaker disclosed some of the questions to the test-taker. Thus, while the test-taker did not purchase the service, when he took the exam on July 31, he was appalled to see that the questions formerly disclosed to him appeared on the exam.

The test-taker subsequently reported the incident to the ETS in early September of the same year. In response, ETS substituted the questions of the TOEIC exam scheduled for September 24, 2017. After analyzing the test responses, ETS found that around 40 examinees had submitted identical or similar answers to the leaked questions. ETS questioned those examinees and found that a man named “Bruce” (hereon referred to as the Defendant) provided them with the answers.

Through further investigation, ETS uncovered the Defendant’s strategy: while the TOEIC tests in the US and Taiwan are held in the same month and use the same questions, the tests in the US were held earlier than the ones in Taiwan. Taking advantage of this cross-jurisdiction administrative lag, the Defendant obtained the test questions in the US and leaked them to Taiwanese examinees before they sat for the test in Taiwan.

Upon the discovery, ETS sued the Defendant for copyright infringement, claiming damages at 13 million New Taiwan Dollars (NTD). To support the damages claim, ETS submitted to the Court its account books including annual financial reports on the preceding two years, showing their test-related expenses amount to roughly USD 300 million every year while their annual revenue from TOEIC exams is close to NTD 8 billion. Additionally, ETS stressed that each TOEIC exam underwent rigorous assessments and pretesting before being formally used on test-takers.

In the decision, Taiwan’s IP Court held that the content of the TOEIC exam should be protected by Taiwan’s Copyright Act and the Defendant’s divulgence of the test questions did infringe ETS’ copyright. The Court further held that, as the acclaimed reputation of TOEIC was fully known to the Defendant who had taken the previous US TOEIC tests, the Defendant’s intent to infringe the copyright in the TOEIC questions is clear.

But how should the damages be calculated? Despite the evidence from ETS for their expenses on administering the tests, the Court viewed that ETS failed to specify what portion of the amount were spent on TOEIC rather than other ETS tests such as TOEFL, GRE, and SAT, let alone what fraction of the expenses were spent on drafting the test questions. Furthermore, the questions divulged by the Defendant are but a small part of ETS’ entire question bank, the Court held.

Article 88.3 of Taiwan’s Copyright Act stated that if the injured party finds it difficult to prove the damages amount it claims, it may ask the court to determine an appropriate damages amount. Where the copyright infringement is intentional and serious, the damages may be increased up to NTD 5 million.  On such grounds, upon ETS’ motion, the Court decided that, since it was difficult for ETS to prove actual damages, the Defendant should pay a compensation of NTD 4 million to ETS. At the time of this report, it is unclear whether the Defendant has appealed (to the Supreme Court).

This court decision has shed light on how damages are determined in Taiwanese courts for infringement of copyrights in examination materials. The harm on ETS’ credibility and the costs incurred by repairing the injured credibility are the main factors the IP Court considered in this case when determining the damages amount. This is juxtaposed with the conventional methods of determining damages which are based on either the plaintiff’s lost profits due to the infringement or the infringer’s profit from the infringement. Although it is still to be seen whether and how this new approach to determine damages will be applied in future cases, one thing is clear: Taiwan’s IP Court is perceptive to new theories in unconventional cases.

The significance of this case is even clearer when compared with a copyright lawsuit of similar nature that took place in Beijing, China nearly two decades ago. Just as ETS sued the Defendant in Taiwan for leaking TOEIC questions, ETS in this case filed a lawsuit in Beijing against New Oriental, an established educational institution, over its use of ETS’s TOEFL test forms. However, when calculating the damages, the Beijing court simply considered New Oriental’s profit harvested from the infringement, thus granting ETS a damages award at RMB 3.7 Million. See news reports on this case here and here.

Another incident worth noting took place in Texas, US in 2008 where a college prep company was accused by College Board, an educational organization known for administering the SAT, of illegally obtaining unreleased SAT forms and providing them to clients. College Board sued the company over copyright infringement but the parties eventually settled with the college prep company paying USD 1 million in damages to College Board. As the two reached settlement, it is unclear how the US court would have addressed the damages calculation. See a news report on this case here.