Copyright law provides the copyright holder with a legal monopoly on his original works of authorship. Such works include music, literature, art and even software algorithms. The rationale for punishing those who infringe copyrights is that infringement deprives copyright holders of the fruits of their labor, thereby providing an economic disincentive to produce such works in the first place.
A copyright holder can collect compensatory damages from you if he can prove the amount of economic damages he suffered as a result of your infringement. Since damages can be difficult to prove in copyright infringement cases, most plaintiffs choose to seek statutory damages instead. A plaintiff may sue for compensatory damages if he is ineligible for statutory damages due to failure to register his work with the U.S. Copyright Office, or if he can prove damages in excess of the maximum allowable statutory damages award.
You may become liable for statutory damages under the Copyright Act if the work was registered prior to your infringement, or if the work was published prior to your infringement and registered within three months of publication. Statutory damages range from $200 to $150,000 per copyrighted work. The copyright holder does not have to prove that he suffered any actual economic damages to collect statutory damages from you.
A court may issue an order enjoining you against further copyright violations. Violation of an injunction can result in a charge of contempt of court, which is a criminal offense that can result in incarceration.
A court can order a federal official to seize material that is alleged to infringe a copyright. It often issues seizure orders when a copyright lawsuit is filed, pending the outcome of the trial. If the plaintiff wins the case, the material will be destroyed without compensation to you. If you win the case, however, the court will return the material to you and may order the plaintiff to pay you compensation for the seizure.
You may be criminally prosecuted for copyright violation if you do it willfully -- after receiving a warning from the copyright holder -- for financial gain or for reproducing or distributing copyrighted material with an aggregate value exceeding $1,000. The maximum penalty is five years imprisonment and a $500,000 fine.