Harbor Motor Co. v. Arnell Cheyrolet-Geo, Inc. , 265 F.3d 630 ( 2001 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-3286
HARBOR MOTOR COMPANY, INCORPORATED, d/b/a
HARBOR OLDSMOBILE-GMC TRUCK, an
Indiana Corporation,
Plaintiff-Appellant,
v.
ARNELL CHEVROLET-GEO, INCORPORATED,
an Indiana Corporation, d/b/a ARNELL CHEVROLET,
and POST-TRIBUNE PUBLISHING COMPANY,
INCORPORATED, d/b/a POST-TRIBUNE NEWSPAPER,
an Indiana Corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 97 C 379--Allen Sharp, Judge.
ARGUED APRIL 2, 2001--DECIDED September 17, 2001
Before RIPPLE, MANION and KANNE, Circuit
Judges.
RIPPLE, Circuit Judge. Harbor Motor
Company, Inc. ("Harbor") brought suit
against Arnell Chevrolet-Geo, Inc.
("Arnell") and Post-Tribune Publishing
Company, Inc. ("Post-Tribune"), alleging
copyright infringement. Arnell and the
Post-Tribune tendered to Harbor an offer
of judgment for $20,100, which Harbor
rejected. The case proceeded to trial
and, at the close of Harbor’s case-in-
chief, both Arnell and the Post-Tribune
moved for judgment as a matter of law.
The district court granted the motion as
to the Post-Tribune but permitted the
claims against Arnell to go to the jury.
The jury found in favor of Harbor and
awarded Harbor $12,500 in damages.
The district court then awarded
attorney’s fees as follows: (1) the Post-
Tribune received over $104,000 in costs
and attorney’s fees as a prevailing party
under the Copyright Act, 17 U.S.C. sec.
101 et seq.; (2) Arnell received more
than $71,000 in costs and attorney’s fees
pursuant to Federal Rule of Civil
Procedure 68 because Harbor’s $12,500
judgment against Arnell was less than the
$20,100 joint offer of judgment; and (3)
Harbor’s request for costs and attorney’s
fees was denied. Harbor now appeals both
the district court’s decision to grant
the Post-Tribune’s motion for judgment as
a matter of law and the court’s award of
costs and attorney’s fees. For the
reasons set forth in the following
opinion, we reverse the judgment of the
district court and remand for further
proceedings.
I
BACKGROUND
A.
1.
Harbor and Arnell are competing
automobile dealerships located in
northwest Indiana. From 1994 to 1997,
Harbor conducted more than a dozen tent
sales in the parking lot of a SuperK
store in Portage, Indiana./1 To
advertise its tent sales, Harbor
principally relied on newspaper
advertising, particularly full-color
Sunday ads published in the Post-Tribune
newspaper. The design of the ads is
disputed and is sketched in brief here.
Harbor explains that its ads were
designed by Gino Burelli, one of its co-
owners and operators, with assistance
from David Lawson, Harbor’s other co-
owner. Burelli designed the ads by hand
on a piece of paper, then met with Karen
Johnson of Lighthouse Media, Harbor’s
advertising agency. Burelli directed
Johnson to adapt his designs to a
newspaper-friendly format. Johnson did so
using computer software and then
delivered the proofs to Burelli for
editing before they were submitted to the
newspaper for publication. For each tent
sale, Burelli took Harbor’s previous tent
sale advertisement and made changes to
the pre-existing text and design. All the
ads were similar to one another; each
successive ad was "tweaked" to improve
upon the earlier ads, although the
overall "look" of the ads was preserved.
Tr.II at 86 & 117.
Arnell and the Post-Tribune, however,
claim that Johnson, and not Burelli, is
the designer of the advertisements./2
Specifically, for each tent sale, Burelli
would take the ad Harbor used for the
last sale and draw changes to the pre-
existing design. He would then give the
ideas to Johnson, who would use computer
software to create an advertisement from
Burelli’s ideas and rough sketches.
2.
In 1997, Harbor conducted a tent sale
from June 11-14 and advertised the sale
in the Post-Tribune the week of Sunday,
June 8. Although Burelli did not
copyright the advertisement at the time,
Harbor did register the copyright for the
June advertisement on August 25, 1997.
Arnell also held a tent sale at the same
SuperK location on July 9-12, 1997.
Thomas Tenhove, Arnell’s sales manager,
contacted Peg Bryan, the Post-Tribune
sales representative who handled Arnell’s
advertising, and asked her to duplicate
Harbor’s ad. Bryan, however, told Tenhove
that she could not make an exact copy of
the Harbor ad and that changes would have
to be made to the ad before it could be
published as an Arnell ad. Bryan
testified at trial that she thought the
changes were necessary to ensure she was
"covering" herself and the newspaper
while at the same time doing "the job
that Arnell wanted." Id. at 156.
Bryan then gave a copy of the Harbor ad-
-complete with Tenhove’s handwritten
alterations--to Kim Piazza, the
newspaper’s graphic designer, and told
her that Arnell wanted its ad to look
like the Harbor copy. Using the Harbor
ad, Piazza created a "layout" for the
Arnell version. This layout was a copy of
the Harbor ad, with the following major
changes: Arnell’s logo instead of
Harbor’s appeared at the top; information
stating that sales would benefit the Boys
& Girls Club of Porter County was moved
from the middle of the advertisement to
the bottom of the page; and a notation
was added that there would be a "Free
Carnival Cruise with Purchase." The ad
ran in the Post-Tribune’s Sunday edition
on July 6, 1997.
Burelli saw Arnell’s ad in the Post-
Tribune. At first glance, he thought that
the ad was Harbor’s own for an upcoming
July tent sale, and he called Johnson to
complain that the ad had been run on the
wrong day. After Burelli and Johnson
discovered that the ad was for Arnell,
Johnson called Bryan and other Post-
Tribune employees and demanded that the
newspaper discontinue the ad. Bryan and
Piazza then created a new and different
ad for Arnell to advertise its tent
sales.
Harbor held another tent sale in July
1997. It claims that, even though it
conducted the sale in the same manner as
its prior sales, it sold approximately
sixteen fewer cars than it had averaged
in previous sales, with a resulting loss
of approximately $21,000./3
B.
Harbor filed suit in late 1997, claiming
(1) that Arnell and the Post-Tribune
infringed upon its copyright, in
violation of 17 U.S.C. secs. 412 and
501-505; and (2) that Arnell
intentionally interfered with its
prospective business advantage, a tort
under Indiana law.
During pretrial proceedings, Arnell
tendered an offer of judgment to Harbor
for $2,500, and the Post-Tribune tendered
a separate offer of judgment for $7,500.
Harbor did not accept either offer.
Arnell and the Post-Tribune then tendered
a joint offer of judgment to Harbor for
$20,100, an unapportioned lump-sum offer
that did not specify how much of the
offer applied to each defendant. The
offer provided that "the total amount of
this offer of judgment [was to be]
collective against both defendants, and
not to be construed as entitling [Harbor]
to the lump sum stated herein against one
defendant or the other individually."
R.142, Ex.J at 1-2. The offer further
specified that the $20,100 was to be
"inclusive of attorneys’ fees and costs
up to the date of acceptance of this
offer" and that acceptance would
"preclude any subsequent claim for costs
or attorney[’]s fees by plaintiff." Id.
at 1-2. Harbor rejected this joint offer,
and the case was tried to a jury.
At the close of Harbor’s case-in-chief,
both Arnell and the Post-Tribune moved
for judgment as a matter of law pursuant
to Federal Rule of Civil Procedure 50(a).
They argued that Harbor did not own the
copyright in the advertisement and that
they had not willfully infringed Harbor’s
copyright. Arnell also moved for judgment
as a matter of law on the intentional
interference with business advantage
claim.
The district court granted Arnell’s
motion on the state-law claim and granted
both the Post-Tribune’s and Arnell’s
motions with respect to willful
infringement./4 The court also dismissed
the Post-Tribune from the case entirely,
ruling that:
I must confess to you in complete
candor--and I am well aware that the
First Amendment has not been argued here.
It is a rare newspaper case that that
isn’t argued, but it hasn’t been.
But there are some values involved that
I think are implicit in the way in which
newspapers should or are supposed to act-
-and granted that they, like many other
of the powerful forces in our society,
are far from perfect--I have a lot of
problem--and I am going to lay this out
with great candor--I have a great deal of
problem, especially with the one witness,
of imposing an obligation on this
newspaper under the circumstances of this
case to hold them responsible for any
improper dealing with regard to the
copyright involved.
I am going to let them out. I am going
to grant their motion for directed
verdict. . . .
So I am not going to--I am excusing the
newspaper on different grounds than the
validity of the copyright.
Tr.II at 280-81.
The jury subsequently returned a verdict
in Harbor’s favor against Arnell on
Harbor’s copyright claim and awarded
Harbor statutory damages of $12,500. Each
party then filed motions to recover costs
and attorney’s fees; the district court
referred the motions to a magistrate
judge. The magistrate judge recommended
(1) that the Post-Tribune be awarded over
$104,000 in costs and attorney’s fees as
a prevailing party under the Copyright
Act; (2) that Arnell be awarded more than
$71,000 in costs and attorney’s fees,
finding that Federal Rule of Civil
Procedure 68 required it to do so because
Harbor’s $12,500 judgment against Arnell
was less than the $20,100 joint offer of
judgment; and (3) that Harbor’s request
for costs and attorney’s fees as the
prevailing party be denied. The district
court adopted the magistrate judge’s
recommendation in its entirety, and
Harbor now appeals.
II
ANALYSIS
A. Judgment as a Matter of Law for the
Post-Tribune
Harbor contends that the district court
erroneously granted the Post-Tribune’s
motion for judgment as a matter of law
because it improperly determined that the
First Amendment shielded the newspaper
from liability. The Post-Tribune, in
contrast, argues (1) that Harbor only
sued the Post-Tribune for contributory,
and not direct, infringement, and a prima
facie case of contributory infringement
was not made out; and (2) that the
district court did not base its ruling on
First Amendment grounds.
We first must determine the cause of
action on appeal. Despite the Post-
Tribune’s assertion to the contrary in
its brief, we believe that all parties
proceeded in the district court under a
direct infringement claim. In both its
motion for summary judgment and its trial
brief, for example, the Post-Tribune
centered its analysis on a direct
infringement claim and made no mention of
contributory infringement. Likewise, the
Post-Tribune did not refer to
contributory infringement in its motion
for judgment as a matter of law. Harbor
also based its pleadings on a direct
infringement claim; in paragraph one of
its complaint, it alleged copyright
infringement under 17 U.S.C. secs.
412, 501-505, all relating to direct
infringement./5 The Post-Tribune points
to various pieces of the district court’s
language in an effort to support its
theory that the court granted its motion
on a contributory infringement basis, but
we are not persuaded by those citations.
The cited references do not relate to
contributory infringement but instead are
taken from the court’s discussion of
Arnell’s motion on the willful
infringement claim. Accordingly, we shall
examine the elements of direct
infringement to determine whether the
Post-Tribune’s case should have been
submitted to the jury.
To make out a prima facie claim of
direct infringement, Harbor must show (1)
that it owned a valid copyright in the
advertisement and (2) that the Post-
Tribune copied constituent elements of
the work that were original. See Wildlife
Express Corp. v. Carol Wright Sales,
Inc., 18 F.3d 502, 507 (7th Cir. 1994)
(quoting Feist Publ’ns, Inc. v. Rural
Tel. Serv. Co., 499 U.S. 340, 361
(1991)); see also 3 Melville B. Nimmer,
Nimmer on Copyright, sec. 13.01[A], at
13-6 (1993). Harbor contends that it made
out a prima facie case against the Post-
Tribune, evidenced by the jury’s decision
in favor of Harbor against Arnell on the
same evidence. We agree.
As an initial matter, we review de novo
a district court’s grant of judgment as a
matter of law. See Bruso v. United
Airlines, Inc., 239 F.3d 848, 857 (7th
Cir. 2001). We ask whether the evidence
presented, combined with the reasonable
inferences permissibly drawn therefrom,
is sufficient to support the verdict when
viewed in the light most favorable to the
party against whom the motion is
directed. See Lane v. Hardee’s Food Sys.
Inc., 184 F.3d 705, 707 (7th Cir. 1999).
We shall reverse the judgment "only if
enough evidence exists that might sustain
a verdict for the nonmoving party." Id.(quoting Continental Bank N.A. v.
Modansky, 997 F.2d 309, 312 (7th Cir.
1993)). In deciding this question, we may
not substitute our view of contested
evidence for the jury’s. See Place v.
Abbott Labs., 215 F.3d 803, 809 (7th Cir.
2000), cert. denied, 121 S. Ct. 768(2001).
We conclude that the district court’s
decision to grant the Post-Tribune’s
motion for judgment as a matter of law
was in error. The court in granting the
Post-Tribune’s motion indicated only that
it did not believe that liability could
be imposed on the Post-Tribune consistent
with the First Amendment because "there
are some values involved that I think are
implicit in the way in which newspapers
should or are supposed to act." Tr.II at
280./6 The court explained that it had
the "private feeling" that "this is not
the kind of case that the copyright act
was really all about." Id. at 281.
Nowhere in its ruling did the district
court articulate a basis, grounded in the
Copyright Act, for granting the Post-
Tribune’s motion for judgment as a matter
of law. It simply noted that it was
"excusing the newspaper on different
grounds than the validity of the
copyright." Id.
In our view, the evidence, viewed in the
light most favorable to Harbor, could
support a verdict in its favor on direct
infringement grounds. First, the jury
verdict against Arnell demonstrates (1)
that Harbor owned a valid copyright in
the advertisement and (2) that Arnell
infringed Harbor’s copyright. Harbor
asserts the same ownership rights in the
copyright against the Post-Tribune/7 and
appears to have an even stronger case
because it was the newspaper that copied
the advertisement. The Post-Tribune’s own
ad representative and graphic designer
created the offending ad, and the paper
published it. Because enough evidence
exists to sustain a verdict for Harbor,
we conclude that the district court erred
in granting judgment as a matter of law
to the Post-Tribune on a direct infringe
ment claim.
Therefore, the judgment as a matter of
law in favor of the Post-Tribune is
reversed. The order granting the Post-
Tribune costs and attorney’s fees as a
prevailing party is likewise reversed./8
B. Rule 68
1. Prevailing Party
Arnell and the Post-Tribune made a joint
offer of judgment to Harbor in the amount
of $20,100. Harbor rejected the offer
and, at trial, obtained a judgment
against Arnell for $12,500. The district
court then permitted Arnell to recover
its fees and costs pursuant to Federal
Rule of Civil Procedure 68, a decision
Harbor contends was in error.
Specifically, because Arnell was not a
prevailing party under the Copyright Act,
Harbor claims that Arnell could not
receive the fees under Rule 68’s
mandatory fee-shifting provision. Arnell
argues in response that it was not
required to be a prevailing party to
recover its attorney’s fees.
Rule 68 permits a defendant to serve on
a plaintiff "an offer to allow judgment
to be taken against the [defendant] for
the money or property or to the effect
specified in the offer." Fed. R. Civ. P.
68. If the plaintiff does not accept the
offer of judgment within ten days and
then obtains a judgment against the
defendant that is less favorable than the
offer, the plaintiff "must pay the costs
incurred after the making of the offer."
Id. Thus, the plaintiff is precluded from
recovering his costs incurred after the
making of the offer. See Marek v. Chesny,
473 U.S. 1, 10 (1985)./9 Rule 68 also
requires the plaintiff to pay any costs
the defendant incurs after making the
offer if the plaintiff’s judgment is less
favorable than the offer. See Gavoni v.
Dobbs House, Inc., 164 F.3d 1071, 1075
(7th Cir. 1999). We review the district
court’s underlying factual findings for
clear error, but to the extent a party’s
entitlement to costs rests on an
interpretation of Rule 68, we review the
district court’s legal conclusions de
novo. See id.Although Rule 68 by its terms only
applies to costs, the Supreme Court has
held that attorney’s fees are included
within the definition of "costs" for
purposes of Rule 68 when the underlying
statute includes attorney’s fees in its
definition of costs. See Marek, 473 U.S.
at 9. Section 505 of the Copyright Act
defines costs to include attorney’s fees,
but only the prevailing party is entitled
to their award. See 17 U.S.C. sec. 505
("Except as otherwise provided by this
title, the court may also award a
reasonable attorney’s fee to the
prevailing party as part of the costs.").
This appeal thus asks us to determine
whether Arnell must be a prevailing party
under the Copyright Act in order to
recover attorney’s fees pursuant to Rule
68.
Courts that have addressed whether a
non-prevailing party can nevertheless
obtain attorney’s fees under Rule 68 have
expressed differing views. In Crossman v.
Marcoccio, 806 F.2d 329 (1st Cir. 1986),
cert. denied, 481 U.S. 1029 (1987), the
First Circuit held that a losing
defendant could not recover post-offer
attorney’s fees because it was not the
prevailing party. See Crossman, 806 F.2d
at 334. ("Although appellants’ attorney’s
fees were ’properly awardable’ costs
under section 1988, appellees’ attorney’s
fees were not. The statute awards costs
only to a ’prevailing party.’") (emphasis
in original); see also O’Brien v. City of
Greers Ferry, 873 F.2d 1115, 1120 (8th
Cir. 1989)./10
The First Circuit in Crossman rejected
the same argument that Arnell makes here,
explaining that the effort to dismiss the
"prevailing party" language in Marek
distorts the law governing the
relationship between Rule 68 and [the
substantive statute] by ignoring the two
crucial words that serve to qualify the
holding of the Marek case. Marek states
that "the term ’costs’ in Rule 68 was
intended to refer to all costs properly
awardable under the relevant substantive
statute or other authority." . . . The
Court stresses the importance of the two
emphasized words by repeating them in the
next sentence of the opinion: "In other
words, all costs properly awardable in an
action are to be considered within the
scope of Rule 68 ’costs.’"
Crossman, 806 F.2d at 333 (emphasis in
original).
The Eleventh Circuit, however, has
determined that a Rule 68 award of costs
includes attorney’s fees even if the
defendant is not the prevailing party.
See Jordan v. Time, Inc., 111 F.3d 102,
105 (11th Cir. 1997). There, the
courtdetermined that the plaintiff was
required to pay the defendant’s costs
incurred after the making of the offer,
simply stating that "Rule 68 ’costs’
include attorneys’ fees when the
underlying statute so prescribes. The
Copyright Act so specifies." Id./11
The court in Jordan, however, did not
confront squarely the requirement in
section 505 of the Copyright Act that a
party seeking attorney’s fees must be a
prevailing party; the Eleventh Circuit
read Marek to mean that the underlying
statute, the Copyright Act, simply must
define costs to include attorney’s fees
for the fees to be properly awardable
under Rule 68. See id.We agree with the analysis in Crossman
and, therefore, hold that only prevailing
parties can receive attorney’s fees
pursuant to Rule 68. Our conclusion is
compatible with the language in Marek
that ties the award of Rule 68 fees to
only those costs that are properly
awardable under the substantive statute
at issue. See Marek, 473 U.S. at 9(concluding that the term "costs" in Rule
68 was "intended to refer to all costs
properly awardable under the relevant
substantive statute or other authority. .
. . Thus, absent congressional
expressions to the contrary, where the
underlying statute defines ’costs’ to
include attorney’s fees, we are satisfied
such fees are to be included as costs for
purposes of Rule 68."). The authority
holding to the contrary does not, in our
view, adequately address the Copyright
Act’s mandate that only the prevailing
party is permitted to recover its
attorney’s fees.
A prior case from this circuit, Poteete
v. Capital Engineering, Inc., 185 F.3d
804 (7th Cir. 1999), supports our
analysis. In that case, dealing with
ERISA, we held that the defendants were
not entitled to attorney’s fees under
Rule 68. See Poteete, 185 F.3d at 807.
"The statutes and common law principles
that sometimes entitle a party to recover
his attorneys’ fees limit that
entitlement to prevailing parties . . .,
and any defendant who is entitled to
invoke Rule 68 is by definition not a
prevailing party." Id. at 807-08. Thus,
Poteete indicates that defendants who are
not prevailing parties cannot recover
attorney’s fees under Rule 68. This
conclusion is applicable to other
statutes, including the Copyright Act.
In sum, we conclude that a non-
prevailing party cannot, under the
Copyright Act, receive post-offer
attorney’s fees pursuant to Rule 68.
2. Apportionment
Harbor also argues that the $20,100
joint offer of judgment from the Post-
Tribune and Arnell was not comparable to
the judgment obtained at trial only
against Arnell. Thus, Harbor contends,
Rule 68’s cost-shifting provision was not
triggered, and Harbor is not responsible
for Arnell’s fees and costs. Arnell
maintains, however, that multiple
defendants may make a joint offer of
judgment and that the two figures in this
case--the amount of the judgment and the
settlement offer--are easily comparable.
Generally, plaintiffs face "serious
consequences in either accepting or
rejecting a Rule 68 offer." Gavoni, 164
F.3d at 1076. As we indicated earlier, a
judgment less favorable than the offer
requires that a plaintiff pay the
defendant’s post-offer costs and forego
entitlement to its own attorney’s fees.
There must, therefore, "be a clear
baseline from which plaintiffs may
evaluate the merits of their case
relative to the value of the offer." Id.We have explained that an
ambiguous offer places the plaintiff in
an uncomfortable position. Not knowing
the actual value of the offer, he can’t
make an intelligent choice whether to
accept it--and there are consequences
either way. For unlike the case of an
ordinary contract offer, the offeree
cannot reject it without legal
consequences, since if he rejects it and
then doesn’t do better at trial he has to
pay the defendant’s post-offer costs.
Nordby v. Anchor Hocking Packaging Co.,
199 F.3d 390, 392 (7th Cir. 1999).
In this case, the parties dispute
whether the baseline was sufficiently
clear. Harbor contends that it was not;
the joint offer was from both defendants,
but unapportioned, with no indication as
to the amount for which each defendant
was liable. Arnell, however, claims that
Harbor possessed all the information it
needed to decide whether to accept the
offer.
Ambiguity in an offer of judgment is to
be construed against the defendant that
makes the offer; a "plaintiff should not
be left in the position of guessing what
a court will later hold the offer means."
Webb v. James, 147 F.3d 617, 623 (7th
Cir. 1998). Accordingly, the burden is on
the defendant-offeror to demonstrate that
its "offer was more favorable than the
judgment and that the mandatory cost-
shifting provision was therefore
triggered." Gavoni, 164 F.3d at 1075-76.
The defendant "bear[s] the burden of
precision." Id. at 1076 n.1. He should
"state his intentions clearly, and any
failure to do so will be at his peril."
Id. at 1076 (quoting Chambers v. Manning,
169 F.R.D. 5, 8 (D. Conn. 1996)).
This circuit--and others--already have
held that various joint offers do not
trigger the fee-shifting provisions of
Rule 68. In Gavoni, 164 F.3d at 1077, for
example, we determined that an
unapportioned offer given to multiple
plaintiffs did not permit the plaintiffs
to "independently evaluate" the offer.
More specifically, an unapportioned offer
of $10,000 to three plaintiffs could not
be compared to the judgment finally
obtained; the jury returned a verdict in
favor of each plaintiff individually in
the amounts of $2,000, $2,000, and
$2,500. See id. at 1076-77. Because it
was impossible to tell whether the amount
each plaintiff received from the jury was
less favorable than what each would have
received from the unapportioned $10,000
offer divided among them in an
undetermined manner, we determined that
the offer of judgment had no effect. See
id. at 1076.
In Johnston v. Penrod Drilling Co., 803
F.2d 867, 870 (5th Cir. 1986), the Fifth
Circuit similarly concluded that Rule 68
did not apply to an unapportioned joint
offer from two defendants, explaining
that the "figure represented by the joint
offer of [the two defendants] on the one
hand and the dollar judgment obtained
only against [one defendant] on the other
are not comparable figures." In that
case, however, the plaintiff settled with
one of the two defendants prior to trial.
The court found that the judgments were
not comparable because the settlement may
have had an effect on the damage award.
See Johnston, 803 F.2d at 870. "The
character and dynamics of a trial often
are drastically changed when one or more
parties are dismissed." Id. If the jury
had found both defendants at fault, it
likely "would have reduced the extent of
[the plaintiff’s] contributory
negligence." Id.Here, we see no way to compare the
$20,100 offer of judgment made jointly by
the Post-Tribune and Arnell with the
$12,500 judgment that Harbor obtained
against Arnell alone. For example, did
the parties intend to apportion the offer
equally? Or did they envision another
division, one more commensurate with
their varying degrees of responsibility?
The Post-Tribune’s initial, individual
offer of judgment for $7,500 was three
times that of Arnell’s $2,500 offer of
judgment. As we noted in Gavoni, "varied
constructions of the single offer only
underscore its fatal problem:
imprecision." Gavoni, 164 F.3d at 1076.
Arnell submits that Harbor had all the
information it needed to make an informed
decision to accept the offer. More
specifically, Arnell maintains that
Harbor knew that the maximum recovery
available to it on the single claim of
non-willful copyright infringement was
$20,000, a hundred dollars less than the
offer of judgment./12 However, this
argument does not take into account that,
at the time the offer of judgment was
made, Harbor was pursuing a claim for
willful infringement, which at the time
carried a maximum statutory recovery of
$100,000. The willful infringement claim
was not dismissed until after Harbor
presented its case-in-chief at trial,
well after the expiration of the ten days
Harbor had in which to accept the offer.
The Post-Tribune, notably, was the entity
that had designed and published the
infringing ad.
In conclusion, courts require "easily
comparable sums," Gavoni, 164 F.3d at
1076, and these were not. The ambiguous
nature of the offer of judgment is
another reason why Arnell should not have
received a fee award under the auspices
of Rule 68. An offeree must know what is
being offered before being held
responsible for refusing the offer.
We need not go so far as to conclude,
however, that Rule 68 always requires an
exact delineation of the manner in which
damages are to be apportioned among
multiple parties. There might be
circumstances where it would be clear to
the district court how a settlement is to
be shared among offerors and/or offerees.
This, however, is not such a case./13
Conclusion
The order granting judgment as a matter
of law to the Post-Tribune is reversed;
therefore, the order of attorney’s fees
to the Post-Tribune as a prevailing party
also must be reversed. The order awarding
Arnell costs and attorney’s fees under
Rule 68 is reversed. The order denying
Harbor its costs and attorney’s fees is
vacated. The case is remanded to the
district court for further proceedings
consistent with this opinion. Circuit
Rule 36 shall apply. Harbor may recover
its costs in this court.
IT IS SO ORDERED
FOOTNOTES
/1 A tent sale is a commonly used promotional device
where an auto dealer sells cars from a location
other than its dealership.
/2 Arnell and the Post-Tribune point out that Gino
Burelli and Karen Johnson amended their deposi-
tion answers by way of errata sheet to reflect
their contention that Burelli, and not Johnson,
designed the tent sale ads.
/3 In August 1997, Harbor filed a copyright applica-
tion for its June 1997 tent sale advertisement.
On the application, Harbor is listed as the owner
of a visual art entitled "Harbor Tent Sale," a
work made for hire. Harbor did not seek copyright
registration for any of its other tent sale ads.
/4 The district court’s decision to grant a judgment
as a matter of law on Harbor’s claim of willful
infringement reduced Harbor’s potential statutory
damages from $100,000 (the maximum statutory
damages for willful infringement) to $20,000 (the
maximum for non-willful infringement). See 17
U.S.C. secs. 504(c)(1) & (2). We note that a
recent change to the statute permits the recovery
of $150,000 for willful infringement and $30,000
for non-willful infringement.
/5 The only mention of contributory infringement is
in paragraph 21 of the complaint, which indicated
that the "conduct of the Post-Tribune constitutes
contributory infringement of Harbor’s copyright
in the Harbor Advertisement." R.5 at 6.
/6 The Post-Tribune never argued that its publica-
tion of the Arnell advertisement was protected by
the First Amendment.
/7 The Post-Tribune attacks the validity of Harbor’s
copyright in several respects, arguing on appeal
that Harbor is not the owner of the copyright in
its ad, that the ad is a derivative work, that
the ad published by the Post-Tribune did not
infringe any copyrightable elements of Harbor’s
ad, that the Post-Tribune’s publication of the ad
constituted fair use, and that any infringement
was de minimus and, therefore, not actionable.
Because the jury already decided these claims in
Harbor’s favor when it found against Arnell on
the copyright infringement claim, we shall not
undertake here an in-depth discussion of these
aspects of copyright law.
/8 To the extent that the order denying Harbor
attorney’s fees as a prevailing party was denied
because of the grant of a judgment as a matter of
law to the Post-Tribune, that order must be
vacated.
/9 In Marek v. Chesny, 473 U.S. 1 (1985), the
Supreme Court confronted only the question of
whether a party’s own attorney’s fees could be
shifted back to it under Rule 68. See id. at 9("Since Congress expressly included attorney’s
fees as ’costs’ available to a plaintiff in a
sec. 1983 suit, such fees are subject to the
cost-shifting provision of Rule 68"); see also
Crossman v. Marcoccio, 806 F.2d 329, 333 (1st
Cir. 1986) ("The Marek Court, however, did not
reach the precise issue before us today [whether
a defendant can recover attorney’s fees where he
is not the prevailing party, but the plaintiff
recovered less at trial than what the defendant
offered in settlement] because the defendants in
that case failed to appeal the portion of the
district court’s order denying their request for
post-offer attorney’s fees.").
/10 See also Jones v. Fleetwood Motor Homes, 127 F.
Supp.2d 958, 971 & n.12 (N.D. Ill. 2000); Doman-
ski v. Funtime, Inc., 149 F.R.D. 556, 557 (N.D.
Ohio 1993); 12 Wright & Miller, Federal Practice
& Procedure, 3006.2, at 132 (2d ed. 1997) ("But
the Supreme Court was careful to specify in Marek
that only ’properly awardable’ costs were to be
awarded to defendants, and the lower courts have
properly held that this means that civil-rights
defendants can recover their fees as a part of
costs under Rule 68 only if they can satisfy the
otherwise-applicable standard for recovery by
defendants.").
/11 See also Lucas v. Wild Dunes Real Estate, Inc.,
197 F.R.D. 172, 175-77 (D.S.C. 2000) (same,
citing Jordan).
/12 Arnell also submits that Harbor knew from the
beginning that the willful infringement claim had
no merit. We decline to engage in such specula-
tion.
/13 The denial of attorney’s fees to Harbor against
Arnell appears to have been predicated on the
award of costs and attorney’s fees to Arnell
under Rule 68. Since the Rule 68 ruling of the
district court cannot stand, we also must vacate
the court’s denial of attorney’s fees to Harbor.