Dream Games of Az v. Pc Onsite ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DREAM GAMES OF ARIZONA, INC.; 
AMERICAN SOFTWARE DEVELOPMENT
COMPANY, INC.,
Plaintiffs-Appellees,
v.
PC ONSITE; CASEY HAGON, No. 07-15847
Defendants-Appellants, D.C. No.
and  CV-03-00433-PHX-
AFFORDABLE VIDEO SYSTEMS, LTD.; ROS
GARLAND PIERCE; FRANK DIANA
CITY ENTERTAINMENT,
Defendants,
v.
PAUL PEREZ,
Third-party-defendant.

3987
3988 DREAM GAMES OF ARIZONA v. PC ONSITE
DREAM GAMES OF ARIZONA, INC.; 
AMERICAN SOFTWARE DEVELOPMENT
COMPANY, INC.,
Plaintiffs-Appellants,
v.
PC ONSITE; CASEY HAGON, No. 07-15919
Defendants-Appellees, D.C. No.
and  CV-03-00433-PHX-
AFFORDABLE VIDEO SYSTEMS, LTD.; ROS
GARLAND PIERCE; FRANK DIANA OPINION
CITY ENTERTAINMENT,
Defendants,
v.
PAUL PEREZ,
Third-party-defendant.

Appeal from the United States District Court
for the District of Arizona
Roslyn O. Silver, District Judge, Presiding
Argued and Submitted
November 20, 2008—San Francisco, California
Filed April 2, 2009
Before: William C. Canby, Jr. and Kim McLane Wardlaw,
Circuit Judges, and Richard Mills,* District Judge.
Opinion by Judge Wardlaw
*The Honorable Richard Mills, United States District Judge forthe Cen-
tral District of Illinois, sitting by designation.
3992 DREAM GAMES OF ARIZONA v. PC ONSITE
COUNSEL
Ray K. Harris, Esq., Fennemore Craig, P.C., Phoenix, Ari-
zona, for defendants-appellants/appellees PC Onsite.
Marvin A. Glazer, Esq., Cahill, Von Hellens & Glazer P.L.C.,
Phoenix, Arizona, for plaintiffs-appellees/appellants Dream
Games of Arizona, Inc.
DREAM GAMES OF ARIZONA v. PC ONSITE 3993
OPINION
WARDLAW, Circuit Judge:
Dream Games of Arizona (“Dream Games”) prevailed in
its lawsuit against PC Onsite for copyright infringement of
“Fast Action Bingo,” an electronic video bingo game, and
was awarded statutory damages. We must decide whether (1)
the district court properly allowed the jury to see unprotect-
able elements of the game without identifying the protectable
elements; (2) the jury should have been allowed to hear evi-
dence that Fast Action Bingo was operated illegally in two
states; (3) statutory damages were available to Dream Games
despite the illegal operation; and (4) the district court erred in
dismissing claims against PC Onsite’s majority owner for lack
of evidence of direct infringement. We have jurisdiction, 28
U.S.C. § 1291, and we affirm the district court’s rulings.
I. FACTUAL AND PROCEDURAL BACKGROUND
Dream Games, a corporation that creates, designs, devel-
ops, licenses, and sells electronic video bingo games, devel-
oped an electronic video game called Fast Action Bingo. In
March 2002, Dream Games entered negotiations with PC
Onsite, a company that licenses, distributes, and sells com-
puter hardware and software, regarding the possibility of PC
Onsite performing software upgrade work on Fast Action
Bingo. When PC Onsite was given the original source code
for Fast Action Bingo, the two companies signed a third party
source code nondisclosure agreement, which listed Dream
Games as the licensor and PC Onsite as the licensee, and pro-
vided that Dream Games would retain all intellectual property
rights in the proprietary information provided to PC Onsite.
The agreement prohibited PC Onsite from assigning, selling,
distributing, licensing, or otherwise transferring the propri-
etary information.
PC Onsite created a new version of Fast Action Bingo, cal-
led “Fast Action Bingo II.” In a September 2002 meeting
3994 DREAM GAMES OF ARIZONA v. PC ONSITE
attended by PC Onsite representatives Casey Hagon, presi-
dent, and Garland Pierce, co-founder and majority owner, PC
Onsite presented Fast Action Bingo II to Dream Games.
Negotiations broke down at the meeting, and though the par-
ties made continued attempts at negotiation, the futility of fur-
ther efforts soon became clear to PC Onsite. Immediately
after the breakdown of negotiations, PC Onsite created
“Quick Play Bingo I”—an electronic video bingo game that
would compete with Fast Action Bingo—on the basis of the
product that PC Onsite developed for Dream Games. On
November 27, 2002, Dream Games registered a copyright,
No. TX 5-622-656, for the Fast Action Bingo I source code.
In December 2002, Pierce and Hagon jointly presented a
demonstration of Quick Play Bingo I to City Entertainment,
a company that operates bingo parlors. PC Onsite and City
agreed to install and operate Quick Play Bingo I in two bingo
parlors in Utah and three bingo parlors in Wyoming. City had
previously offered Fast Action Bingo at the two Utah parlors,
and at one of the Wyoming parlors. Thus, Fast Action Bingo
and Quick Play Bingo directly competed with each other in
City’s bingo parlors between January 2003 and March 2003.
Dream Games and American Software Development Com-
pany, a licensor of Fast Action Bingo, filed a complaint in the
United States District Court for the District of Arizona, alleg-
ing copyright infringement under 17 U.S.C. § 501, common
law breach of contract, and unjust enrichment, and seeking
injunctive relief and damages. Specifically, Dream Games
alleged that PC Onsite, Casey Hagon, and Garland Piece (col-
lectively, “PC Onsite”),1 “having full knowledge of the copy-
right rights of Dream Games, have infringed Dream Games’
1
Paul Perez, president of Dream Games, was later named a third party
defendant. Other defendants Affordable Video Systems, a licensed distrib-
utor of both Fast Action Bingo and Quick Play Bingo, Frank Diana, and
City Entertainment LLC, were dismissed by stipulation before summary
judgment.
DREAM GAMES OF ARIZONA v. PC ONSITE 3995
copyrights by manufacturing, displaying, distributing, . . .
selling, [and] licensing . . . an electronic video bingo game
known as ‘Quick Play Bingo.’ ” Dream Games obtained a
preliminary injunction against PC Onsite, enjoining it from
infringing Dream Games’s copyright.
A six day jury trial began on November 7, 2006. During
trial, PC Onsite moved for Judgment as a Matter of Law
(“JMOL”), arguing that Garland Pierce was not liable for
copyright infringement because he did not directly distribute
Quick Play Bingo to the public or participate in its develop-
ment, and that Dream Games was not entitled to damages
because Fast Action Bingo was operated illegally. During oral
argument on the motion, Dream Games argued for the first
time that Garland Pierce was secondarily liable for infringe-
ment. The district court granted judgment as a matter of law
in favor of Pierce and dismissed him from the case. The court
further ruled that Dream Games could not recover actual dam-
ages for Fast Action Bingo’s lost profits because the game
was offered illegally in Utah and Wyoming, but that Dream
Games was entitled to recover statutory damages to be deter-
mined by the jury.
The jury found PC Onsite and Hagon liable for willful
copyright infringement. It awarded $25,000 to Dream Games
in statutory damages. Final judgment was entered on March
30, 2007, in favor of Dream Games. Dream Games subse-
quently moved to amend the judgment for an error correction
and to enter a permanent injunction. It also filed a motion for
a new trial on Pierce’s liability for inducement. On May 2,
2007, the district court amended its judgment to correct the
clerical error and to order a permanent injunction, and denied
Dream Games’s motion for a partial new trial.
PC Onsite timely appeals. Dream Games and Affordable
Video Systems cross-appeal the district court’s denial of
Dream Games’s motion for a partial new trial on Pierce’s lia-
bility.
3996 DREAM GAMES OF ARIZONA v. PC ONSITE
II. JURISDICTION AND STANDARD OF REVIEW
The district court’s jurisdiction was based on 28 U.S.C.
§§ 1331, 1338(a) and 1367(a). We have jurisdiction under 28
U.S.C. § 1291 from a final judgment that disposes of all
claims with respect to all parties.2
We review a district court’s evidentiary ruling for abuse of
discretion. See Tritchler v. County of Lake, 358 F.3d 1150,
1155 (9th Cir. 2004). Appellant must also show “that the error
was prejudicial.” Id. “We review a district court’s formulation
of civil jury instructions for an abuse of discretion,” and “[w]e
review de novo whether a jury instruction misstates the law.”
Wall Data Inc. v. L.A. County Sheriff’s Dep’t, 447 F.3d 769,
784 (9th Cir. 2006). A denial and a grant of a motion for a
judgment as a matter of law are both reviewed de novo. See
Quiksilver, Inc. v. Kymsta Corp., 466 F.3d 749, 755 (9th Cir.
2006).
2
We reject PC Onsite’s argument, set forth in a footnote in its reply
brief, that the district court lacked jurisdiction to hear this case because
Dream Games’s deposit with the copyright office represents only eighty
percent original work. A certificate of registration raises the presumption
of copyright validity and ownership. See Micro Star v. Formgen Inc., 154
F.3d 1107, 1110 (9th Cir. 1998); Ets-Hokin v. Skyy Spirits, Inc., 225 F.3d
1068, 1075-76 (9th Cir. 2000). In this case, the Copyright Office was
informed by an email from Dream Games’s counsel, after the Certificate
of Registration issued, that the deposited copy represented eighty percent
original work and that Dream Games no longer had access to the original
work. The Copyright Office then expressly granted Dream Games relief
from the deposit requirement, as permitted under 37 C.F.R. section
202.20(d). Therefore, Dream Games’s Certificate of Registration was
valid and meets the jurisdictional and statutory damages requirements of
the Copyright Act. For the same reason, we reject PC Onsite’s remaining
arguments based on the percentage of original work submitted to the
Copyright Office.
DREAM GAMES OF ARIZONA v. PC ONSITE 3997
III. DISCUSSION
A. Evidence of Unprotectable Elements Before the Jury
[1] Because “copyright protects only an author’s expression
of an idea,” Data E. USA, Inc. v. Epyx, Inc., 862 F.2d 204,
207 (9th Cir. 1988), “elements of expression that necessarily
follow from an idea, or . . . expressions that are as a practical
matter, indispensable or at least standard in the treatment of
a given idea” are not protected, id. at 208 (alteration and inter-
nal quotation marks omitted). We have held, however, that a
claim of copyright infringement can be based on infringement
of a combination of unprotected elements. See Apple Com-
puter, Inc. v. Microsoft Corp., 35 F.3d 1435, 1446 (9th Cir.
1994). “It is well settled that a jury may find a combination
of unprotect[a]ble elements to be protect[a]ble . . . because
‘the over-all impact and effect indicate substantial appropria-
tion.’ ” Three Boys Music Corp. v. Bolton, 212 F.3d 477, 485
(9th Cir. 2000) (quoting Sid & Marty Krofft Television
Prods., Inc. v. McDonald’s Corp., 562 F.2d 1157, 1169 (9th
Cir. 1977), superseded on other grounds by 17 U.S.C.
§ 504(b)). To allow the possibility of such a finding, the jury
must be allowed to see the complete work. Apple Computer
and its progeny do, however, require that the unprotected ele-
ments be identified to the jury. See, e.g., Apple Computer, 35
F.3d at 1446 (“[T]he unprotectable elements have to be identi-
fied, or filtered, before the works can be considered as a
whole.”).
1. District Court’s Refusal to Limit Evidence To Protect-
able Elements
[2] PC Onsite argues that the district court abused its dis-
cretion in allowing the jury to see the unprotectable elements
of Fast Action Bingo.3 Unprotectable elements such as Bingo
3
PC Onsite properly raises this objection on appeal. Federal Rule of
Evidence 103(a) provides that “[o]nce the court makes a definitive ruling
3998 DREAM GAMES OF ARIZONA v. PC ONSITE
cards and game function buttons, i.e., “Log Out,” were intro-
duced into evidence as part of the complete printouts of Fast
Action Bingo screen displays. Because it is appropriate for the
jury to see unprotected elements of a copyrighted work so that
it may assess whether the combination of such elements war-
rants protection, the district court did not abuse its discretion
in allowing into evidence complete Fast Action Bingo screen
displays that include unprotectable elements.
2. Identification of Protectable Elements in Jury Instruc-
tions
PC Onsite argues that the district court erred by failing to
identify in the jury instructions the specific elements of Fast
Action Bingo that are protected by copyright. “[P]rejudicial
error results when, looking to the instructions as a whole, the
substance of the applicable law was not fairly and correctly
covered.” Gambini v. Total Renal Care, Inc., 486 F.3d 1087,
1092 (9th Cir. 2007) (internal quotation marks omitted).
on the record admitting or excluding evidence, either at or before trial, a
party need not renew an objection . . . to preserve a claim of error for
appeal.” “When the ruling is definitive, a renewed objection . . . at the
time the evidence is to be offered is more a formalism than a necessity.”
Fed. R. Evid. 103, advisory committee’s note to 2000 Amendment. We
have held that when the “substance of the objection has been thoroughly
explored during the hearing on the motion in limine, and the trial court’s
ruling permitting introduction of evidence was explicit and definitive, no
further action is required to preserve for appeal the issue of admissibility
of that evidence.” Palmerin v. City of Riverside, 794 F.2d 1409, 1413 (9th
Cir. 1986); see also Sheehy v. S. Pac. Transp. Co., 631 F.2d 649, 652-53
(9th Cir. 1980) (finding that objection during pretrial arguments alone was
adequate to preserve the right to appeal). PC Onsite argued in its motion
in limine that Dream Games “should be precluded from presenting any
evidence or testimony regarding infringement of screen displays unless
Plaintiffs identify the specific protected elements in each screen.” The dis-
trict court was sufficiently informed as to PC Onsite’s grounds for objec-
tion and denied that motion in a definitive ruling. Therefore, PC Onsite’s
objection to screen displays that contain unprotectable elements has been
preserved for appellate review.
DREAM GAMES OF ARIZONA v. PC ONSITE 3999
PC Onsite relies primarily on Harper House, Inc. v.
Thomas Nelson, Inc., 889 F.2d 197 (9th Cir. 1989), to support
its argument that the jury instructions did not fairly and cor-
rectly cover the applicable law. In Harper House, the district
court “refused to give defendants’ proposed jury instructions
that portions of the organizers were not protected by copy-
right.” Id. at 200. We held that because organizers were
“copyrightable as compilations” that consisted “mainly or
entirely of uncopyrightable elements,” id. at 204, it was error
for “the jury instructions . . . [to fail to] adequately distinguish
between protectable and unprotectable material,” id. at
207-08. However, as PC Onsite concedes, Harper House did
not address whether merely instructing a jury as to the protec-
table elements is sufficient without also identifying those ele-
ments.
[3] Consideration of the whole work is proper under Apple
Computer as long as “the unprotectable elements [are] identi-
fied.” Apple Computer, 35 F.3d at 1446 (emphasis added). No
case law or legal theory requires that “protectable” elements
be identified as well. Here, the jury instructions properly iden-
tified the “unprotectable” elements of Fast Action Bingo. The
district court instructed the jury that “to establish that PC
Onsite is liable for infringement, Dream Games must show
that the accused screen displays are virtually identical to pro-
tected elements of corresponding screen displays of the Fast
Action Bingo game.” It further instructed that “even a combi-
nation of unprotectable elements may be entitled to some
copyright protection if the works are virtually identical.”
Finally, the district court identified in detail those elements of
the copyrighted work that are not protected: “Functions such
as ‘Add user,’ ‘Games Menu’ and ‘Done’ are not copyright-
able . . . ,” “Bingo cards, called numbers (often printed on
balls), a key describing winning patterns and corresponding
prizes, and the player’s balance and winnings, are all elements
of a video bingo game that are not protected by copyright.”
The district court correctly rejected PC Onsite’s proposed
instructions that listed four specific protected elements of Fast
4000 DREAM GAMES OF ARIZONA v. PC ONSITE
Action Bingo because they would have improperly limited the
jury’s consideration to four aspects of Fast Action Bingo, as
opposed to the whole work.
Because the district court specifically identified the unpro-
tected elements, the jury instructions fairly and sufficiently
explained the theory of the case and did not misstate the law.
Neither party argues that the district court abused its discre-
tion in formulating the exact wording of the instructions, and
the text of the instructions supports this conclusion. There-
fore, the district court did not abuse its discretion in giving the
jury instructions.
B. Impact of Illegal Operation on Award of Damages
During the relevant time period, Dream Games operated
Fast Action Bingo in two states, Wyoming and Utah. While
Dream Games’s lawsuit was pending, the Wyoming Supreme
Court ruled that Fast Action Bingo was illegal in that state.
See Fraternal Order of Eagles Sheridan Aerie No. 186, Inc.
v. State ex rel. Forwood, 126 P.3d 847 (Wyo. 2006). The
State of Utah also prohibits gambling,4 and has seized several
Fast Action Bingo machines operated in one particular bingo
hall, but has not declared the game illegal without regard to
operation. Before trial, the district court concluded that
because Fast Action Bingo is definitely illegal in Wyoming,
“there is no potential recovery” in that state, but whether there
is recovery in Utah “really depends upon the facts.” Ruling on
PC Onsite’s subsequent JMOL motion, the district court first
noted that it “resolved that Fast Action Bingo is illegal” in
Utah. It nevertheless held that because “the illegality I have
found is not, per se, so it only pertains to the actual damages
for violation of a copyright,” Dream Games “may recover
statutory damages.”
4
“The Legislature shall not authorize any game of chance, lottery or gift
enterprise under any pretense or for any purpose.” Utah Const. art. 6, § 27.
DREAM GAMES OF ARIZONA v. PC ONSITE 4001
1. Availability of Actual or Statutory Damages
Although we have not previously addressed whether illegal
use or operation of a work by the copyright owner precludes
the award of actual or statutory damages for copyright
infringement, analogous case law persuades us that it does
not.
[4] Previously, we have held that fraudulent content is not
a basis for denying copyright protection to a work, and is not
a defense to infringement. See Belcher v. Tarbox, 486 F.2d
1087, 1088 (9th Cir. 1973) (refusing to deny copyright protec-
tion to fraudulent advertising). “[T]he currently prevailing
view” is that “no works are excluded from copyright by rea-
son of their content.” 1 Melville B. Nimmer & David Nim-
mer, Nimmer on Copyright § 2.17 (2008) (citing Mitchell
Bros. Film Group v. Cinema Adult Theater, 604 F.2d 852,
863 (5th Cir. 1979)); see also Belcher, 486 F.2d at 1088(explicitly disagreeing with a Fifth Circuit case later overruled
by Mitchell). Dismissing the defense of obscenity to a claim
of copyright infringement, the Fifth Circuit concluded in
Mitchell that “[t]he maxim of unclean hands is not applied
where plaintiff’s misconduct is not directly related to the mer-
its of the controversy between the parties, but only where the
wrongful acts ‘in some measure affect the equitable relations
between the parties in respect of something brought before the
court for adjudication.’ ” 604 F.2d at 863 (quoting Keystone
Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 245 (1933)).
It held that “[t]he alleged wrongdoing of the plaintiff does not
bar relief unless the defendant can show that he has personally
been injured by the plaintiff’s conduct.” Id.; see also Fuller
v. Berger, 120 F. 274, 278 (7th Cir. 1903) (“[I]f the defendant
can do no more than show that the complainant has commit-
ted some legal or moral offense, which affects the defendant
only as it does the public at large, the court must grant the
equitable remedy and leave the punishment of the offender to
other forums.”); Jartech, Inc. v. Clancy, 666 F.2d 403, 406
4002 DREAM GAMES OF ARIZONA v. PC ONSITE
(9th Cir. 1982) (recognizing that obscenity is not a defense to
copyrightability).
As Professor Nimmer has written, the defense of illegality
or unclean hands is “recognized only rarely, when the plain-
tiff’s transgression is of serious proportions and relates
directly to the subject matter of the infringement action. For
instance, the defense has been recognized when plaintiff mis-
used the process of the courts by falsifying a court order or
evidence, or by misrepresenting the scope of his copyright to
the court and opposing party.” 4 Nimmer on Copyright
§ 13.09[B] (citing L.A. News Serv. v. Tullo, 973 F.2d 791, 799
(9th Cir. 1992)) (internal footnotes omitted).
Sound policy reasons support the “Congressional intent to
avoid content restrictions on copyrightability.” 1 id. § 2.17. In
Belcher, we explained that “[t]here is nothing in the Copy-
right Act to suggest that the courts are to pass upon the truth
or falsity, the soundness or unsoundness, of the views
embodied in a copyrighted work.” 486 F.2d at 1088. We
noted that “[t]he gravity and immensity of the problems, theo-
logical, philosophical, economic and scientific, that would
confront a court if this view were adopted are staggering to
contemplate.” Id.5 Similarly, the Mitchell court was concerned
that the broad use of the illegality defense would swallow the
entire right to copyright protection. See Mitchell, 604 F.2d at
864 (“[L]imiting copyright protection on a broad public injury
rationale would lead to absurd and unacceptable results. . . .
Arguably an infringer could defend on the ground that the
work had been transported into the state in the copyright
owner’s truck that does not meet federal safety and pollution
requirements . . . . The possibilities are well nigh limitless.”).
5
In an astute aside applicable to material capable of illegal use, we
noted that no “public policy would be served by eliminating [the copy-
right] restriction in the case of fraudulent matter and permitting it to be
reprinted and circulated freely.” Belcher, 486 F.2d at 1088 n.3.
DREAM GAMES OF ARIZONA v. PC ONSITE 4003
[5] The Mitchell/Belcher principle leads to the conclusion
that illegal operation of a copyrightable work neither deprives
the work of copyright protection nor precludes generally
available remedies. See 1 Nimmer on Copyright § 2.17
(applying the Mitchell principle to conclude that “the fact that
a copyrightable work is being used for illegal purposes should
not constitute a defense in a copyright infringement action”).
If work that contains illegal content is copyrightable, then a
work that contains legal content, but which may be used for
illegal purposes is surely copyrightable. The same holds true
for works that are capable of illegal uses in geographically
limited areas. It would be absurd to deny a work the protec-
tion of a federal copyright because it is capable of illegal use
in one or more states, but capable of perfectly legal use in
other states.
The noncontrolling, decades-old cases cited by PC Onsite
are not to the contrary because those courts did not consider
the question presented in this case—whether illegal use con-
stitutes a defense to infringement. Those courts first found
that no infringement was committed, and then denied equita-
ble remedies on the basis of its illegal use. See Kessler v.
Schreiber, 39 F. Supp. 655, 656 (S.D.N.Y. 1941) (holding
that “defendant has not infringed plaintiff’s copyright,” and
that “because plaintiff’s card is primarily intended to be used
to carry out a lottery, he can not have relief in a court of equi-
ty”); Affiliated Enters., Inc. v. Gantz, 86 F.2d 597, 598-99
(10th Cir. 1936) (holding that “there are no allegations of fact
showing infringement of the copyright,” and that the “system
is too closely akin [to an illegal lottery] to have the protection
and assistance of a court of equity”). Here, by contrast, the
jury concluded the defendant did infringe plaintiff’s copy-
right.
[6] Thus, illegal operation of an otherwise copyrightable
work does not deprive the work of copyright protection, nor
is it a defense to infringement. Because Fast Action Bingo has
a valid copyright, and the copyright was unlawfully infringed,
4004 DREAM GAMES OF ARIZONA v. PC ONSITE
Dream Games is entitled to damages. The Copyright Act of
1976 provides that “the copyright owner may elect, at any
time before final judgment is rendered, to recover, instead of
actual damages and profits, an award of statutory damages for
all infringements involved in the action . . . .” 17 U.S.C.
§ 504(c)(1). Nothing in the Copyright Act suggests that plain-
tiff’s statutory right to elect the type of damages it seeks is
forfeited upon presentation of evidence of illegality. Thus, we
hold that an award of either type of damages available under
the Copyright Act—actual or statutory—is not precluded by
evidence of illegal operation of the copyrighted work, at least
where the illegality did not injure the infringer. We therefore
reject PC Onsite’s challenge to the district court’s award of
statutory damages to Dream Games.
2. Exclusion of Evidence of Illegal Operation
The district court properly determined that the jury was to
decide the amount of statutory damages. However, the district
court did not allow PC Onsite to argue evidence of illegality
to the jury. The court concluded that the jury should focus on
the conduct of PC Onsite, and that any possible illegal activity
by Dream Games was irrelevant to the willfulness or inno-
cence of PC Onsite’s conduct.
[7] “Error may not be predicated upon a ruling which
admits or excludes evidence unless a substantial right of the
party is affected . . . .” Fed. R. Evid. 103(a). The Copyright
Act provides that the copyright owner, at his election, is enti-
tled to “an award of statutory damages for all infringements
involved in the action, with respect to any one work, for
which any one infringer is liable individually, . . . in a sum of
not less than $750 or more than $30,000 as the court considers
just.” 17 U.S.C. § 504(c)(1). The Supreme Court has held that
“the Seventh Amendment provides a right to a jury trial on all
issues pertinent to an award of statutory damages under
§ 504(c) of the Copyright Act, including the amount itself.”
Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340,
DREAM GAMES OF ARIZONA v. PC ONSITE 4005
355 (1998). We have subsequently interpreted Feltner to
uphold the constitutionality of the statutory damages provi-
sion, provided that at the plaintiff’s election of a jury trial, we
replace the term “court” in § 504(c) with “jury.” See Colum-
bia Pictures Television, Inc. v. Krypton Broad. of Birming-
ham, Inc., 259 F.3d 1186, 1192-93 (9th Cir. 2001).
[8] Statutory damages further “compensatory and punitive
purposes,” and help “sanction and vindicate the statutory pol-
icy of discouraging infringement.” L. A. News Serv. v. Reuters
Television Int’l, 149 F.3d 987, 996 (9th Cir. 1998) (internal
quotation marks omitted). “If statutory damages are elected,
[t]he [jury] has wide discretion in determining the amount of
statutory damages to be awarded, constrained only by the
specified maxima and minima.” Peer Int’l Corp. v. Pausa
Records, Inc., 909 F.2d 1332, 1336 (9th Cir. 1990) (first alter-
ation in original) (internal quotation marks omitted); see also
Krypton Broad., 259 F.3d at 1194; Nintendo of Am., Inc. v.
Dragon Pac. Int’l, 40 F.3d 1007, 1010 (9th Cir. 1994). The
jury is guided by “ ‘what is just in the particular case, consid-
ering the nature of the copyright, the circumstances of the
infringement and the like . . . .’ ” Peer Int’l Corp., 909 F.2d
at 1336 (quoting F.W. Woolworth Co. v. Contemporary Arts,
Inc., 344 U.S. 228, 232 (1952)). Other circuits have also held
that the decisionmaker may consider plaintiff’s conduct dur-
ing litigation. See Warner Bros. Inc. v. Dae Rim Trading, Inc.,
877 F.2d 1120, 1126 (2d Cir. 1989) (reducing award of statu-
tory damages due to vexatious, oppressive, and unreasonable
manner in which owner conducted infringement action);
Bourne Co. v. Hunter Country Club, Inc., 772 F. Supp. 1044,
1052 (N.D. Ill.1990), aff’d 990 F.2d 934, 939 (7th Cir. 1993)
(reducing award of statutory damages when plaintiff’s agent
delayed eight months in answering inquiries as to whether
certain material was copyrighted).
[9] Though the jury has wide discretion in setting the
award, the district court maintains its role as the evidentiary
gatekeeper. The court may exclude evidence when “its proba-
4006 DREAM GAMES OF ARIZONA v. PC ONSITE
tive value is substantially outweighed by the danger of unfair
prejudice.” Fed. R. Evid. 403. “ ‘Unfair prejudice’ within
[this] context means an undue tendency to suggest decision on
an improper basis.” Id., advisory committee’s notes to 1972
proposed rules. Here, because of the “district court’s familiar-
ity with the details of the case and its greater experience in
evidentiary matters,” Sprint/United Mgmt. Co. v. Mendelsohn,
128 S. Ct. 1140, 1144-45 (2008), it was not an abuse of dis-
cretion to exclude evidence of illegal operations. It was rea-
sonable for the district court to conclude that such evidence
might improperly influence the jury to reduce the statutory
damages award. Such reduction would have been improper
because illegal operation does not diminish copyright protec-
tions or undermine the punitive purposes of the statutory dam-
ages provision. Further, illegal operation of a work does not
provide information relevant to the nature of the copyright,
the circumstances of the infringement, plaintiff’s conduct dur-
ing litigation, or any of the other factors commonly relied
upon by decisionmakers in setting statutory damages awards.
PC Onsite misrelies upon Advisers, Inc. v. Wiesen-Hart,
Inc., 161 F. Supp. 831 (S.D. Ohio 1958). In Advisers, the
court found that the copyrighted material at issue, a coupon
book, “is fraudulent in nature in that it is used for the sole and
express purpose of enticing the gullible into . . . business
establishments.” Id. at 834. Finding “that it was not the intent
of Congress to award statutory damages of $1 per copy for
books which are thus so fraudulent in nature,” the court
reduced statutory damages from approximately $23,000 to
$2,500. Id.First, Advisers was interpreting the Copyright Act of 1909,
Pub. L. No. 349, 35 Stat. 1075 (repealed 1976), which has
been superseded by the Copyright Act of 1976, Pub. L. No.
94-553, 90 Stat. 2541 (codified as amended at 17 U.S.C.
§§ 101-810 (2000)). The 1976 Act made significant amend-
ments to and expansions of the statutory damages provision.
Compare Pub. L. No. 349, ch. 320, 35 Stat. 1075, at 1080
DREAM GAMES OF ARIZONA v. PC ONSITE 4007
(repealed 1976), with 17 U.S.C. § 504(c) (1976). Second,
Advisers did not actually explain the basis for its finding of
Congressional intent to reduce statutory damages upon evi-
dence of illegal content, and we have not been able to locate
one, either in the Copyright Act of 1909 or the Copyright Act
of 1976. Third, the Advisers decision predates Belcher and
Mitchell, both of which identified policy reasons for rejecting
a fraudulent content defense to a claim of copyright infringe-
ment. We thus are unpersuaded by the reasoning of the Advis-
ers court, and conclude that the decisionmaker is not required
to consider evidence of illegal operation of a copyrighted
work in making an award of statutory damages.
Because illegal operation of a copyrighted work does not
remove copyright protection or foreclose the award of either
actual or statutory damages, we uphold the award of statutory
damages to Dream Games. We also conclude that the district
court did not abuse its discretion in excluding evidence of ille-
gal operation from the jury’s consideration on the ground that
it was more prejudicial than probative.
C. Dismissal of Garland Pierce on Judgment as a Matter
of Law
Dream Games appeals the district court’s denial of its
motion for a partial new trial on claims against Garland
Pierce, which we review in conjunction with the court’s
JMOL in favor of Garland Pierce. See, e.g., Neely v. Martin
K. Eby Constr. Co., 386 U.S. 317, 322-24 (1967) (holding
that an order conditionally granting or denying a motion for
new trial under Federal Rule of Civil Procedure 50(c) or (d)
is reviewable in conjunction with an appeal from the grant or
denial of a renewed motion for judgment as a matter of law
under Rule 50(b)).
1. Whether the Appeal Was Timely
The district court orally granted PC Onsite’s JMOL motion
on November 22, 2006, dismissing Pierce from the suit. Final
4008 DREAM GAMES OF ARIZONA v. PC ONSITE
judgment was entered on March 30, 2007. On April 2, 2007,
Dream Games timely filed a motion to amend or, alterna-
tively, correct the judgment under Federal Rules of Civil Pro-
cedure 59 and 60, requesting the correction of a clerical error
in the name of a defendant and seeking a permanent injunc-
tion enjoining PC Onsite from infringing copyright in Fast
Action Bingo. On April 16, 2007, Dream Games moved under
Rules 50(c)(2) and 59, requesting a partial new trial on
Pierce’s liability. No timeliness objection was raised by PC
Onsite or addressed by the court. Dream Games’s motion for
a new trial was denied in a May 2, 2007, order, and an
amended judgment was issued the same day.
[10] On appeal, PC Onsite attacks the timeliness of Dream
Games’s motion for a new trial.6 Rule 59(b) mandates that
this motion be filed no later than ten days after the entry of
judgment. Under Rule 6(a), because the time limit is less than
eleven days, intervening Saturdays, Sundays, and legal holi-
days are excluded. The untolled deadline was therefore April
13, 2007, three days before Dream Games filed its motion for
a new trial. Dream Games’s timely motion to amend or cor-
rect the judgment under Rule 59 and 60, however, affected the
finality of the March 30, 2007, judgment. See Fed. R. App. P.
4(a)(4)(iv) (providing that a timely motion to amend the judg-
ment under Rule 59 tolls the period for filing a timely notice
of appeal). Because the judgment was not yet final when
Dream Games filed its motion for a new trial, that motion was
timely, and we have jurisdiction to consider the appeal.
2. The Merits of Pierce’s Dismissal
“Judgment as a matter of law is proper when the evidence
6
Timeliness is a jurisdictional question, Tillman v. Ass’n of Apartment
Owners of Ewa Apartments, 234 F.3d 1087, 1089 (9th Cir. 2000), and
therefore, we consider it regardless of whether PC Onsite raised the issue
in the district court, see Attorneys Trust v. Videotape Computer Prods.,
Inc., 93 F.3d 593, 594-95 (9th Cir. 1996).
DREAM GAMES OF ARIZONA v. PC ONSITE 4009
permits a reasonable jury to reach only one conclusion.”
Quiksilver, 466 F.3d at 755 (internal quotation marks omit-
ted). Dream Games argues on appeal that the district court
erred in dismissing Pierce because the evidence could support
the conclusion that Pierce was secondarily liable for infringe-
ment, either contributorily or vicariously. PC Onsite responds
that Dream Games never asserted the secondary liability the-
ory until oral argument on the JMOL motion.
[11] First, Dream Games waived its argument that the dis-
trict court improperly dismissed Pierce on its theory of direct
liability by failing to include that argument in its opening
brief. We “will not ordinarily consider matters on appeal that
are not specifically and distinctly argued in appellant’s open-
ing brief.” Miller v. Fairchild Indus., Inc., 797 F.2d 727, 738
(9th Cir. 1986). Dream Games spent the entire relevant por-
tion of its opening brief arguing that the district court erred
because the evidence supported its new theory of secondary
liability.
[12] Second, Dream Games failed to raise its theory of sec-
ondary liability at trial, and cannot now raise it on appeal.
Dream Games’s complaint against all defendants claimed
only direct copyright infringement and did not mention vicari-
ous or contributory liability. Neither did the February 7, 2006,
joint pretrial order. Dream Games proposed a jury instruction
regarding secondary liability, but on PC Onsite’s objection,
Dream Games deleted it, and did not include it in its own set
of submitted instructions. It was only during oral argument on
PC Onsite’s JMOL motion that Dream Games argued for the
first time that “even if [the evidence at trial] didn’t support a
direct infringement claim, it certainly supports a claim of
inducement to infringe.”
The theory of secondary liability is distinct from the theory
of direct infringement. While direct infringement requires
proof of unlawful copying, contributory infringement requires
proof that a defendant “(1) has knowledge of a third party’s
4010 DREAM GAMES OF ARIZONA v. PC ONSITE
infringing activity, and (2) induces, causes, or materially con-
tributes to the infringing conduct.” Perfect 10, Inc. v. Visa
Int’l Serv. Ass’n, 494 F.3d 788, 795 (9th Cir. 2007) (internal
quotation marks omitted). Vicarious infringement requires
proof that “that the defendant exercises the requisite control
over the direct infringer and that the defendant derives a direct
financial benefit from the direct infringement.” Perfect 10,
Inc. v. Amazon.com, Inc., 487 F.3d 701, 729 (9th Cir 2007).
We cannot entertain now Dream Games’s argument that the
district court erred by dismissing Pierce because he was sec-
ondarily liable. If Dream Games had intended to assert a the-
ory of secondary liability, it should have done so either in the
original or an amended complaint, following proper proce-
dure. Instead, the original complaint failed to provide “fair
notice” to defendants of such liability, see Yamaguchi v. U.S.
Dep’t of the Air Force, 109 F.3d 1475, 1481 (9th Cir. 1997),
and Dream Games failed to amend the complaint under Rule
15(a) to allege that theory.
[13] Nor was the issue of secondary liability tried by
implied consent. See Fed. R. Civ. P. 15(b) (“When an issue
not raised by the pleadings is tried by the parties’ express or
implied consent, it must be treated in all respects as if raised
in the pleadings.”). PC Onsite expressly objected to Dream
Games’s proposed jury instructions regarding secondary lia-
bility. See 6A Charles Alan Wright, Arthur R. Miller & Mary
Kay Kane, Federal Practice and Procedure § 1493 (2008)
(“[W]hen a party has objected to the introduction of evidence
on a new issue, the opposing party cannot later seek to amend
the pleadings to conform to the evidence on the ground that
the party impliedly consented to the trial of that issue.”).
Implied consent is also ruled out because the evidence intro-
duced at trial, to the extent it was relevant to secondary liabil-
ity, was also relevant to direct liability for infringement. See
id. (“[W]hen the evidence that is claimed to show that an
issue was tried by consent is relevant to an issue already in the
case, . . . and there was no indication at trial that the party
DREAM GAMES OF ARIZONA v. PC ONSITE 4011
who introduced the evidence was seeking to raise a new issue,
the pleadings will not be deemed amended under . . . Rule
15(b).”). Allowing Dream Games to argue secondary liability
in response to a JMOL motion and on appeal would unduly
prejudice PC Onsite by not giving it fair notice of the claims
at trial. See Crawford v. Lungren, 96 F.3d 380, 389 n.6 (9th
Cir. 1996) (finding that plaintiff waived equal protection and
due process claims when the complaint contained only a
“passing reference” to those claims, and the arguments were
“newly minted” on appeal); see also 6A Wright, Miller &
Kane, Federal Practice and Procedure § 1491 (“An amend-
ment will be allowed only if the parties have received actual
notice of an unpleaded issue and have been given an adequate
opportunity to cure any surprise that might result from the
change in the pleadings.”).
[14] Finally, to prevent prejudice, parties are typically con-
sidered bound by the statements of claims made in their pre-
trial order. See Fed. R. Civ. P. 16(e) (2006) (“This order shall
control the subsequent course of action unless modified . . . to
prevent manifest injustice.”). As discussed above, the pretrial
order contained no mention of secondary infringement liabil-
ity. Because direct and secondary liability theories have such
distinct elements and require different forms of proof, it
would be unduly prejudicial to require PC Onsite to defend its
JMOL motion or this appeal on a theory of secondary liabil-
ity.
IV. CONCLUSION
The district court properly admitted evidence of unprotect-
able elements and did not err in failing to more specifically
identify the protectable elements to the jury. Dream Games
was entitled to statutory damages despite evidence that Fast
Action Bingo was operated illegally in two states. The district
court did not err in excluding evidence of illegal operation of
the copyrighted work from the jury’s consideration. Nor did
4012 DREAM GAMES OF ARIZONA v. PC ONSITE
the district court err in dismissing Garland Pierce on a motion
for judgment as a matter of law.
AFFIRMED.